Accounting is the Language of Sustainability

38 Pages Posted: 25 Feb 2025

See all articles by Peter D. Easton

Peter D. Easton

University of Notre Dame - Department of Accountancy

Gary K. Taylor

University of Alabama - Culverhouse College of Commerce & Business Administration

George W. Ruch

University of Denver - School of Accountancy

Date Written: February 06, 2025

Abstract

This paper is based on a presentation at the 2024 Accounting and Business Research, International Accounting Policy Forum in Berlin. We thank participants at the forum for their helpful comments ABSTRACT We discuss the FASB Conceptual Framework as a foundation for developing an environmental accounting system. We describe three proposed carbon accounting systems. We introduce a carbon accounting measurement framework for net-zero pledges that parallels the financial reporting framework for lease accounting (ASC Topic 842). Under this framework, entities prepare emission reduction schedules to achieve net-zero targets by a specific date. This proposed framework creates a Pledge Asset and a Pledge Liability account (the present value of projected emissions) as beginning balances, which are amortized in a manner similar to lease assets and liabilities. A Carbon Flow Statement tracks actual emissions and pledge variances, providing information regarding an entity's progress toward its net-zero target. Significant variances may result in a revised emission reduction schedule or target date. The pledges may be monitored and audited.

Keywords: carbon emissions, accounting, net zero, carbon pledge, sustainability

Suggested Citation

Easton, Peter D. and Taylor, Gary Kenneth and Ruch, George W., Accounting is the Language of Sustainability (February 06, 2025). Available at SSRN: https://ssrn.com/abstract=5153689 or http://dx.doi.org/10.2139/ssrn.5153689

Peter D. Easton (Contact Author)

University of Notre Dame - Department of Accountancy ( email )

Mendoza College of Business
Notre Dame, IN 46556-5646
United States
574-631-6096 (Phone)
574-631-5127 (Fax)

Gary Kenneth Taylor

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Box 870223
Dept. of Accounting
Tuscaloosa, AL 35487-0223
United States

George W. Ruch

University of Denver - School of Accountancy ( email )

2101 South University
Boulevard, Suite 355
Denver, CO 80208-8921
United States

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