The Role Of Accounting On Climate Change

1. Basic Issue

As major player of the anthropocentric climate change, corporations significantly contribute to the climate change through emission of greenhouse gases and deforestation activities with the energy sector as its main contributor.
If not well mitigated, the impact of the corporations’ activities will increase the global warming in a certain temperature level that could harm Earth. Thus, c2. rolling the corporations’ activities is critical

2. The Two Types of Roles that accounting profession can play

  • Mitigation: an attempt to reduce GHG emission
  • Adaptation: an attempt to minimize the impact of climate change

3. The Three Areas of Roles in Accounting

Accounting is challenged to play the controlling role toward the climate change through the three functions:

  • Risk assessment
  • Valuation, and
  • Disclosure

Risk Assesment
Risk assessment function refers to assessing the vulnerability of corporation and identifying the impact of climate change

Valuation
Valuation function relates to the cost and benefit consideration of the climate change adaptation

Disclosure
Disclosure function means disclosing the climate change risk-related information.

Sources taken from:  FGD- IAI KAPD, 2017 (Hazan Fauzi)

-LL