ICAEW ACA Sustainability and Ethics flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Scope 1 emissions

Direct greenhouse gas emissions from sources owned or controlled by the entity, such as fuel combustion in boilers, company vehicles and fugitive refrigerant leaks.

Scope 2 emissions

Indirect emissions from purchased electricity, heat, steam or cooling consumed by the entity, calculated using either the location-based grid average or market-based contractual instruments.

Scope 3 emissions

All indirect value-chain emissions not covered by Scope 1 or 2, split into 15 GHG Protocol categories including purchased goods, business travel and use of sold products.

GHG Protocol

The most widely used corporate accounting and reporting standard for greenhouse gas emissions, defining scopes, consolidation approaches, calculation methods and disclosure requirements.

Location-based method

Scope 2 calculation using the average emissions intensity of the electricity grid in the region where consumption occurs, ignoring any renewable energy purchases.

Market-based method

Scope 2 calculation reflecting contractual instruments such as renewable energy certificates or supplier-specific tariffs, showing the emissions profile of energy actually procured.

Emissions calculation formula

Emissions in tonnes CO2e equal activity data multiplied by the applicable emission factor, with units converted first; the factor source and year must be disclosed.

Operational control approach

A consolidation boundary that includes 100% of emissions from operations the entity controls, regardless of ownership percentage; the chosen approach must be applied consistently.

Equity share approach

A consolidation boundary that includes emissions in proportion to the entity's ownership interest in each operation, matching the financial statements treatment.

TCFD four pillars

Governance, Strategy, Risk Management, and Metrics and Targets: the disclosure architecture for climate-related financial information now embedded in IFRS S2.

Physical climate risk

Risk from acute events such as floods, storms and wildfires, or chronic shifts such as sea-level rise and temperature change, affecting assets, supply chains and operations.

Transition risk

Risk arising from the move to a low-carbon economy, covering policy and legal changes, technology shifts, market and customer changes, and reputational damage.

IFRS S2

ISSB standard requiring disclosure of governance, strategy, risk management, and metrics and targets for climate, including Scope 1, 2 and 3 emissions and scenario-based resilience assessment.

Science Based Targets initiative

Body validating corporate emissions targets against climate science; near-term targets require at least 95% Scope 1 and 2 coverage and 1.5 degrees C alignment.

Net zero versus carbon neutral

Net zero requires deep absolute emission cuts with only residual emissions neutralised; carbon neutral can be claimed through offsetting alone without reducing emissions.

Climate scenario analysis

Assessment of how climate-related risks and opportunities affect strategy under different pathways, including at least a 2 degrees C or lower scenario, as required by IFRS S2.

Conceptual framework threats

The five IESBA threat categories: self-interest, self-review, advocacy, familiarity and intimidation, each of which must be identified, evaluated and addressed.

Self-interest threat

A threat where a financial or other interest, such as fee dependence or a contingent fee, inappropriately influences professional judgement or behaviour.

Self-review threat

A threat arising when a professional re-evaluates their own prior work or the output of a system they designed, making unbiased challenge difficult.

Advocacy threat

A threat where a professional promotes a client's or employer's position, for example acting as an advocate in litigation, which compromises objectivity.

Familiarity threat

A threat from long association or close personal relationships that makes a professional too sympathetic to a client's interests or too accepting of their representations.

Intimidation threat

A threat where pressure, threats, dominant personalities or litigation risk deter a professional from acting objectively or from raising a concern.

Independence of mind

The state of mind enabling a conclusion to be reached without being affected by influences that compromise professional judgement, allowing integrity and objectivity.

Independence in appearance

Avoidance of facts and circumstances so significant that a reasonable and informed third party would conclude integrity, objectivity or scepticism had been compromised.

Fundamental principles

The ICAEW Code's five principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour, applying to all members.

ICAEW Code of Ethics

The ethical requirements for ICAEW members and firms, based on the IESBA Code, comprising the fundamental principles, conceptual framework and independence provisions.

Ethical decision model

A structured five-step approach: gather facts, identify ethical issues, identify affected parties, identify principles and alternatives, then decide and document the rationale.

Audit fee dependence threshold

Guideline that total fees from one audit client should not exceed 15% of the firm's total fees, or 10% for a public interest entity, with disclosure and safeguards.

Contingent fees prohibition

Charging audit fees contingent on the outcome of the engagement is prohibited because it creates an unacceptable self-interest threat to independence.

Confidentiality exception

Disclosure of client information is permitted where required by law, permitted by the client, or where there is a professional right or duty to disclose.

Protected disclosure

A whistleblowing disclosure qualifying for legal protection under the Public Interest Disclosure Act 1998, made to an employer or prescribed regulator in the public interest.

Ethics partner

A designated individual within a firm responsible for advising on ethical issues and handling escalation where engagement-level resolution of a threat fails.