Value-transforming financial, carbon and biodiversity footprint accounting

TL;DR

This paper proposes an integrated approach to quantify and account for organizational carbon and biodiversity footprints using a novel biodiversity equivalent metric, aiming to influence financial decision-making and promote sustainable practices.

Contribution

It introduces a framework for value-transforming financial and environmental accounting that incorporates biodiversity loss metrics and demonstrates its application through a Finnish university case study.

Findings

Offsetting costs significantly change organizational financial valuation.

The biodiversity equivalent can serve as a universal environmental impact metric.

Integrated accounting can better inform sustainability decisions.

Abstract

Transformative changes in our production and consumption habits are needed to halt biodiversity loss. Organizations are the way we humans have organized our everyday life, and much of our negative environmental impacts, also called carbon and biodiversity footprints, are caused by organizations. Here we explore how the accounts of any organization can be exploited to develop an integrated carbon and biodiversity footprint account. As a metric we utilize spatially explicit potential global loss of species across all ecosystem types and argue that it can be understood as the biodiversity equivalent. The utility of the biodiversity equivalent for biodiversity could be like what carbon dioxide equivalent is for climate. We provide a global country specific dataset that organizations, experts and researchers can use to assess consumption-based biodiversity footprints. We also argue that the current integration of financial and environmental accounting is superficial, and provide a framework for a more robust financial value-transforming accounting model. To test the methodologies, we utilized a Finnish university as a living lab. Assigning an offsetting cost to the footprints significantly altered the financial value of the organization. We believe such value-transforming accounting is needed to draw the attention of senior executives and investors to the negative environmental impacts of their organizations.