Picture this scenario: A real estate developer wins a bid to convert a large swath of forested land into a housing project. On the surface, this seems like a win-win. The housing shortage gets addressed, jobs are created, and the economy gets a boost. But beneath this apparent victory lies a cost: the chirping birds, the rustling leaves, and the communities intertwined with this land’s history are at risk of vanishing. These environmental and social costs often go unnoticed. As accountants, we can put a spotlight on these hidden costs through the practice of green accounting.
Recent articles in Forbes highlight the increasing role of accountants in driving sustainability. According to a 2023 piece from the Forbes Business Development Council, young CPAs are in a unique position to champion sustainability initiatives within their organizations by leveraging their financial expertise to highlight the economic benefits of environmentally friendly practices. Another Forbes article notes that accountants can lead the way in sustainability by incorporating environmental costs into financial statements. This is what green accounting is all about.
Green accounting, or environmental accounting, aims to capture the hidden costs and benefits of urban and industrial development. It integrates environmental and social factors into the financial reporting process, providing a more comprehensive view of an organization's impact. By doing so, it encourages businesses to make more sustainable decisions that balance economic growth with societal and environmental stewardship.
A perfect example of the importance of green accounting is the ongoing battle for the conservation of the Masungi Georeserve in Baras, Rizal. The Masungi Georeserve is home to several endangered species, offering a sanctuary for biodiversity. Its natural landscape plays a crucial role in managing and reducing flood risks, providing essential ecosystem services. Additionally, the georeserve supports eco-tourism, with income generated primarily financing its conservation efforts while also providing job opportunities for local communities.
However, there have been proposals and attempts to develop parts of Masungi into commercial properties and resorts. These pose significant risks to both society and the environment. Environmental degradation from construction would lead to the loss of flora and fauna, while altered landscapes could increase flooding severity.
By applying green accounting principles, the true value of preserving the Masungi Georeserve can be highlighted. The long-term environmental and social benefits far outweigh the short-term economic gains from development which may benefit only a few individuals or businesses.
Green accounting does not only benefit the environment. Organizations and corporations that practice green accounting are viewed more favorably by consumers, investors, and regulators. It can also help businesses comply with increasingly strict environmental regulations and enjoy long-term financial benefits through cost savings in areas like energy consumption and waste management.
Despite its benefits, green accounting faces several obstacles. The sad reality is that many businesses remain unaware of these practices and their advantages, or worse, are aware but unwilling to consider them. There is often resistance to change, especially that the initial costs of implementing green accounting may often require significant investments such as in new systems and training. Data collection challenges also pose a significant hurdle, as accurately measuring environmental impacts can be complex and time-consuming.
Furthermore, green accounting can highlight business activities that are harmful or potentially harmful to the environment and society, but businesses may find that transitioning to sustainable or more sustainable operations would entail substantial costs. However, isn’t keeping the status quo costlier over time? How much would it cost to continuously adapt to, instead of preventing, the changing and worsening environmental conditions? As the Filipino saying goes, “What good is the grass if the horse is already dead?” Preserving resources means nothing if we’ve already destroyed the very environment that makes them valuable. By investing in sustainable practices now, we not only protect our environment but also secure long-term economic stability and resilience against future challenges.
The way forward
According to the 2024 Grant Thornton International Business Report, 78% of mid-market businesses in the Philippines plan to invest in sustainable initiatives within the next 12 months. This presents an opportune time for us to create ripples of change that will have significant positive impact on society, environment and economy. It is time to act to make sure that sustainability becomes a reality and not merely a buzzword.
As accountants, we hold a unique position to drive sustainability within organizations. Collaborating with sustainability groups and staying updated on the latest developments in sustainability and green accounting can allow us to provide informed guidance to the people in our community. By adopting and advocating for green accounting practices, we can help businesses recognize the true cost of their societal and environmental impact. We can help management and stakeholders better understand the benefits of green accounting and advocate for its adoption. We can help them integrate sustainability into their operations which can then be accounted for and reported to their stakeholders. This, together with the usual financial reports, will provide a holistic view of their performance.
At P&A Grant Thornton, we have committed to integrating sustainability into every aspect of our operations as guided by our five sustainability pillars to empower individuals, businesses, and communities towards sustainable existence. Recently, as part of our sustainability programs, we have partnered with the Rotary Club of Makati to hold a free virtual forum on sustainability on June 20, 2024. It aims to create awareness of plastic pollution in the country and how the Extended Producer Responsibility Act of 2022 and its implementing rules and regulations can help solve this problem. It also serves as a call to action for every stakeholder, which includes the local governments and communities, to join forces in our collective pursuit of sustainability.
Accounting is the language of business. When we use this language to advocate for sustainable practices, we can drive meaningful change across the economy and society, and ultimately positive impact on the planet where we all belong. By using our expertise to make a difference, we can ensure that economic growth, and societal and environmental stewardship go hand in hand.
Let us embrace green accounting and lead the way towards a more sustainable and vibrant tomorrow.
As published in The Manila Times, dated 19 June 2024
