4 questions to Pascale Taddei on the challenges and adoption of socio-environmental accounting

Accounting is used by leaders and managers to make strategic decisions about the future of the business. As environmental and climate concerns influence company management, environmental accounting is becoming increasingly important. Measuring ecological impact enables them to make more responsible decisions, not only for their own future but also for that of the planet.

This is the role of socio-environmental accounting (SEA), including the Comprehensive Accounting in Respect of Ecology (CARE) model.

To gain a better understanding of this accounting innovation and the issues involved in its adoption by companies, we interviewed Pascale Taddei, Associate Professor at EDHEC and author of the thesis ‘The future of accounting in a changing world: analysis of obstacles and catalysts for the implementation of an integrated accounting model, the example of the CARE model’ (2024) at Paris Dauphine University.

How can the CARE model complement traditional accounting practices?

Pascale Taddei Valenza: The CARE accounting model (for Comprehensive Accounting in Respect of Ecology), designed in 2012 by Jacques Richard, is one of the socio-environmental accounting models. It makes it possible to include all positive and negative externalities in the valuation of a company's assets and liabilities, i.e. all productive activities that have an impact on the natural and social environment. This is a major innovation in the accounting world, where conventional accounting focuses solely on financial capital (2).

Initiatives such as those carried out in the PACA region in collaboration with academic partners, notably Agro Paris Tech, have shown that the CARE model could clearly transform business management, particularly for SMEs.

This more complete view of accounting is essential in a world where companies have to take into account of their ecological footprint. However, while this model is more comprehensive, it is also more complex.

Given the benefits of this innovative accounting method, how is it being adopted by companies and what are the main obstacles encountered?

It's clear that the CARE model is not widely used in companies. There are a number of reasons for this, starting with its complexity, coupled with a lack of resources and difficulty in seeing the cost-benefit of this approach, especially for SMEs. What's more, in many companies, the financial and CSR departments are often separate, which further complicates the adoption of this type of integrated accounting.

But in reality, reluctance to change remains the main obstacle to its adoption. Accounting evolves slowly and is often resistant to innovation, especially when it profoundly alters traditional methods.

As a result, the adoption of the CARE accounting model depends first and foremost on corporate governance, which must allocate human and financial resources to this innovation.

Are there no academic or government incentives to encourage its adoption?

Although this model enjoys growing academic support and some government incentives exist, such as the EESC's recommendations in 2017, its adoption remains slow (3) in the absence of strict regulations making its application mandatory.

More good practices should be put in place to act as catalysts and further encourage its adoption. This can be achieved through training, commitment and active support from senior management, particularly at financial and CSR levels, as well as networking and sharing good practice.

What do you see as the future prospects for the development of the CARE model?

The future of the CARE model is promising, but its development will depend on several factors. Firstly, at regulatory level, with the CSRD (Corporate Sustainability Reporting Directive) and ESRS (European Sustainability Reporting Standards) standards in particular, which could encourage wider adoption. Secondly, within the private sector, with the growing expertise of financial services, which are beginning to take CSR issues on board more effectively.

We are already seeing some progress thanks to partnerships between pioneering companies and institutional players such as ADEME and the WWF. These partnerships point to a future in which the CARE model will play an increasingly central role in the sustainable management of companies.

Finally, opening up companies to the fundamental principles of strong sustainability models in a general way, rather than adopting a single model, would undoubtedly be a first step in the right direction. Provided, however, that we start putting these principles into practice.

References

(1) “L'avenir de la comptabilité dans un monde en mutation : analyse des obstacles et des catalyseurs pour l'implementation d’un modele de comptabilite integrée, l’exemple du modèle CARE”, Pascale Taddei Valenza (mars 2024). Executive PhD Université Paris Dauphine. Jury members: Frédérique Dejean (Professor, Dauphine), Didier Bensadon (University Professor, IAE Lyon) and Madina Rival (University Professor, CNAM).

(2) La comptabilité entame sa mue socio-environnementale (2022) The Conversation. Stéphane Ouvrard, Pascal Barneto.

(3) Les entreprises face à la comptabilité socio-environnementale (2022) Alternatives économique. Clément Carn and Mathilde Pernias