When the IFRS Foundation trustees put out their
Thirty-nine responses to the consultation came from 104 academic signatories across 74 organizations or scientific networks and 20 countries. The majority (72%) of these 39 submissions were opposed to the proposals, and this opposing majority collectively have substantial research records in sustainability reporting, in contrast to the group in favor. But even amongst the supporters, concerns were raised.
Mainstream accounting research has highlighted the political nature of accounting practices. Accounting is not simply a technical tool that gives you the “correct” answer, but a tool at the mercy of the powerful that can have unintended consequences. When it comes to sustainability reporting for enterprise value, the range of interpretations of what an “investor perspective” entails, and then what is financially material and in what time frame, is huge.
The IFRS Foundation itself has not to our knowledge discredited evidence-informed views of this branch of accounting academe. In fact, it states the importance of evidence-based decision making, although it did not consult with academics or draw on their research, when developing its Consultation Paper on Sustainability Reporting. However, some of its supporters have labeled academics in this field as extreme left wing, grumpy and cantankerous, one even noting that more people that count listen to them.
A major bone of contention among the objecting academics was the conceptual framing — the talk of financial materiality, cash flows and enterprise value. Researchers know that messaging that directs corporate efforts matters. We use the term interpretive schemes to refer to the messaging that influences corporate approaches. A conceptual framing that doesn’t address sustainable development and planetary boundaries will be interpreted as “business largely as usual.” And this will have a negative impact on long term returns. It will encourage a lack of accountability for the impacts of an organization on achieving sustainable development — that is, rather than being curtailed, greenwashing will flourish. Academics did not question the need for mandatory reporting requirements; far from it, they have been calling for them for decades — but to make companies accountable for their impacts. Most companies know their stakeholders want it and deliver it anyway, but under a voluntary regime, quality suffers.
Academics questioned the global relevance of sustainability reporting standards that take a financial materiality perspective.
This conceptual framing from the IFRS Foundation might be tolerated by the scientific community were it not for the dismissive approach to the Global Reporting Initiative (GRI) Standards. Twenty-three of the 39 academic submissions commended the GRI’s work to the IFRS Foundation. A memorandum of understanding (MOU) has now been signed by the IFRS Foundation and the GRI, but how far it will go to address the scientific community’s concerns remains to be seen. The GRI’s multistakeholder approach is not likely to be something the IFRS Foundation would be trusted to replicate, giving due weight to, say, civil society organizations.
Only five of the 39 responses agreed with the climate first approach, with 26 arguing for broader coverage, not least because it would further weaken accountability for a broad range of corporate impacts.
Other criticisms of the IFRS Foundation proposals made by academics and informed by evidence included:
- The assumption that the IFRS Foundation has the best governance structure without analyzing what else is out there or what is appropriate for sustainability reporting;
- The IFRS Foundation lacks legitimacy to set sustainability reporting standards and what is being proposed is not sustainability reporting;
- The IFRS Foundation does not have the required technical expertise;
- The proposals are not compatible with the commitments made by national governments with respect to climate change and the United Nations Sustainable Development Goals;
- The proposals are not in the wider public interest; and,
- The lack of evidence supporting the proposals and the body of evidence indicating they won’t have the desired consequences.
The findings from our analysis
Our research paper examines the arguments that have been used to credit and discredit particular arguments. Most (64%) of the submissions opposed to the proposals supported their arguments with research evidence (a crediting technique).
Our literature review highlighted how positions can be discredited, either regarding empirical (or other) evidence or, more indirectly, by highlighting the stake that proponents supposedly have. Stake accusation has a history in climate change advocacy and climate change skepticism: climate change advocates have typically been accused of being driven by a left-wing ideology and/or lucrative research grants; climate change skeptics have typically been accused of being driven by financial interests tied to fossil fuel friendly think tanks or foundations. Our review of the literature suggests that engagement can be legitimated (credited) by pointing to the knowledge base it rests on. Our findings highlight that the majority of academic submissions opposed to the IFRS Foundation’s consultation paper cited relevant peer reviewed research to support their argument.
Engagement in an academic discipline of accounting links academics with practitioners and other members of the profession. Where the ongoing legitimation of a professionalized field is in doubt, legitimacy deficits can arise. As was shown earlier, discrediting happens when critics decide to point to discrediting motives, financial or ideological, that are seen as driving the research. Questions over the legitimacy of a profession or discipline persist when arguments driven by stake accusations predominate over arguments driven by reference to our empirical knowledge base.
We conclude that the opposing academic voice with respect to the IFRS Foundation trustees’ proposals on sustainability reporting was credible and supported by research evidence. Yet it has not been taken into consideration. Just as the IFRS Foundation trustees’ consultation paper did not provide analysis or evidence to support its proposals, to a large extent, neither did the academic submissions that were supportive of them.
