When it comes to sustainability, the problem is not that there are no standards. Rather, there are too many of them, writes Dr Brian Keegan.

In the current abnormal news cycle, something has to be really strange to stand out.
One such item in October was a report that UK authorities were to permit the opening of a coal mine in the north-east of England. This runs counter to most of the prevailing trends. True, the rehabilitation of coal was an element of Donald Trump’s first presidential campaign, but that has not prevented its decline in the US in favour of cleaner natural gas and more sustainable sources like wind and solar. Coal from this new British mine is not for energy production. It is apparently to be used in the manufacture of steel. It is also being used in the manufacture of jobs for the impoverished north-east. Job creation tends to rattle sustainability priorities and seems to have been the consideration that swayed the local council into granting permission.
The incident does highlight, however, the elusiveness of sustainability because “Decent Work and Economic Growth” is Goal 8 of the 17 sustainability goals promoted by the United Nations. While these goals have garnered considerable traction in the sustainability debate, having 17 goals impedes progress because, in practice, the goals can be contradictory. Goal 13, for example, is “Climate Action”, which is at right angles to opening coal mines in some quarters.

This vagueness has conflated the sustainability debate with the already nebulous concept of corporate social responsibility. Corporate social responsibility should be looked upon with suspicion. All too often, HR initiatives to boost staff morale, marketing initiatives claiming green credentials for a particular product or service, or even support for the pet charity of the chief executive are folded in under an ersatz comfort blanket of social responsibility.

Claiming sustainable practices or having corporate social responsibility champions won’t cut it. There has to be a concerted drive to come up with broadly acceptable standards to measure genuine corporate progress on sustainability issues. The current problem is not that there are no standards, but rather, that there are too many of them.

The current custodians of standards- and ethics-setting, the International Federation of Accountants (IFAC), recently proposed that a new sustainability standards board be established, which would exist alongside the IASB under the IFRS Foundation. This new sustainability standards board should pull together existing expertise and the work of some existing sustainability reporting initiatives. The resulting framework could then be passed to the International Audit and Accounting Standards Board to develop the best assurance processes.

This IFAC initiative differs from many other governance initiatives. Too often in the past, ‘solutions’ were provided, for which there was no demand. One of the legacies of this pandemic will be a greater awareness of sustainable practices.  There is demand from investors for comparable and dependable data on environmental, social and governance factors and this form of reporting offers a value-added opportunity for accountants. On the other hand, the initiative carries the risk of becoming hijacked by environmental activism, leading to reporting requirements that would fail a cost/benefit analysis within the SME sector.

Earlier this year, Harvard Business Review suggested that the chief financial officer should become the most prominent climate activist in their organisation. There is still some distance to go before this becomes a reality, but in an era when western governments are contemplating opening coal mines, nothing can be ruled out.