Profit maximisation and the Green New Deal cannot mix — Richard Murphy

The simple fact is that the Green New Deal and profit maximisation are incompatible with each other, and this is of massive importance and is an issue that cannot be ducked if the Green New Deal is to work. This is the idea behind my work on what I call sustainable cost accounting (SCA).

The core idea within SCA is that existing accounts treat the supply of finance as the constraint on corporate activity and as such the return to financial capital is considered to be the focus of financial reporting, without any consideration being given to the use of that financial capital and who might benefit from it. Quite explicitly, externalities such as environmental cost are ignored in this framework, which accepts the standard neoclassical line that natural capital is a ‘free gift of nature’. This is inappropriate in a world where we face the reality of climate crisis. The capital constraint that businesses now face does not come from finance - which is readily available to most of them at almost no real cost in the case of larger companies - but from natural capital, whose use we have to limit.

Sustainable cost accounting does, then reject the reporting structure of current accounting, which is no longer fit for purpose, and in the process effectively imposes a new reporting requirement, and so corporate objective, on all companies in place of profit maximisation. This new requirement is the obligation to maintain their business on behalf of all stakeholder groups in society within the constraints that the climate crisis will impose upon them. Unless this is done the Green New Deal cannot deliver the transformation in the way in which we manage the economy that the Common Wealth think tank describe in their report. But when this is understood the ramifications are also much bigger than they appear willing to embrace.…

Tax Research UK
Profit maximisation and the Green New Deal cannot mix
Richard Murphy | Professor of Practice in International Political Economy at City University, London; Director of Tax Research UK; non-executive director of Cambridge Econometrics, and a member of the Progressive Economy Forum

Peter Bakker — Accountants Will Save the World

...we need to ensure that corporate reporting makes clear how a company is making its money, not just how much money it has made. For every robust, time-tested measure of return on financial capital, we need another for social capital — the economic benefits that derive from cooperation among groups, and yet another for natural capital — the supply of natural ecosystems (think forests, oceans, mineral deposits) that we turn into valuable goods or services future.

Make no mistake, I am a capitalist: Someone who puts capital to work, and wants something back. But where we've lost the plot is that we only demand — and manage — a return on financial capital. In order to address current economic crises in a systematic way, we must begin to demand a return on social and natural capital as well. That's where we need to change the rules of the game.

Harvard Business Review — HBR Blog Network
Accountants Will Save the World
Peter Bakker | formerly CEO of TNT N.V., now president, World Business Council for Sustainable Development