Occupy Wall Street protestors walk past the New York Stock Exchange Wednesday, July 11, 2012, in New York. (AP Photo/Frank Franklin II)
Not quite three years ago, standing in an ornate hall of St. James’s Palace in London, Charles, Prince of Wales, laid out his belief that accounting can change the world. A longtime environmentalist, he told hundreds of politely seated leaders that annual reports were “not providing the information we need to tackle the major issues confronting the world economy today”: everything from an increasing global population to the overconsumption of finite natural resources, from pollution to climate change.
Prince Charles knew that corporations had been expanding their efforts to measure and disclose their impacts through sustainability reports. The problem was that companies were far more concerned with their financial reports, which had little connection to their social and environmental counterparts. The time had come, he argued, for the institutions that governed these respective efforts to seek common ground through a new initiative known as the International Integrated Reporting Council (IIRC), whose purpose would be to lay out the principles through which sustainability and finance could be combined.
Many powerful organizations convened to support the effort, including the world’s largest accounting firms and associations; major nongovernmental organizations such as the World Wildlife Fund, Ceres and Transparency International; financial institutions, stock exchanges and reinsurers; and a smattering of corporate titans such as Microsoft and Nestle. A steering committee began meeting twice a year to set policy, and a working group was handed the complex task of defining the purposes businesses should serve and the measurements they should use.
At the heart of the debate was a simple but polarizing question: Was the goal to adjust financial accounting to serve the needs and limits of sustainability, or to extract lessons from sustainability to make more money for shareholders? Prince Charles had been blunt about his preference for the former. But some committee members worried that if the IIRC appeared too radical—if it deviated too far from the complacent assumptions of the demigods in the financial markets—the whole venture would collapse.
Over the course of the meetings, the more conservative voices began to dominate. Visionary language was slowly squeezed out of drafts. Phrases that might raise the hackles of Wall Street and the City were delicately excised. Debates erupted about whether even to use terms like “planetary limits” and “sustainability.” Under pressure from traditionalists, the committee diffidently concluded that the primary audience for integrated reports would be major actors such as pension and sovereign wealth funds, who would be inclined, in theory, to take the long-term view and thus represent the public interest. But the committee stated hopefully that an integrated report would also benefit “all stakeholders interested in an organization’s ability to create value over time, including employees, customers, suppliers, business partners, local communities, legislators, regulators, and policy-makers.”