Climate Change Accountability through Emissions Reporting

It’s become common knowledge that corporations are the largest global contributors to climate change. In 2021, it was reported that just 90 companies worldwide are responsible for two-thirds of historical greenhouse gas emissions. So how do we hold these corporations accountable?

Mia Nixon ’23, who is currently a double major in accounting and business intelligence, conducted her Summer Scholars research on the U.S. SEC's brand new emissions reporting proposal, based heavily on the European Union’s Emissions Trading System (EU-ETS). The ETS placed a limit on each EU-based company’s right to emit pollutants over an area. Companies can also trade emission rights within that area.

“Typically, when people are thinking about preventing climate change, they’re thinking small — driving their cars, littering, composting,” notes Nixon. “But when you think about the incredible amounts of jet fuel being consumed by airlines or the animal waste produced by cattle farmers — that’s the bulk of what is being detrimentally released into the atmosphere. That’s what the EU is trying to audit and limit.”

But how do you track all the emissions of a single company? Conveniently, this information can be found on their books.

According to Nixon, that’s the beauty of Environmental Social Governance (ESG) — it can really tie into anything we do. As she researched the new SEC proposal, she was able to speak with ESG employees at KPMG and PwC.

“ESG is so new to business,” explains Nixon. “People who never thought they would be involved in the finance industry, like environmental scientists, are being brought in to help auditors understand the standards for accounting in environmental issues. It’s a huge learning process.”

Under the SEC's new proposal for reporting, businesses will have to disclose climate-related finances and metrics in audited statements.

“These companies will be required to report if there was a fire or an oil spill,” explains Nixon. “anything that's going to affect their business models or strategies in the long- or short-term has to be accounted for.”

This is truly the cutting-edge of accounting, notes A.J. Stagliano, PhD, professor of accounting and Nixon’s faculty mentor on this Summer Scholars project. Stagliano believes Nixon will be part of the next generation of leaders to assist in reorienting financial reporting and disclosure so that ESG becomes more prominent.

“The accounting establishment has not had to deal with many qualitative aspects of their company’s economic outcomes,” says Stagliano. “Moving ESG into the forefront is frontier-like, in a way — we’re proud to see one of our best students forging a path for herself in such an innovative space.”

Though Nixon is determined to blaze a trail in ESG, she’s discovered that it isn’t easy to establish yourself in such a new profession as someone who has yet to graduate.

“It’s not something you can just wander in and ask for, unfortunately,” Nixon jokes. “I know because I’ve tried!”

Instead, Nixon has been seeking out highly competitive internships and networking opportunities that will help her gain her footing in this new field.

“What’s great about the work I did with Dr. Stagliano this summer is that now I have such a thorough understanding of what’s going on with the SEC and how ESG can work,” says Nixon. “It’s critical that we make sure climate issues integrate into everything we do in this world since they affect everything we do in this world. I’m a great believer in that.”