Accounting Sustainable Development: International Advancements at Macro and Micro Level

At its 51^st session, in 2020, the United Nations Statistical Commission (UNSC) started the process of revision of the 2008 System of National Accounts (SNA) for adoption by the Commission in 2025 (“Towards 2025 SNA”; see website UNSTAT 2).

This is a periodic review of the system at an international level, to update the accounts and introduce into the system new challenging topics, such as ‘Sustainable development’, which require systematisation of the relevant data to achieve the level of coherence needed for policy purposes. The views of the UN, the EU and other countries, such as India, are reported in this chapter.

After recalling the key role of SNA in official statistics, the revision process at the UN level is resumed, with a focus on the main extension, led by Eurostat, on the environmental dimension of sustainability.

The chapter concludes with some remarks on the prospects of this extension for the Indian subcontinent and the Arab countries of the Persian Gulf.

 Accounting at corporate level has a long and consolidated history and is nowadays highly standardised internationally. Financial and fiscal accounts are the core part of corporate information systems, but the emerging policy needs in recent decades and market pressure from stakeholders and consumers of their products are putting pressure on ‘traditional’ corporate accounting.

This chapter introduces the two main developments underway at the EU community level, stimulated and, at the same time, supported by specific EU regulations. A new so-called ‘taxonomy’ is being developed and implemented in Europe. The relationship with the sustainability objectives set at the political level for the business sector will be explained. A second important innovation concerns ‘sustainable’ reporting, i.e. a new form of non-financial accounting and presentation of the social and environmental impacts of business companies' activity.

This chapter is an introduction to this area of accounting which will see important and rapid development in the near future. 

The UN System of National Accounts (SNA) and the European System of Accounts (ESA) both provide a sequence of accounts, at the national and possibly regional level, describing economic activity in an accounting year. This is the core of the system of accounts which has been consolidated over several decades of implementation in official statistical offices after periodical revisions. The central framework has been progressively expanded and integrated with further accounts, to focus on specific sectors of economic activity, sub-populations of national producers, or new areas of policy interest, going far beyond the consolidated representation of the economy and society.

Today, there is a broad consensus among academia, statisticians, and experts in the field that the system of accounts should cover information on key sustainability topics. This implies including measurements of the other two dimensions of sustainability: the social and the environmental. Probably in the future, there will be a refocusing on what should be considered ‘central’ to this accounting framework.

It is now clear to countries around the world that economic development is no longer sustainable at the expense of the natural environment. Only economic accounting integrated with environmental accounting allows for controlling any imbalances and finding out the trade-offs for appropriate policy decisions. In developing countries, like India, solutions are being sought to enhance the value of natural capital in policy decisions, in a similar way as in developed economies.

This chapter introduces how India is implementing the System of Economic and Environmental Accounting (SEEA), now recognised by the UN as an international statistical standard. It also highlights new opportunities in data availability and technological advances that suggest innovative ways to exploit this information for environmental accounting purposes. 

The implementation of the United Nations 2030 agenda for sustainable development requires a solid statistical framework that has prompted the National Institutes of Statistics (NISs) to produce Sustainable Development Goals (SDGs) indicators. While nonprofit institutions and social entrepreneurship are increasingly recognized as important actors supporting the achievement of sustainable development goals (Salamon et al., 2015), official statistics investigating those actors are rare. Even in the absence of international regulations as a legal basis for producing social economy and the third sector-related statistics, the Italian Institute of Statistics (ISTAT) has been producing official statistics on the core characteristics of NonProfit Institutions (NPIs) for more than 20 years (definition in S.15; Eurostat, 2013).

The objective of this chapter is to show the state of the art of statistical production on the non-profit sector and Corporate Social Responsability (CRS) in Italy. With the objective of enhancing the available information and expanding the perspective of social economy, the ISTAT permanent census of enterprises has investigated the corporate Environmental, Social, and Governance (ESG) performance, including corporate social CSR. Undeniably, the integration of data sources, combining survey results with administrative data, positively contributes to acquiring insight into SDGs while enhancing measures and statistics on the third sector and social economy, such as the creation of a satellite account of NPIs (UNSTAT, 2018).

The research agenda of the System of Environmental-Economic Accounting–Central Framework (SEEA CF), the UN standard on environmental accounts, includes developing an integrated framework for monetary environmental accounts. At the 2017 London Group meeting, Eurostat (European Commission), leader on this topic, presented a proposal for a framework, calling, in the following year, EU member states for experimental compilation of the proposed tables. ISTAT (Italian Institute of Statistics) completed a pilot exercise in 2020, compiling the tables covered by the Eurostat layout: Supply Table, Use Table, Production account, and Expenditure account.

 This chapter recalls the main accounting features of the integrated monetary framework and presents the results of the Italian pilot compilation.

Based on the same equations underlying national accounts, the integrated framework aims at assuring consistent estimates on the supply and demand of environmental products and it can be compiled starting from existing environmental accounts, EGSS mainly providing estimates on the supply of environmental goods and services, and Environmental Protection Expenditure Accounts (EPEA) providing, at present, estimates on expenditures for environmental protection purposes.

In the Italian exercise, putting EGSS and EPEA into the integrated framework layout allowed us to highlight and quantify differences in scope, coverage, and definitions between the two accounts. However, the most interesting findings concern the improvements derived from the combined use of the two accounts: the production of balanced estimates allowed for checking and adjusting inconsistencies among data, filling in gaps, and optimizing calculation processes. Furthermore, it allowed us to enlarge the supply of statistical information on the economy and the environment for Italy, beyond the present scope of EGSS and EPEA.

The exercise carried out by ISTAT is an example of how statistical information can be enhanced to better comply with the requirements of the European Green Deal and, more generally, with the demand arising from the effort towards mainstreaming environmental sustainability in all EU policies.

This chapter presents issues related to the modernisation of the economic accounts for agriculture since 2017 (Eurostat, 2022). The methodological aspects and the transmission deadlines of the Economic Accounts for Agriculture (EAA) are set up in Regulation (EC) No 138/2004 Annex I (EU, 2004) and follow closely the SNA 2008 (UNSTAT, 2009) and the ESA 2010 (Eurostat, 2013).

Eurostat’s effort in the modernization of EAA is an example of the direction to follow and the potential of these satellite accounts for the core system of national accounts in SNA. 

The specific sub-system of national accounts dedicated to the public sector deserves careful analysis since through this, the main public policy actions can be monitored by statisticians. With great care, in the System of National Accounts (SNA) and the European System of Accounts (ESA) in the EU, public sector and government accounts are brought into the framework and firmly linked within the core system of national accounts. This is a required coherence effort as there is a long history of public sector accounts and, normally, a double accounting with different criteria is carried out by the public institutions in European countries. The basic frame and definitions will be introduced in this chapter, underlining the problems but also the necessity of this great effort at the accounting level.

This challenge represents a frontier for accounting research for the purposes of monitoring policies for sustainable development.

The definitions of output and Gross Domestic Product (GDP) are, in line with the UN System of National Accounts (SNA), intended to measure the total “human economic activity” over a territory and estimates have been developed by official statistical offices to calculate the economic aggregates.

A theoretical reclassification of their components would allow us to account for different categories of products and new types of producers. This is a useful exercise that can become a tool for supporting data collection and measuring the difficult components of these key national accounts aggregates. In addition, new subsystems of accounts, such as the UN Economic and Environmental Accounts (SEEA), can be developed from them, in support of core national estimates. They can provide data to calculate indicators on important environmental policies and to monitor the sustainability of development. From this point of view, studies on European countries such as Italy could provide instructive starting points for further research. 

The growing awareness of the need for sustainable development at the United Nations level, has highlighted the complexity of system dynamics and the challenges for governments and policymakers. New objectives, based on increasing dimensions considered relevant to sustainability, are incorporated in the agenda of policy designers: in this scenario, the traditional economic goals of long-term prosperity become more difficult to achieve.

Moreover, although governments in Europe, the United States, and many other market economy countries are committed to balancing the public budget, de facto, public deficits are realized every year and public debt accumulates. Specifically in the EU, due to the pandemic crisis, the previously agreed limits of the public deficit in relation to the level of economic activity are currently not respected. The data and statistical trends are evident.

In the current organization of the globalized economy, multinational groups do not help the public authorities in governing the economy, playing as autonomous economic entities. The introduction of technological innovations and the re-location of plants to deal with regional demand crises, falling prices, and global market competition worsen the tasks of economic and social stabilization. Shareholders demand profitability and, consequently, private financial statements must be annually positive.

This is a budget 'trap': policymakers struggle with income redistribution to address the current economic crisis. This dilemma is discussed with examples from OECD countries.

The global economic crises of the new century are long-lasting and seem without prospects of recovery. The ‘green' economy paradigm proposes an alternative basket of products with respect to the standard one, currently available for consumption and investment in the industrial economies of the 21st century.

The green economy is proposed as a smart solution for an alternative growth path that should lead to sustainable economic development.

If this is a possible scenario, a specific sustainability accounting system is necessary. This system should allow us to investigate: whether the available policy instruments are sufficient to achieve the required structural change in the economy and if the economic transition will take place in time with respect to what scientific studies require.

This new paradigm and the related economic trends are discussed in this chapter.