Our Journey: The Accounting Bodies’ Road to Net Zero

As a baseline to determining our journey towards net zero, it was important for CPA Australia to set a robust, verifiable baseline for our own carbon emissions. We evaluated our scope 1, 2 and 3 emissions, with the help of an external provider, to identify which of these would be material for disclosure. Our disclosures are primarily to provide transparency for our members but also to other stakeholders.

As a result of this exercise, scopes 2 and 3 were deemed the most material. These would be disclosed in our integrated report.

Setting a baseline is a critical foundation towards our commitment to reach net zero. We are also mindful that the journey to net zero will require a range of milestones, and we will continue measuring and evaluating our emissions and reporting on our progress towards achieving net zero.

Data for our emissions profile came from across the business (namely facilities management, finance, people and culture, and procurement) and were overseen through an internal Environmental, Social and Governance (ESG) Working Group. This is an internal cross-departmental and cross-functional internal working group. Sign off was via the Audit, Risk and Compliance Committee, which endorsed the approach to the board of directors for sign off. Our non-financial disclosures, including our GHG emissions, were subjected to limited assurance by our external auditor. We believe assurance, which relies on a robust reporting framework and high-quality reporting, is fundamental for enhancing credibility.

Emissions were reported using the GHG protocols.

In our 2021 Integrated Report, we reported under the strategy element of the guidelines produced by the Task Force on Climate-Related Financial Disclosures (TCFD) and partially reported other elements as we were still undertaking further work in the governance, risks, and opportunities and metrics and targets areas. Emissions data from our 2021 Integrated Report is shown here.

In 2022, we have undertaken scenario analysis to determine the priority risks and opportunities presented by climate change and will add further disclosures and metrics in our 2022 Integrated Report. Our GHG emissions will continue to be reported using the GHG Protocol. We will also align them to the relevant Global Reporting Initiative (GRI) Standards. The use of standards and guidelines helps provide a consistent way of reporting and allows users of our report to make comparisons between similar organizations using standards/guidelines.

As a member-based organization, part of CPA Australia’s role is to lead by example for both members and the broader business community. Our journey to net zero is one such example.

A range of options to consider in achieving net zero was compiled with the help of an external provider.

The proposed pathways were subject to a robust process of internal consultation and approval. Stakeholders included the ESG Working Group, the Finance and Business Services team, the management Risk Committee and the Executive Management team. Although a lengthy process, this underscores not only the broader impact on the organization but also ensures sufficient cross-functional support of the actions needed to reach net zero.

We recognize the importance of driving effective change from the top. There has been continuous engagement by management with the board to ensure a comprehensive understanding of our approach to net zero. The board in turn delegated appropriate responsibility for the execution of our strategic approach to management. Sign off was via the Audit, Risk and Compliance Committee, which endorsed the approach to the board for sign off.

In executing the mandate provided by the board, we have looked at multiple options to achieve net zero. This is in recognition of the operational realities that our commitment would entail across our global locations. Considering a range of approaches enables informed decision making and supports our commitment to good corporate governance.

The decision of an appropriate pathway towards net zero was made according to several key dimensions, including alignment with the spirit of our stated ambition balanced against the practicality of implementation and the feasibility of achieving our key performance indicators and targets. Due recognition was also given to the implications of a transition to a lower carbon state on our risk profile.

Click this link to view CPA Australia’s net zero commitment >

Having established our baseline as the calendar year ending 31st December 2021, we set out to measure our scope 1, 2 and 3 carbon emissions. By understanding our baseline, we can prioritize those initiatives that will have the biggest impact in reducing our carbon footprint. As a professional body, we deliver key services to members, our students and our firms, and, in turn, we rely on our network of suppliers to deliver services to us. These upstream suppliers include provision of our IT and cloud services, our facilities, our examiners and invigilators.

For our energy costs, our business travel and our waste, we were able to calculate carbon emissions precisely; however, for some spend, we had to work with a third party to estimate our carbon emissions based on our ‘average spend’ in a certain category. They were able to calculate average ‘market-based’ emissions based on our spend. This has enabled us to create a baseline against which we can measure our progress. As we navigate our net zero pathway, we will be able to refine this calculation much further.

We have identified opportunities to reduce the scope 1 and scope 2 carbon emissions that are within our direct control. However, in order to realize our net zero ambition, we need to work collaboratively with our supplier base, as their scope 1, 2 and 3 emissions are part of our scope 3 emissions. We have found that nearly 90% of our total emissions are scope 3 – either upstream or downstream in our value chain.

The largest proportion of these emissions come from our purchased goods and services, which is reflective of our service-based organization (this includes students and employees studying and working from home, as we include a proportion of their estimated purchased energy within our scope 3 emissions).

We now plan to work with our largest suppliers to understand their net zero journeys and collaborate to reduce carbon emissions through their supply chains.

The majority of JICPA’s emissions fall into scope 2 and scope 3. To achieve net zero, it was important that we estimated the amount of these emissions to take effective actions to minimize them. JICPA formed a cross-functional sustainability taskforce led by the Chief Executive serving as the ultimate decision maker. We considered the 15 scope 3 categories of emissions and identified six that were the most relevant to us across our operations and organization.

These were:

• Purchased goods and services
• Fuel- and energy-related activities not included in scope 1 or 2
• Upstream transport and delivery
• Waste generated in operations
• Business travel
• Employee commuting

The indirect emissions from the commuting and business travel of employees and purchased services make up the majority of our Scope 3 emissions.

Having identified the types of emissions, we then tried to estimate the amount for each. The Facilities Management team, together with the Finance team, the Human Resource team and the IT team, collaborated on two issues:

• The type of data that should be collected from the different sources and categories.
• The estimations of emissions using aggregated data and the emissions factors referenced in the guideline issued by the Japanese government.

JICPA plans to sign up with the Science Based Targets initiative (SBTi) and file near-term targets in a bid to demonstrate to our stakeholders how we will endeavour to achieve net zero emissions goals. In addition, JICPA has been working to develop policies that encourage all our employees to take action and change their ways of thinking towards reducing scope 3 emissions. To reduce our scope 2 emissions, JICPA has taken energy-saving measures and is planning other measures, such as a shift to renewable energy.

JICPA had planned to shift to purchasing electricity from renewable sources but found that the move was not easy for two main reasons:

• Most of Japan’s nuclear power plants have remained idle since the major Fukushima nuclear power plant accident. This was in the aftermath of the Great East Japan Earthquake in 2011, which seriously harmed the reputation of Japan’s safety brand in relation to the use of nuclear power generation. Moreover, nuclear power sources tend to be perceived negatively. All this suggests that renewables are practically the only power sources that we are allowed to use in net zero emissions initiatives.
• The Ukraine crisis and the sanctions against Russia, causing uncertainty with the supply of fossil fuels such as liquefied natural gas, has pushed demand for alternative sources of energy.

With the demand for renewables significantly high, the major energy companies have insufficient supply capacity to meet it and are thus unable to take up new contracts.

Despite the challenges to switch to renewable energy in Japan, we believe this is no reason to abandon hope for making a shift to sustainable energy or realizing a carbon-neutral society. JICPA, therefore, decided to install its own solar panels as part of its facilities renovation project. Having discussed details of the installation of solar panels with a consulting firm, including issues such as reflecting light onto neighbouring properties, we have found that we are unable to install as many solar panels as expected. With solar panels alone, therefore, JICPA can cover only a limited proportion of its overall energy needs. We will now be considering implementing complementary measures, such as offsite public purchase agreements, to source renewable energy from outside sites.

All persons that offer accounting services to others must be authorized in accordance with Norwegian law. To keep their authorization, the accountants are bound to update their knowledge by attending a minimum of 80 course hours within a period of 3 years. Providing this training is Accounting Norway’s main product, delivered either in-person or web-based.

Over the last few years, the shift from in-person to web-based training has been material, which was boosted by the pandemic. From 2019 to 2021, digital training courses increased from 47 % to 71% of total training hours delivered by us. This alone has a significant impact on the total emissions, eliminating the need for travel and accommodation. Accounting Norway were interested in calculating the carbon footprint of producing and delivering such digital training courses, and began to measure the following data sources for each event:

• Heating and lighting of the studio (kwh per year)
• Cameras, sound equipment, and computers that capture and process video signals (kwh per year)
• Storage of interim files, backups, and final video files locally (emissions per gigabyte)
• Transfer and storage of files to our main distribution system for web access (emissions per gigabyte)
• Users playing videos at local computer (kwh per year)
• Storage of supporting training documentation (emissions per gigabyte)

As emissions data was not readily available from our IT-providers, we made some assumptions to calculate emissions per hour of web-based training.

Going forward, Accounting Norway is aiming to calculate the carbon footprint from in-person courses, and are developing data capture systems for the following:

• Where attendees live (data from our CRM-system)
• Where attendees attend our in-person training (data from our Learning Management System)
• Distance between those places (using a map API)
• Probable transportation method - given the distance (assumptions are made between airplane, train, car, public transportation, by foot)
• Energy used at the conference hall during the training session

Click this link to view Accounting Norway’s net zero commitment >

To manage emissions effectively and report on the related performance, it was important to HKICPA to define clearly the scope of emissions to be covered in our reduction and reporting efforts.

It can be challenging to determine which emissions are relevant and material. However, it is important to make a start and this can be easiest to do, in the first instance, with the ones you have control over before moving on to those you can influence. In addition to using traditional materiality assessments based on emissions volumes from various sources, we also examined the following factors to help make a sensible and practical scoping decision:

• Ability to control – whether we had the ability to control the emissions at sources
• Measurable – whether the amount of emissions could be quantified reliably
• Business relevance – whether there were other implications, such as cost, compliance and reputation to us, on specific sources of emissions
• Reduction opportunity – whether we could effectively reduce the emissions
• Resources required – whether it was practical to measure the emissions with reasonable resources

As there are no dominating factors and the assessment is judgmental, we considered all these factors together with our operations, available resources and our sustainability ambitions. As there is no definite answer on whether a specific scoping arrangement is appropriate, we recommend organizations formulate their process to help ensure the scope is robust.

To facilitate an initial scoping discussion, benchmarking was a useful starting point, as it helped us understand the industry practice and the sources of emissions that our peers were focusing on. We found that, although benchmarking with organizations in the same sector in closer geographic locations was beneficial, other organizations with similar business models (or in the same sector but in other jurisdictions) were also a good point of reference. This also helps in cases where there is a lack of relevant local information or if a broader assessment on the possible practices that they can leverage is necessary. We need to be mindful when interpreting the information disclosed by others, as each organization has their own approach to manage and report on their GHG emissions and are subject to different stakeholder requirements.

One of the essential steps for organizations to formulate an emissions reduction target is to establish a baseline year, which serves as a reference point for measuring the effectiveness of subsequent reduction efforts. For example, the Hong Kong government has set a target of reducing carbon intensity by 65% to 70% by 2030 compared with that of the baseline year of 2005.

Although there are no specific criteria to determine the appropriateness of a baseline year, as it would be used for comparison over time to determine the levels of achievement, HKICPA aimed to choose a baseline year where the emissions volume could be reliably quantified using the same scope and approach in subsequent years, to enable a fair and meaningful assessment.

We felt that the baseline year should be representative of what can be considered a ‘business as usual’ scenario to reflect better the impact of the changes taking place internally and externally, whether negative or positive, on the emissions performance. This would help our management team recognize the effects and take appropriate actions. The COVID-19 pandemic has made choosing a baseline year challenging. During this period of time many organizations have reduced their business activities and travelling, which has led to a reduction of emissions. If one of the affected years is selected as the baseline, the difference in the levels of emissions would appear to be higher when business gets back to normal, and any subsequent emissions reduction efforts are likely to be undermined as compared with the abnormally low baseline.

Therefore, in order to determine a suitable baseline year, we suggest organizations conduct a thorough assessment to understand the changes in our external and internal environments, including how emissions are impacted, data availability, the perception and expectation of stakeholders and the development of rationales to support the conclusion.

Click this link to view HKICPA’s pathway >

Chartered Accountants Australia and New Zealand (CA ANZ) wanted to make a substantial commitment to reducing emissions from business travel through a 30% reduction target. The year preceding the COVID-19 pandemic, 2019, was selected as the base year, as it was a good reflection of our ‘normal’ pre-pandemic travel requirements. Travel is required to support global professional commitments, the membership base and offices across Australia and New Zealand, so it certainly is a challenging target.

Our target affects all of CA ANZ’s operations and governance bodies, so it was vital to obtain agreement of the executive and the board, with discussions led by the Chief Executive Officer and Sustainability Lead. In order to meet the target, we considered a mix of face-to-face and fully virtual meetings. Although all meetings preceding the COVID-19 pandemic were face-to-face and remained a preferred option for many, the option of reducing the number of meetings and keeping them all face-to-face was dismissed, as it could impact the effectiveness of achieving our target. As using online meeting software was now very familiar, the board and executive agreed to a 50/50 mix.

There are conflicting drivers that will impact the ability to achieve the financial year 2023 (FY23) target:

• CA ANZ’s operations are spread across Australia and New Zealand with offices in four other countries, and so there is a desire to renew face-to-face interaction for team building, developing relationships with networks and members, and building new partnerships.
• Flights are the main source of business travel across Australia and New Zealand, but costs are increasing. By setting a financial reduction, as well as an emissions reduction, the budgetary restrictions may prevent travel before target emissions reductions are met.

To embed the target into our operations, FY23 meeting plans were based on the face-to-face/virtual mix, and financial budgets were set with a 30% dollar reduction in travel. CA ANZ organized monthly reports from its travel provider covering actual travel and related tonnes of carbon dioxide equivalent. This raw data was then manually compiled to enable monthly reporting by division (including the governance groups).

We have not set targets by division. We will track monthly, and if our travel emissions look like they are going over the 30% reduction target, the Executive will jointly decide a response, including one division giving up travel to enable the commitments of another.

AICPA & CIMA have 32 offices globally, which has presented challenges to our net zero efforts as employees in different jurisdictions and cultures have varying perspectives and varying levels of knowledge about the issue. Some currently equate net zero with a money-saving travel ban exercise; elsewhere, climate change is still a politically debated issue. Our role is not to take sides in any political debate, but rather, to continue to assess properly and provide reliable information on our net zero commitment and measurable impact. Consequently, as part of our net zero planning, we are taking our employees on a journey of broadening their mindset as well as building their knowledge base.

We have spent a significant amount of time upskilling ourselves internally on what it means for our organization to achieve net zero. Our ‘Accounting for Carbon’ report is being used internally with employees to explore the ‘what’, ‘why’ and ‘how’ net zero questions and to articulate our net zero planning journey. More broadly, we have educated ourselves on how the march towards net zero fits within an organization’s strategy, the risks and opportunities presented by moving to net zero and the impact this achievement will have on key stakeholders – in our case – employees, members and students.

An update on ESG and net zero planning was included at the recent AICPA fall council meeting, and our 2021 annual ‘Letter from Leadership’ publicly articulated the importance of our net zero commitment to the AICPA & CIMA membership.

We recognize the need to commit additional resources in order to meet our objective of net zero emissions and have therefore partnered with a third-party ESG solution provider to help measure, monitor and report on our emissions. We also recognize that in order to succeed at meeting our goals, our efforts need to be deliberate and focused. Therefore, our initial focus is where we believe we can make the most significant impact: facilities and travel. Within facilities, we are prioritizing the assessment of current emissions across our three largest offices, with the intention of examining our other offices at a later time. Similarly, within travel, we are prioritizing air travel from our largest regions and will look across other regions in subsequent periods.

When CPA Canada committed to go net zero, we recognized the need to develop near- and long-term targets. It was essential that our targeted emissions reductions were aligned with widely accepted climate science. Our decarbonization plans needed to be feasible, so any GHG emissions measurements needed to be sufficiently robust and reliable for us to achieve net zero.

Our journey has been an ongoing learning experience and we have dealt with various operational decisions and trade offs across different areas. Our net zero pathway considers a variety of factors such as the impact of future employee and workplace needs, business travel, investments in technology, and the digital transformation of knowledge-based products and services.

We developed an initial inventory of our scope 1 and 2 emissions, collected preliminary baseline measurements pre- and post- pandemic, and considered related scope 3 emissions. The next step will be to test the feasibility of our preliminary net zero action plan through a scenario planning exercise. This will be conducted with stakeholders across the organization with the greatest contribution to current GHG emissions and with influence over the decisions and activities that can reduce our emissions over time. This foundational work will enable us to develop credible net zero targets and increase organizational alignment and buy-in to this critical strategic initiative.

CPA Canada has adopted a flexible approach to the execution and implementation of our net zero action plans, enabling us to remain adaptable as we respond to an ever-changing business environment. We acknowledge there may be a need to refine targets and update measurements as new information comes to light. The plan will also need to include details on underlying assumptions and risk factors that could affect progress in meeting targets.

At the start of the pandemic, we adjusted rapidly to hosting online events for our community, introducing online exams with remote supervision and working at home ourselves. Moving to this digital-first approach for our members and students significantly reduced ACCA’s carbon emissions, particularly those associated with travel, events and exams. Recognizing the benefits of this transition, we are now embedding a digital-first approach across ACCA including for employees.
 
Our digital-first approach has transformed how we work on a global scale. ACCA employees have welcomed our flexible and inclusive approach, making use of a Ways of Working Playbook that sets out guidance for our people. We don’t mandate days ‘in the office’ – the focus is on working in a way that delivers maximum value to stakeholders and promotes wellbeing. This has also transformed how we use ACCA’s offices, which, in turn, has also reduced our carbon emissions. At ACCA’s global headquarters in London, for example, we undertook an energy modelling and optimization review to make the office more efficient. These changes, alongside a 65% reduction in office space (from 37,450 square feet to 12,576 square feet), equate to:

• A 70% reduction in carbon emissions
• Expected energy consumption to reduce by 70%
• Cost savings of £8m over the next five years

Strong governance and leadership are necessary to ensure that a net zero strategy is driven throughout an organization, and that needs to start at the top. The Chief Operating Officer at ICAEW assumed ownership of our carbon neutral strategy, which was approved in July 2020 by our board. Operationally, we had been working towards this for about five years, reducing our GHG emissions by 20% since 2015. ICAEW is now scoping out the project to take us to net zero.

With our reach to nearly 190,000 members and students in 147 countries, as well as to our many stakeholders, we take our reputation and influence position seriously. While being a carbon neutral and subsequently a net zero organization is important, ICAEW considers the most significant aspect of our sustainability and climate change work to be influencing, educating and encouraging others to act.

Given these two aspects of our climate impact – what we can do ourselves and what we can cause to happen – we have moved the ownership of the carbon neutral strategy to the Chief Operating Officer. Our climate activities fall within ICAEW’s strategy for 2030, and becoming carbon neutral supported our formal endorsement of the Sustainable Development Goals (SDGs) in 2016 (see UN SDG 13). Our Finance and Operations teams have played a leading role in making the business carbon neutral. However, all departments of ICAEW have a focus on our strategic themes and have been progressing work on climate action. Finance and Operations support these activities. At the staff level, climate activities are coordinated through a cross-ICAEW climate group, which is supported technically by the Sustainability team, who help encourage take-up across ICAEW.

In the net zero transition project, mentioned above, we will review the governance of ICAEW’s climate activities.

Our current working definition for carbon neutral is that all GHG emissions are offset, but there is not a requirement to reduce absolute emissions. For net zero, emissions are reduced in line with science-based targets and aligned with the target of limiting global warming to a 1.5⁰C increase in temperature from preindustrial levels, with only hard-to-abate emissions being offset. However, ICAEW had been reducing emissions since 2015, and even our carbon neutral roadmap had emissions reduction at its core.

We found that going carbon neutral was a good first step; it got us on the journey with an easily achieved first stage and was a great way to engage staff. It can be the case that one sets a goal that is so far away it seems unachievable. Being carbon neutral has helped overcome that by achieving something relatively quickly and inspiring everyone to go for net zero!

Carbon neutral also allows for flexibility on scope 3 emissions, which do not need to be included (although we did include ours). Net zero includes your scope 3 emissions. The types of offsets used are also more restrictive for net zero. While, for carbon neutrality, traditional carbon offsets can be used, net zero requires that hard-to-abate carbon is only offset by carbon removal from the atmosphere. Such credits are based on nature-based solutions or technology that removes emitted carbon from the atmosphere.

When we bought offsets, we had an eye on the wider ambition of our strategic theme to deliver on the UN Sustainable Development Goals (SDGs). We made sure that we purchased offsets that contributed socio-economic benefits, including improving health and living conditions in Asia and Africa as well as avoiding and reducing emissions. Staff also connected with, and were proud that, ICAEW was able to leverage additional benefits beyond carbon.

Offsets are actions taken by organizations to compensate for the emission of carbon dioxide equivalents (CO₂e) that result from their activities. Offsets often take the form of investments in renewable energy projects, in low-energy technologies or in nature-based solutions that directly remove CO2_e emissions from the atmosphere.

We were keenly aware that offsets do not in themselves reduce emissions, which is what is urgently required. Organizations must aggressively reduce all CO2_e emissions and invest in offsets only as a last resort and clearly for the purposes of making a positive contribution to people and planet. They are not a means of continuing ‘business as usual’ while purporting to become carbon neutral or to reach a net zero target.

Chartered Accountants Ireland debated whether or not to use offsets in our journey to net zero. We consulted experts and discussed our options with informed stakeholders. We looked at only high-quality accredited and verified projects that have been independently audited against third-party certification standards, such as the Gold Standard for the Global Goals. This standard sets requirements to design projects for maximum positive impact in climate and development and to measure and report outcomes in the most credible and efficient way.

From our own discussions and research, Chartered Accountants Ireland decided not to purchase offsets and instead has focused on effective energy management. Much of the work of decarbonizing operations sits with our Facilities team, as it has in depth knowledge of the building’s energy profile, suppliers and day-to-day operations. This team reports to the Finance function.

We commissioned an energy audit from an energy auditor registered with the Sustainable Energy Authority of Ireland and have begun to work through the results of this to drive down our total emissions. Already, we have insulated the roof and protected this insulation with a net to prevent it being eaten by seagulls, which has reduced use of our gas boiler by 75%. Our Facilities team also implemented a dashboard to chart our energy consumption and cost, water use and carbon emissions, which is a useful way to obtain a clear picture of scope 1 and 2 emissions at a glance.

All organizations need to start on a path towards net zero and look at ways to reduce their emissions dramatically. While making progress towards this goal, however, for many organizations the pressures to achieve carbon neutral status are both great and growing. This creates a pragmatic need to offset as an additional measure, purchasing carbon credits related to projects that either capture carbon, reduce carbon or develop renewables.

At AAT, we worked with specialists in the field who identified a project connected to renewable energy in India and proceeded to achieve certified carbon neutral status. AAT wanted to ensure that the offsetting had a wider social impact and started to explore the subject. We learned that some projects have more potential to do good than others. For instance, for a carbon credit project, are you investing in a social enterprise that both reduces carbon and has wider social benefits? Or if the investment is with a more commercial organization, to what extent do they provide wider benefits to the community in which it is based? As a result, AAT subsequently moved offsetting to a project in Myanmar (where we have a training presence) which provides efficient stoves which not only reduce carbon use and deforestation, but save local communities money and time.

We found that the price of carbon credits has become very volatile as more companies have begun to buy them. For example, in January 2022, nature-based schemes such as planting trees tripled in price. Increased competition has also reduced availability. This situation favours large organizations with significant buying power, but for smaller organizations, budgeting becomes incredibly difficult. These difficulties could derail their ambitions or drive a market in lower cost but lower quality carbon schemes.

We also found that, as an alternative to carbon offsetting, some organizations were investing in supply chain partners to produce more renewable energy, or in ‘start-up’ carbon reduction schemes, whereby they can achieve the credits they need at a set price over a set number of years as the carbon credit scheme matures. Some airlines have abandoned offsetting altogether and are investing in alternative areas, such as research and development. We are aware, however, that this course of action is not likely to be open to smaller organizations, which lack the capital to make these kinds of investments.

AAT has worked with external consultants and brokers to help with this issue and to identify more suitable projects, and other organizations may wish to consider doing the same.