Speech

Speech by the Chancellor of the Exchequer, Rt Hon George Osborne MP, at the Accounting for Sustainability Annual Forum

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Speech by the Chancellor of the Exchequer.

Your Royal Highness, ladies and gentlemen, good afternoon.

I would like to start by thanking you for the opportunity to address the Prince’s Accounting for Sustainability Annual Forum.

It is very encouraging to see so many of you here today from across the international business community, leading names from academia, as well as representatives from the public and voluntary sectors - all of you playing a leading role in this important issue.

We all know that our planet’s natural resources are limited.

We also know that the world’s population is growing and its material expectations are ever increasing.

And that is precisely the dilemma facing all of us.

The implications for the natural environment, for the biodiversity of our planet, for the future of international development and climate change are - to put it simply - enormous.

Let us consider the following three facts about the catastrophic impact of human activity on our environment:

By 2050 we may lose services from natural habitats equivalent to 7% of global GDP;

By 2070 large parts of northern Brazil and southern Africa could lose their tropical forests, and if this happens global vegetation will no longer absorb carbon dioxide but become a source of carbon;

By 2080 it is estimated that up to an additional three billion people could suffer increased problems accessing clean water, and sea levels are expected to rise by up to 60cm.

The task is clear.

Dealing with these problems will be the greatest challenge of our generation.

And I believe it is no exaggeration to say that the Prince’s Accounting for Sustainability Project represents a crucial step towards helping us understand the impact of human activity on the natural environment.

As we have just heard, the project is proving a real success.

It is only six years since its inception, and already it is making a considerable difference.

Much of that is down to the leadership and vision of the Prince of Wales.

Sir, yours has been a consistent and untiring voice arguing for the importance of sustainability and calling for the protection of our natural resources.

It may fashionable these days to care about the environment, but you Sir were making the environmental case years ago - when few others were.

And crucially, you understood where the pressure points were and you were willing to work within the system to help it adapt to the realities of sustainability.

It is all well and good to be concerned about the problem.

It is a lot harder to find practical solutions.

Unless you get close enough to the detail of corporate financial accounts, unless you make the argument for sustainability, and convince decision-makers that this is the way forward - you will not make a difference.

The work of A4S is so impressive precisely because it recognises and encourages the link between the pro-sustainability decisions of top management and their detailed financial and non-financial consequences within organisations.

The depth and reach of your work is demonstrated by the sheer number of organisations taking part in your project.

Over two hundred public and private sector organisation have so far created a Connected Reporting Framework for their operations, embedding sustainability into their operations.

Household names like Sainsbury’s - and it is very good to see you Justin joining us here today - HSBC, BT, Aviva or EDF Energy.

And as we have just heard, this year has seen the establishment of the International Integrated Reporting Committee, to help integrate sustainability, social and corporate governance impacts into companies’ annual reports.

This is a very welcome development and I am sure it will make a valuable contribution to the debate around corporate responsibility.

So, Sir, I recognise and celebrate your achievements at A4S.

But the success of the Accounting for Sustainability project is also down to the great work all of you do in your own individual companies and organisations.

I want to be crystal clear with you today and tell you that I fully support your initiative.

What’s more, for some time now I have advocated the principles which underpin your project.

Economists will tell you that complete and perfect information, as well as assignable property rights, are the way to deal with environmental market failures.

To put it in a language the rest of us will understand - we need to know what the problem is before we can set about finding a solution.

Better and fuller information is a crucial first step towards promoting environmental sustainability.

As some you will know, the Government is on course to formally introduce many elements of the Accounting for Sustainability approach into our own accounts.

We have benefited from a healthy exchange of views and expertise between A4S and the Treasury.

Your excellent Project Director, Jessica Fries, has been a member of the steering group helping the public sector put together the guidance on how to implement sustainability reporting requirements.

And the Treasury’s Group Director of Finance, until recently Louise Tulett, was on the supervisory board of A4S.

So I am very pleased that this cross-fertilisation has proved fruitful.

The public sector has adapted the Project’s integrated reporting guidance and during this financial year it is being piloted across the whole of central Government.

We want to go further than that.

So from April we are planning to fully implement sustainability reporting across Government.

For the first time there will be a mandatory requirement for all central government departments and the NHS to publish in their Annual Reports and Accounts a Sustainability Report.

These sustainability reports will include details of departments’ carbon emissions, waste management and use of finite resources - reflecting the integrated reporting requirements recommended by Accounting for Sustainability.

For example, in terms of non-financial reporting, departments will now report data on:

  • Direct and indirect greenhouse gas emissions,
  • The absolute cost of waste disposal;
  • And data on water consumption.

And departments will also report the related financial information, for example gross expenditure on greenhouse gas emissions.

These steps will undoubtedly increase transparency and accountability across the public sector.

And over time we aim to move towards more advanced sustainability reporting in Government.

I am sure you will all agree with me that these are very welcome developments in the way the public sector accounts for its activities, and fully in line with the objectives of your project.

I also know how important it is for all of you that international accounting standards are adapted in order to reflect sustainability concerns.

Of course, the UK Government is active in supporting international efforts to improve financial reporting standards and will continue to support such efforts in international fora, including through the G20.

Making sure financial reporting fully reflects the impact on the environment is no easy task.

It will take a long time to change the way we do things and challenge vested interests.

But that doesn’t mean we shouldn’t do it. Or that we should wait for future generations to do it.

In my mind, the promotion of sustainability is a constant struggle against the forces of short-termism.

And nowhere is that struggle greater than when governments of all colours pursue their environmental policies.

As you have pointed out Sir, people’s enjoyment of life is not solely determined by a profit and loss calculation.

Of course, at a time like this, as we exit recession and enter recovery, people are naturally focused on their livelihoods and their material wellbeing.

That is understandable. But we must not lose focus.

We all love and enjoy the natural environment in which we live.

So we need to protect it.

Each in our own way and with our own resources must do what we can to further this cause.

Let me tell very briefly about what the Government is doing.

First on biodiversity.

We are almost doubling spending, in this difficult time, on the higher level stewardship scheme, which will pay farmers to look after ecologically sensitive areas.

We will designate the first Marine Conservation zones by the end of 2012.

In October, our Environment Secretary Caroline Spelman worked to reach an international agreement at Nagoya to protect global biodiversity.

To support that agreement, I committed £100 million as part of the Spending Review to fund biodiversity projects in forest regions.

And in the spring we will publish the Natural Environment White Paper, the first such paper for 20 years, which will include measures to protect wildlife, analyse the state of our natural asset base and value natural capital complementing the national accounts.

But protection alone cannot be the complete answer.

We also need to lessen the impact of human activity on the natural environment.

And in just a few months we have already put in place the foundations of an ambitious green agenda.

I have still committed up to £1 billion to fund one of the world’s first commercial scale carbon capture and storage demonstration projects.

We are also investing in the development and manufacturing of off-shore wind technology.

We are in the process of setting up a new Green Investment Bank, something I have long argued for, and which will be initially funded with £1 billion of public money plus additional funds from asset sales.

Our aim is for Britain to be a leader of the new green global economy.

And this comes at the end of a week when we have seen greater international agreement on climate change than seemed possible only a few months ago.

The international talks on climate change in Cancun exceeded expectations, with agreements on:

  • Urging deeper mitigation targets for all developed countries;
  • International assessment of emerging market emissions;
  • Establishing a Green Climate Fund;
  • A new framework for dealing with deforestation;
  • And an agreement to define 2050 global emission targets by next year’s meeting in South Africa.

When it comes to the natural environment, we face tremendous challenges.

We can make a difference.

Because both in politics and in business, it falls to our generation to have the foresight and the prescience to start thinking beyond our lifetimes.

So that we can leave to our children a safer and cleaner planet than that which we ourselves inherited.

I wish you the best of luck in taking forward your project.

Thank you very much.