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The Impact of Accounting on Environmental Sustainability: Lessons from the Deepwater Horizon Disaster

This document outlines the intersection of accounting practices and environmental sustainability, using the Deepwater Horizon oil spill as a pivotal case study. The spill, which leaked an estimated 206.2 million gallons of oil into the Gulf of Mexico, highlights the inadequacies of current financial metrics like GDP in accounting for environmental externalities. It advocates for alternative measures such as the Genuine Progress Indicator (GPI) and emphasizes the need for a shift towards integrating environmental factors into corporate reporting and decision-making.

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The Impact of Accounting on Environmental Sustainability: Lessons from the Deepwater Horizon Disaster

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  1. Accounting and the Environment Anna Caulder Drew Frey Valerie Pagani ArunSundaram

  2. Deepwater Horizon Oil Spill April 20, 2010 Well leaked ~50,000 barrels a day into Gulf of Mexico, 206.2 million gallons total BP’s estimated price tag = $40 billion https://www.youtube.com/watch?v=QiF-X-Ez9Bs http://www.greenpeace.org/international/en/multimedia/slideshows/Deepwater-Horizon-Oil-Rig-Disaster/

  3. History of Environmental Accounting • 1992 - Conference on Environment and Development in Brazil • Agenda 21 • 1998 - INTOSAI Working Group on Environmental Auditing • 2003 – System of Environmental and Economic Accounting (SSEA) http://legal.un.org/avl/images/ha/ccc/04-l.jpg

  4. GDP & Environmental externalities • Welfare and economic growth is currently measured by GDP • GDP does not accurately account for environmental externalities • Private Costs < “Social” Costs Upper Safety Limit http://www.global-greenhouse-warming.com/images/CO2CH4N2OGasesConcentrations.jpg?aba085

  5. Alternative measures • Genuine Progress Indicator • Measures value instead of money spent. • Accounts for nonmonetary factors • Environmental degradation • Pollution • Crime • Poverty Rate http://newparadigmdigest.com/wp-content/uploads/2011/06/GPI_graph_for_IJEC.jpeg

  6. Environmental Reports New Value Creation 2009 Study by Thomas Reuters 82% of investors evaluate environment, social, and governance criteria as part of their investment decision Included in Annual Reports http://images.apple.com/environment/reports/docs/iPad_wRetinaDisplay_PER_Mar2014.pdf​

  7. Regulations • Contingencies • Environmental Reports • Traditional vs. New Methods • National Asset Trust Model http://www.southernfriedscience.com/?p=11692 http://www.wwf.org.za/?5181/Environmentjeopardisedbyeconomicbail-outplanwarnsWWF

  8. Walmart Corporation http://corporate.walmart.com/global-responsibility/environment-sustainability/global-responsibility-report

  9. Utilitarian Accountant • Zero-sum equation? • Current generation uses natural resource at expense of future generation • Advances in technology? http://www.sandiegohistory.org/journal/75summer/images/pg50.jpg

  10. Kantian Accountant • Duty to Sustainability • Individual Responsibility to community • Focus on intent of actions, not the outcome http://smilepolitely.com/images/uploads/culture/2010/june/9/Cartoon.jpg

  11. Virtuous Accountant • No fear of personal financial loss • Self-Interest • Independent and Impartial • Lobbyists • Businessmen • No extreme asset valuation http://straighttalkinmountvernon.typepad.com/straighttalk/2013/08/self-convicted-serial-racist-rogue-judge-mark-gross.html

  12. Our Views

  13. References Boisson De Chazournes, Laurence. "United Nations Framework Convention on Climate Change - Main Page." United Nations Framework Convention on Climate Change - Main Page. United Nations, n.d. Web. 20 Apr. 2014. <http://legal.un.org/avl/ha/ccc/ccc.html>. Herath, G. (2005). Sustainable development and environmental accounting: The challenge to the economics and accounting profession. International Journal of Social Economics, 32(12), 1035-1050. Retrieved from http://exproxy.lib.vt.edu Morphy, Erika. "Green Accounting: A Greener Bottom Line?" Forbes. Forbes Magazine, 07 Oct. 2012. Web. 20 Apr. 2014. <http://www.forbes.com/sites/erikamorphy/2012/10/07/green-accounting-a-greener-bottom "Oil from Deepwater Horizon Disaster Entered Food Chain in the Gulf of Mexico." ScienceDaily. ScienceDaily, 20 Mar. 2012. Web. 20 Apr. 2014. <http://www.sciencedaily.com/releases/2012/03/120320142100.htm>. Senge, S. V. (1993). Accounting for the Environment: An analysis of issues. Ohio CPA Journal, 52(1), 33. Retrieved from http://ezproxy.lib.vt.edu

  14. Questions?

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