sustainability and ethics

3 pillars of sustainability

Environmental, Social and Economic

Which of the 9 planetary boundaries have not been breached as of 2023?

Stratospheric ozone depletion, atmospheric aerosol loading and ocean acidification

What is natural capital?

Natural resources and ecosystems that provide valuable services for humans, supporting life and economic activity.

Paris agreement temperature limits x2

to limit global average temp increase to below 2 degrees Celsius, with efforts to limit the temperature increase to 1.5 degrees Celsius above pre-industrial levels.

What are the 5 capitals?

Natural, Human, Social, manufactured and financial

natural capital

stock of renewable and non-renewable natural resources and ecosystem services. Bio-diversity is a part of ecosystem services. Natural capital underpins all other capitals

human capital

knowledge, skills, health and wellbeing of people that enable productive work

social capitsl

insttitutions, networks and relationships that facilitate social cooperation

manufactured capital

human made physical infrastructure, tools and technology facilitating production of goods

financial capital

traditional economic measure of wealth and value, which enables other forms of capital to be traded

Inner ring of doughnut economics? What happens if operate inside these?

The social foundation. 12 social boundaries to make sure basic needs covered. Operating inside these results in critical human degradation

Dark outer ring of doughnut economics? What happens if operate outside?

Ecological ceiling. Outside results in environmental degradation.

Doughnut economics. What is area between social foundation and ecological ceiling?

Safe and just operating space

What does distributive / regenerative economies mean?

Distrib = ensuring resources reach people. Regen = work within ecological cycles

Two cycles of the circular economy

Technical cycle - products materials kept in circulation through maintenance/repair, refurb, recycle

Biological cycle - organic materials safely returned by cascading use (which is the sequential use of resources), digestion ans composting of waste, raw material extraction from livingor recently living organisms

Traditional viiew of economic growth

continuous expansiom, measured through GDP growth, assumed that GDP growth = better living standards and reduced poverty

Green growth oncept

growing economies to the extent that the environment allows. Based on using resources more efficiently. focused on economic growth from resource use without environmental degradationCeii

Criticism of green growth concept? Any alternative?

Criticism = moving resource inensive use/pollution moved to developing countires so overall change is nil. Alternative is degrowth

What is degrowth?

Reduce resoource use in some areas to allow growth in critical areas for wellbeing. Economic measures are not the goal. Quality of life/social conections and ecological sustainability are prioritised. Inifnite growth on finite planet not possible

What is a just transaition?

Transition that leaves nobody behind / inclsive

3 pillars of sustainability

environmental, social and economic

does GHG burning lead to ocean acidification?

Yes -ocean asborbs co2 = carbonic acid = pH down

What does the Triple Bottom Line evaluate a company’s performance against?

Profit, people and planet

tragedy of the commons

if some people make use of a finite resource that is available to all, it will eventually be exhausted or destroyed, meaning everyone suffers

what is TCFD and is mandatory in UK? who for?

Task-force on Climate-related Financial Disclosures. Yes, for larger listed entities.

what is the COP?

Decision making body of the UNFCCC. Reviews its implementation and agrees upon collective action.

What are NDCs? When updated?

Under Paris Agreement each country must outline efforts to reduce GHGs/adapt to climate change impacts. Known as Nationally Determined Contributions and updated every 5 years

Global stocktake? Under what agreement? When?

Every 5 years to assess collective progress towards paris agreement.

UN CBD proper name? What followed in 2022? and what was the vision in 2022

UN Convention on Biological Diversity. In 2022 there was Kunming-Montreal Global Biodiversity Framework - set up 2050 vision.

Kunming-Montreal Global Biodiversity Framework - 2030 goals in relation to degraded ecosystems and land, water , seas?

Restore 30% degraded ecosystems

Conserve 30% of land, waters and seas

Overall aim of European Green Deal

Specific target on GHG by 2030 and by 2050

Make Europe the first climate-neutral continent

Reduce net GHG emissions by 55% by 2030 compared to 1990 levels

No net emissions by 2050

What is New European Bahaus?

creative and interdisciplinary initiative that connects EDG to living spaces/experiences

EU Sustainable FInance Framework and EU Taxonomy. What are aims?

Raise over 620 billion euros annually to meet objectives of the EGD. Taxonomy used to identify sustainable activities supporting EDG

CSRD

public disclosure of sustainability matters for companies listed in EU / exceed certain size thresholds

What is CBAM? When full implementation?

Carbon Border Adjustment Mechanism. Carbon price on imports of certain goods from outside the EU to prevent carbon leakage (shifting emissions to other, usually poorer countries). Full implementation by 2026

What is ETS? What is the principle? What does each allowance permit emission of?

Emissions Trading System

Cap and Trade Principle - GHG cap on installations covered by system. Can buy allowance and trade it

One allowance = emit 1 tonne of carbon (or other GHG)

Cap reduces over time

CSDDD? Main aim?

Corporate Sustainability Due Diligence Directive. Confirm entities such as suppliers have been evaluated for human rights/enviornmenta risks

EUDR? When take effect?

EU Deforestation Regulation. Prohibits sale of products sourced from land that has been deforested degraded after 31 Dec 2020. Takes effect December 2025

UK SECR. What is it? Mandarory?

Streamlined Energy and Carbon Reporting. Requirement for larger UK companies. Disclose environmental information

UK Green Finance Strategy aim

boost investment in climate projects

UK SRS what? When implement

Uk gov working towards own version of IFRS Sustainability Disclosure Standards. Likely 2025

What is capacity building?

Developing strength, skills, instincts, processes and resources that organisations and communities need to survive, adapt, thrive in a fast changing world.

Scope 1, 2, 3 GHG emissions

1 - Directly from business / controlled sources

2- GHG a business creates indirectly from generation of purchased energy

3 - All GHG emissions business is responsible for across whole value chain, including upstream and downstream emissions

which forum identified the megatrends?

Report of the UN Economist Network for the Un 75th Anniversary

where did 3 pillars of sustainability come from?

Bruntland Report 1987

Porter’s chain value

sequences of business activities by which, in the perspective of the end user, value is added to the products or services produced by an entity

Porter’s chain four support activities

firm infrastructure, human resource management, technology development, procurement

porter’s chain primary activities x5

inbound logistics, outbound logistics, operations, marketing and sales, service

upstream activities

processes related to initial stages of production, such as raw material extraction, manufacturing

downstream actiivities

processes after production = distribution, warehousing, delivery

Tier 1 vs Tier 2 supplier

Tier 1 supply direct to company for use in production

Tier 2 supply products or services to Tier 1 suppliers

How can businesses monitor its progress in a sustainability plan? x4

KPIs, Reporting, Using technology, benchmarking

Acute physical risk from effects of climate change

Event driven. Arise from specific weather-related events which cause major disruption to business

Chronic physical risk of climate change

from longer term shifts in climatic patterns e.g changes in rainfall, biodiversity loss

enterprise value

reflects expectations of amount/timing/certainty of future cash flows over short, medium and long term

sustainability linked finance. Detail how money used? How incentivise borrowers to improve sustainabilty?

Purpose not detailed at time of borrowing. Terms of the finance encourage borrowers to achieve sustainability linked targets.

use of proceeds finance

used exclusively for specific projects tha have positive impact on environmental/social outcomes. Project must be specified at time of borrowing

green bonds

debt instrument where proceeds will be exclusively be applied to finance/re-finance eligible green projects

blue bonds

financial instruments designed to support ocean/marine based projects

social bonds

bond instrument to achieve positive social outcome

ICMA principles for issuers of green/blue/social bonds (4)

Use of proceeds - state what should be for

Evaluation/Selection - define which projects eligible

Management of proceeds - funds tracked/separate account

Reporting - info readily available on use of proceeds

life cycle assessment. ONLY relevant to what?

evaluation of environmental impacts associated with all stages of a product’s life. From raw material extraction to disposal

ONLY relevant to enironmental

which gases covered by GHG protocol? (3)

co2, methane, nitrous oxide

measure scope 1 emissions x2 ideas

Directly measure exhaust stream contents/track fuel consumption

Use emissions factors co-efficient to quantify the total amount of GHG

measure scope 2 emissions - two ways

Location based - average emissions intensity of grid where energy consumption occurs

Market based - Emissions factors from specific energy contracts or suppliers

what two things make up double materiality?

Financial materiality and Impact materiality

What is impact materiality?

focuses on company’s impacts on people and environment

TCFD still applicable?

No, disbanded in 2023

Aims of ISSB global sustainability disclosure standards? x2

Meet info needs of investors

Produce consistent and comparable info

What kind of materiality do IFRS S1 and S2 apply?

Financial materiality

What kind of materiality does CSRD apply? Who does CSRD apply to?

double materiality

All companies with securities listed on an EU Stock Market (inc UK companies)

All large EU companies (250+ employees, 50m+ euros revenue, 25m+ assets

Non -EU companies with revenue of 150m+ in the EU, or brancj in EU with 40m+ turnover

when CSRD applicable to non-EU companies?

from 2029

What is GRI? What kind of materiality used? mandatory?

Global Reporting Initiative. 

Impact materiality

Voluntary, independent organisation

TNFD? what kind of materiality used? what does it recommend?

Taskforce on nature related financial disclosures

Double materiality

guidance for companies to report, assess and act upon their nature related dependencies, impacts, risks and opportunities

who is companies act strategic report targeted at?

Mainly shareholders

What kind of assurance opinion can you get on a voluntary engagement relating to sustainability disclosures?

Reasonable assurance expressed positively

What type of assurance opinion usually on mandatory CDRD?

Limited expressed negatively

what are the four Rs

reduce, reuse, recycle, replace

which standards must EU companies apply to comply with CSRD?

European Sustainability Reporting Standards

which reporting framework requires mandatory assurance over sustainability reporting?

CSRD

Objectivism

Idea of universal moral principles regardless of individual beliefs/cultural differences. Application can vary based on context/complexity of situation

Relativism

knowledge, truth and morality exist in relation to culture, society, historical context. Cannot say one is superior to another

teleological / consequentialist ethics

An action is right or wrong based on its consequences

utilitarianism

An example of a teleological approach where an action is right or wrong based on whether consequences result in greatest good for greatest number of people

deontological ethics (non consequential ethics)

action is right or wrong based on whether it adheres to a set of rules or duties

who provides oversight to regulation of UK accountancy profession?

FRC

what will replace FRC as audit regulator?

Audit Reporting and Governance Authority (ARGA)

How can accountants act in the public interest in relation to tax?

Avoid aggressive tax planning

idea of cognitive bias? Effect on professional scepticism/professional judgement

mental shortcuts based on perceptions, beliefs, memories, previous beliefs

undermine prof scept

reduce quality of prof judge

affinity bias

gravitate towards similar individuals

anchoring bias

relying heavily on the first piece of info received

availability bias

decisions influenced by most readily available info / most memorable

confirmation bias

tendency for people to seek out info that confirms existing beliefs

framing bias

making decisions based on how information is presented e.g. in a positive light

rush to solve bias

quick decisions/conclusions due to time pressure

what is NOCLAR

non compliance with laws and regulations

which three things make up the fraud triangle

Pressure

Opportunity

Rationalisation

What is an inducement?

Thing that persuades someone to do something. e.g. gifts, hospitality, entertainment, appeals to friendship and loyalty, employment or other commercial opportunities, preferential treatment

how would accountant (usually money laundering reporting officer) report money laundering?

submit SAR Suspicious Activity Report to NCA