ICAEW ACA Sustainability and Ethics key terms

The idea that a company reports both how sustainability matters affect its own financial performance and how its activities affect people and the environment, requiring assessment from two directions.

The threshold at which sustainability information is significant because it could influence the economic decisions of users of the financial statements, focusing on effects on the entity's cash flows and value.

The perspective that information is material when it concerns the entity's actual or potential effects on people, society and the environment, regardless of whether those effects feed back into its own results.

Direct greenhouse gas emissions from sources owned or controlled by the reporting organisation, such as fuel burned in its own boilers, furnaces or vehicles.

Indirect greenhouse gas emissions from purchased electricity, heat, steam or cooling that the organisation consumes, generated upstream by the energy supplier.

All other indirect greenhouse gas emissions arising across the value chain, including purchased goods, business travel, distribution, product use and end-of-life treatment of sold products.

The widely used international accounting framework that sets standards for measuring and reporting greenhouse gas emissions, including the scope classification and corporate value chain guidance.

A state in which the greenhouse gases released into the atmosphere are balanced by removals over a defined period, so that the organisation's net contribution to warming is eliminated.

An emissions reduction goal consistent with what climate science says is needed to keep global warming within agreed limits, typically validated against a recognised methodology.

A documented, time-bound strategy describing how an organisation will shift its business model, operations and investments towards a low-carbon economy, including milestones and capital allocation.

A credit representing a reduction or removal of greenhouse gases elsewhere, purchased to compensate for an organisation's own emissions rather than eliminating them at source.

The potential harm to an organisation from climate-related events such as floods, heatwaves, storms or sea-level rise, whether acute events or chronic shifts in weather patterns.

The potential financial loss arising from the shift to a low-carbon economy, including policy changes, carbon pricing, technology shifts, market sentiment and reputational or legal pressure.

The combined physical and transition risks, plus liability risks, that climate change and the response to it create for an organisation's operations, strategy and finances.

A method of exploring how a business might perform under several plausible future conditions, such as different warming pathways or policy environments, to test strategy resilience.

A mechanism that assigns a cost to emitting greenhouse gases, through taxes or emissions trading, encouraging organisations to reduce emissions and shifting relative costs between activities.

A market-based system in which a cap is set on total emissions and participants trade allowances to emit, so that reductions occur where they are cheapest.

The disclosure of an organisation's environmental, social and governance performance and impacts to stakeholders, increasingly prepared under mandatory or voluntary reporting standards.

A reporting approach that explains how an organisation creates value over time by connecting strategy, governance, performance and prospects across financial and non-financial capitals.

A framework describing the resources an organisation uses and affects: financial, manufactured, intellectual, human, social and relationship, and natural capital.

The stock of natural resources and ecosystems, such as water, soil, forests and biodiversity, that provide goods and services on which organisations and society depend.

The variety of living species and ecosystems, whose loss creates business dependencies and impacts that organisations are increasingly expected to measure and disclose.

Making misleading or unsubstantiated claims about environmental performance so that a product, investment or organisation appears more sustainable than it actually is.

The practice of deliberately under-reporting or staying quiet about sustainability credentials, often to avoid accusations of greenwashing or scrutiny from regulators and activists.

The full sequence of activities, suppliers, customers and end-of-life stages connected to an organisation's products and services, across which impacts and dependencies arise.

The process of identifying, preventing and mitigating adverse human rights and environmental impacts in an organisation's chain of suppliers and business relationships.

Independent examination of sustainability disclosures by a practitioner to increase confidence in their accuracy and completeness, similar in purpose to a financial statement audit.

A model in which materials are kept in use for as long as possible through reuse, repair and recycling, reducing waste and the extraction of new resources.

The ongoing process of identifying and communicating with parties affected by or interested in an organisation, used to understand their concerns and inform decisions and reporting.

The ethical quality of being straightforward, honest and consistent between what one says and does, resisting pressure to compromise standards for personal or commercial gain.

The ethical principle that accountants should not let bias, conflict of interest, undue influence or personal relationships override professional judgement and honest assessment.

Freedom from relationships or interests that could compromise, or appear to compromise, the impartiality of an assurance provider's judgement and conclusions.

The ethical obligation to maintain the knowledge and skills needed for a task and to perform it thoroughly, in line with current technical and professional standards.

The principle that information acquired through professional work should not be disclosed or used for personal advantage without proper authority, except where law requires disclosure.

The principle requiring compliance with relevant laws and avoidance of conduct that a reasonable third party would see as damaging to the profession's reputation.

An attitude of alert questioning, being watchful for evidence of misstatement or bias and not accepting information at face value without appropriate corroboration.

A circumstance that could compromise an accountant's ability to exercise sound judgement, classified as self-interest, self-review, advocacy, familiarity or intimidation.

A threat arising when a financial or other interest, such as a fee dependency or bonus tied to a reported metric, improperly influences professional judgement.

A threat arising when a professional evaluates their own previous work or output, making it harder to challenge that work objectively.

A threat arising when a close or long-standing relationship with a client or colleague causes a professional to be too sympathetic to their interests or too accepting of their views.

A threat arising when pressure, threats or dominant individuals deter a professional from acting objectively or from raising concerns as they should.

A threat arising when a professional promotes a client's or employer's position to the point that subsequent objectivity on the same matter is compromised.

An action or control, such as review by another professional or removal from a decision, that reduces an ethical threat to an acceptable level.

Reporting suspected wrongdoing, such as fraud or environmental breaches, to an appropriate internal or external authority, often protected by law when done in good faith.

The systems, principles and processes by which an organisation is directed and controlled, including board responsibilities, accountability and oversight of risk and reporting.

A board subcommittee, normally of independent non-executive directors, that oversees financial and sustainability reporting, external audit and internal control arrangements.

The signals sent by senior leadership through their behaviour and priorities, which shape whether an ethical, compliance-focused culture takes hold throughout the organisation.

A situation in which a person's private interests or other duties could improperly influence, or be seen to influence, decisions made in a professional role.

The wider good of society that the accountancy profession is expected to serve, justifying duties that go beyond the interests of a single client or employer.

A structured approach to resolving dilemmas, typically identifying facts, relevant principles, stakeholders, options and consequences before reaching and documenting a conclusion.

The firm or practitioner engaged to give an independent opinion on an organisation's sustainability information, requiring suitable competence, independence and scepticism.

The ethical and legal exposure created when sustainability disclosures are selective, unverifiable or exaggerated, potentially misleading users and damaging trust in the organisation.