Recent correspondence about confidence in the findings of the Intergovernmental Panel on Climate Change (IPCC) detracts from the more substantive issue of whether it is time to develop an accounting methodology capable of quantifying the impact emissions of carbon dioxide and other such externalities have on the process of generating wealth.
It is easy to question the work of the IPCC, but it will require real effort to develop an internationally agreed set of rules that businesses can use to assess how much they rely on the draw-down of natural resources and utilisation of the atmosphere, water and the soil to dispose of their waste. In this regard, it is important to note that the World has moved on from an era when the development and accumulation of human wealth were constrained by the availability of capital, to one where its generation will increasingly be constrained by the availability of resources.
The model used to generate such capital relied on the creation of concepts in accounting (creditor and debtor / balance sheet / profit and loss) as well as ownership (company and stock market) that is now showing its age under an onslaught of off-balance sheet, leveraged and derivative financing. Given that it has taken the International Accounting Standards Board (IASB) and its predecessor the IASC, going on thirty years to redraft the model (that in all likelihood is broken), we may need as much time again, to draw up a new set of rules capable of identifying the true utilization of natural resources in the process of creating value. By then, the IPCC will long have put its house in order.