View source for Draft:Accounting for sustainability: the C.A.R.E. project

{{Short description|ecological accounting framework}}
{{Draft topics|business-and-economics}}
{{AfC topic|other}}
{{AfC submission|||ts=20250213103012|u=Pgrondier|ns=118}}
{{AfC submission|t||ts=20250203093145|u=331dot|ns=118|demo=}}

The Comprehensive Accounting in Respect of Ecology (C.A.R.E.) project seeks to integrate sustainability into the information systems of organisations, enabling accurate accounting of "all things that matter" at the corporate level. While traditional accounting addresses only the financial dimension of an enterprise's operations, C.A.R.E. aims to bring at the same level its ecological{{refn|group=note|name="ecology"|C.A.R.E. uses the term "ecology" in its original sense, as "the global science of the relationships of organisms [including humans and non-humans] with the surrounding external world, in which we broadly include all conditions of existence [and cohabitation]". This perspective therefore implies a fundamental and intrinsic coupling between "social" and "natural": "ecology" is thus not simply synonymous with "environmentalism."<ref>{{Cite book |last=DAJOZ |title=Précis d'Ecologie |date=2006 |publisher=Editions Dunod |isbn=978-2100806348 |language=fr}}</ref>}} sustainability concerns through the understanding and measurement of their impact on the natural and human environment.

In a way somewhat similar to that of financial capital (understood as a debt owed by the organisation toward its owners{{refn|group=note|name="capital"|}}), human and natural entities impacted by the enterprise's operations are regarded as entities toward which the enterprise owes a debt. This debt is expressed through a measure of the degradation impacting the entity. With this debt comes the associated obligation to reimburse it. C.A.R.E. reaches this objective by generalising the concept of capital to non-financial entities and by extending existing accounting principles and techniques to these entities. Once the impacts of an organisation on its human and natural environments are properly measured and accounted for, C.A.R.E. proposes to bring the corresponding cost of their protection in its financial statement .

Operationally, C.A.R.E. is an integrated accounting system where the biophysical accounting of non-financial entities is cross-referenced with financial data, allowing for the complete integration of financial and socio-environmental information in a single framework. This integration calls for the emergence of new accounts at the level of the general ledger, the balance sheet, and the income statement, resulting in a single set of accounting reports that fully intertwine the financial and socio-environmental health of the organisation.

== Levels of understanding. ==
The overall C.A.R.E. project refers to three levels of understanding:

;A socio-economic and organisational theory
* The C.A.R.E. project supports a socio-economic and organisational theory that highlights the necessity to protect our human and natural environments as a way to ensure the long-term resilience of human societies and their well-being.
;A conceptual framework
* With this objective in mind, C.A.R.E. proposes to report on the environmental and human impacts of corporations by extending the traditional conceptual accounting framework to non-financial entities.
;A methodology
* CA.R.E. also encompasses a methodology that describes the step-by-step implementation of this accounting model, allowing for the integration of human and environmental concerns into an organisation's accounting plan, income statements, balance sheets, and management dashboards.

== Theory ==

At the research level, C.A.R.E. is developed as a distinct socio-economic theory with the following characteristics<ref>{{Cite web |title=Qu'est-ce que CARE? |url=https://www.cerces.org/care |access-date=2025-02-07 |website=CERCES |language=fr}}</ref>:

* It reconnects with the original definition of [[economy]] as a "mode of administration of a common household".
* In order to address the challenges of the ecological transition, this mode of administration must encompass not only the financial aspects of the economy but also its ecological {{refn|group=note|name="ecology"|}} dimensions.
* Organisations, through their activities, are degrading our human and natural environment. The extent of these degradations - understood as an ecological debt - can then be evaluated scientifically, thereby allowing for the evaluation of the costs associated with their restoration.
* C.A.R.E. proposes to modify our current accounting processes to bring this ecological debt and its management within the framework of our information and decision-making systems.

== Conceptual framework ==
For the vast majority of people, accounting is nothing but a calculative management technique focused on the financials of an organisation. However, for historians and anthropologists, accounting techniques play a central organising role in the development and complexification of civilisations: "Accounting records are abstract physical representations of past exchange and cooperative endeavour, and they act as backup and/or primary memory for economic agents engaged in large-scale complex exchange. By expanding memory capacity far beyond the biological constraints of the human brain, accounting records vastly increased the scale and scope of human cooperation. Combined with language, law, and other coordination-supporting institutions, hard transactional records helped human civilisations to emerge."<ref>{{Cite journal |last1=Basu |first1=Sudipta |last2=Waymire |first2=Gregory B. |date=2005 |title=Recordkeeping and Human Evolution |url=https://papers.ssrn.com/sol3/papers.cfm?abstract_id=762004 |journal=SSRN Electronic Journal |doi=10.2139/ssrn.762004 |ssrn=762004 |issn=1556-5068}}</ref>

Indeed, historical studies show a much more generic and wider use of accounting. Following the adoption of agriculture by settled humans, record-keeping techniques flourished with the development of large-scale human organisations and the corresponding necessity to track resources and their trades. The earliest known accounting records are clay tokens, dating back to around 7500 BCE in Mesopotamia, <ref>{{Cite book |title=The origins of writing |date=1991 |publisher=University of Nebraska Press |isbn=978-0-8032-9167-6 |editor-last=Senner |editor-first=Wayne M. |edition=1. paperback |location=Lincoln [Neb.] London}}</ref> thus preceding abstract numbers and the use of money. Anthropologists consider that the first writing techniques derive from such archaic counting devices.<ref>{{cite book |date=2006 |first1=Denise |isbn=978-0-292-77704-0 |last1=Schmandt-Besserat |publisher=Univ. of Texas Pr |title=How writing came about}}<!-- auto-translated from French by Module:CS1 translator --></ref>

=== Functions of accounting ===
In the most generic way, accounting systems can be described by the functions they fulfil,<ref>{{cite web|access-date=2025-01-30 |language=fr |title=Qu'est-ce que la comptabilité? |url=https://www.cerces.org/qu-est-ce-que-la-comptabilit%C3%A9 |website=CERCES}}<!-- auto-translated from French by Module:CS1 translator --></ref> namely:

* '''Taking into account''': the primary function of accounting is not to count but to take into account: "Accounting is largely a method of classifying entries into proper pigeonholes, which are called accounts."<ref>{{Cite journal |last=de Roover |first=Raymond |date=1938 |title=Characteristics of Bookkeeping before Paciolo |url=https://www.jstor.org/stable/238652 |journal=The Accounting Review |volume=13 |issue=2 |pages=144–149 |jstor=238652 |issn=0001-4826}}</ref>
* '''Being accountable (for one's actions)''': accounting systems then arrange the regimes of responsibilities and accountabilities of organisations, that is, who is responsible, to whom, and why. In this regard, accounting is traditionally strongly connected to laws and regulations.
* '''Counting''': Accounting systems also provide specific metrics, quantitative and qualitative, monetary or not, capable of making certain pieces of information considered important commensurable.
* '''Reporting''': Accounting finally organises the communication and discussion around this information, based on the actors identified as the primary recipients of it. In this sense, accounting is central to the governance of organisations.

Redefined through this much broader understanding, accounting can be seen as what it is effectively: by deciding what to count, how to count for it, and who is responsible for that accounting, accounting is deeply influenced by the surrounding social and political norms and theories. In this sense, much more than a neutral technique, accounting is indeed a political tool.<ref>{{cite web|access-date=2025-01-30 |date=2018-06-26 |language=fr |title=La comptabilité, c'est politique ! |url=https://www.alternatives-economiques.fr/franck-aggeri/comptabilite-cest-politique/00085177 |website=Alternatives Economiques}}<!-- auto-translated from French by Module:CS1 translator --></ref>

The C.A.R.E. project is based on this interpretation of accounting and aims to renew the accounting architecture that is at the heart of our organisations. By drawing inspiration from the traditional accounting system, it proposes to make it compatible with ecological requirements by bringing non-financial entities, human and environmental, into traditional accounting.

=== Incorporation of non-financial entities into traditional accounting ===
At the core of the C.A.R.E. accounting principles is the concept of capital, taken here in its original understanding, that of a debt. Historically, capital is, for an organisation, the principal part of a debt in money<ref>{{Cite journal |last=Hodgson |first=Geoffrey M. |date=2014-09-01 |title=What is capital? Economists and sociologists have changed its meaning: should it be changed back? |url=https://academic.oup.com/cje/article-abstract/38/5/1063/2875364?redirectedFrom=fulltext |journal=Cambridge Journal of Economics |volume=38 |issue=5 |pages=1063–1086 |doi=10.1093/cje/beu013 |issn=0309-166X}}</ref> owed to its investors{{refn|group=note|name="capital"|
This conception of capital opposes a neoclassical model, now predominant, of capital as a "set of productive things," called "assets." At the organizational level, this model is embodied by the implementation of IAS/[[International Financial Reporting Standards|IFRS]] accounting standards, and adheres to accounting practices whose primary objective is to measure the fair value of organisations, whose role is then reduced to maximising the dividends received by its shareholders.

The C.A.R.E. project clearly questions the ability of this neoclassical model to adapt to new environmental challenges. In this regard, the recent works of the [[International Sustainability Standards Board|ISSB]] (the body established by the IFRS, responsible for sustainability issues) particularly oppose the double materiality approach, as supported by C.A.R.E. and proposed by the European [https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en CSRD].

For an in-depth analysis of the two conceptions of capital, please see the corresponding page on the CERCES's [https://www.cerces.org/fondements-care webpage].
}}. While the organisation uses and degrades this monetary capital to face its expenses, its activities are creating a value that materialises in a production of goods or services eventually sold. At the end of a given period, the financial resources spent to produce this value should be at a minimum reimbursed through the sales, ensuring the financial sustainability of the organisation. It is indeed only after its degraded capital has been regenerated that an enterprise can claim a profit.

C.A.R.E. proposes to extend this definition of capital as a debt owed to other non-financial entities that are used and degraded through the organisation's activities. Such entities can be of human or environmental nature: people living near a factory, workers executing their tasks in dangerous conditions, a river used for the discharge of industrial effluents, or a field planted with cereals.

This debt, as the impact of an organisation on these non-financial capitals, is accounted for in corresponding biophysical units: cubic meters of polluted water, tonnes of greenhouse gases emitted, number of work incidents, etc. The state of the impacted capital is then be compared to a pre-agreed, science-based, good status. Good statuses can be defined in different ways, such as law (European Water Directive<ref>{{Cite web |date=2025-01-29 |title=Water Framework Directive - European Commission |url=https://environment.ec.europa.eu/topics/water/water-framework-directive_en |access-date=2025-02-03 |website=environment.ec.europa.eu |language=en}}</ref>), treaties ([[Paris Agreement|the Paris Agreement]] <ref>{{Cite web |title=The Paris Agreement {{!}} UNFCCC |url=https://unfccc.int/process-and-meetings/the-paris-agreement |archive-url=http://web.archive.org/web/20250212215519/https://unfccc.int/process-and-meetings/the-paris-agreement |archive-date=2025-02-12 |access-date=2025-02-14 |website=unfccc.int |language=en}}</ref>), or voluntarily adopted by the organisation itself (Michelin living wage policy<ref>{{Cite news |title=French tire maker Michelin rolls out its own global living wage after minimum wages left staff in 'survival mode' |url=https://finance.yahoo.com/news/french-tire-maker-michelin-rolls-115947412.html |archive-url=http://web.archive.org/web/20240614082951/https://finance.yahoo.com/news/french-tire-maker-michelin-rolls-115947412.html |archive-date=2024-06-14 |access-date=2025-02-03 |work=Yahoo Finance |language=en-US}}</ref>). The level of the biophysical debt contracted by the organisation is then related to the difference between the actual state of the capital considered and its pre-agreed good status.

The linkage between this biophysical debt and traditional financial accounting can then be made by acknowledging that its reimbursement, being the activities to be conducted to bring the capital back to a good state, has a financial cost. This amount of money is then considered as owed to the corresponding entity, and the extinguishment of the debt will only happen once the corresponding activities have been conducted and the corresponding money spent.

Through this approach, C.A.R.E. allows for a complete integration of financial and non-financial concerns in an organisation's accounting system. It is then possible to define an organisation's sustainability through its capacity not only to reconstitute its financial capital but also to preserve the non-financial entities it relies on for its activities. It is only once all of its financial and non-financial debts are reimbursed that the organisation can then claim a profit.

== Methodology ==

=== Core principles ===
The C.A.R.E. methodology is developed on a few overarching principles 
* C.A.R.E. is built on a '''multi-capital''' approach:
Multi-capital approaches to accounting expand beyond traditional financial capital to recognise and measure multiple forms of capital that contribute to an organisation's value creation. C.A.R.E. addresses three categories of capital: financial, environmental, and human{{refn|group=note|C.A.R.E. does not propose a triple-capital accounting, but a true multi-capital one, where each entity that needs to be preserved is acknowledged as a capital.}}. This approach acknowledges that businesses rely on various forms of capital in their operations and on the necessity to measure and report on the organisation's impact on these capitals.
* C.A.R.E. relies on '''double materiality''':
Double materiality is a concept that considers both: 

<math>\Rightarrow</math> how sustainability issues affect a company's financial value (financial materiality) and

<math>\Rightarrow</math> how the company's activities impact the environment and society (impact materiality).

This dual perspective requires organisations to assess and report not only on environmental, social, and governance (ESG) factors that could affect their business performance but also on how their operations affect their natural and socio-economic environments, making it a comprehensive framework for sustainability reporting. Double materiality approaches are strongly embedded into European regulations around sustainability, notably the CSRD.<ref>{{Cite web |title=FINANCE - Sustainable finance |url=https://ec.europa.eu/newsroom/fisma/items/754701/en |access-date=2025-02-03 |website=ec.europa.eu}}</ref>
* C.A.R.E. is aligned with the principles of '''strong sustainability''':
Strong sustainability holds that the different capitals impacted by an organisation cannot be substituted with each other, and each one of them has to be considered independently when it comes to their sustainability. This perspective argues that there are absolute ecological limits that must be respected and that economic activity must operate within these planetary boundaries, rejecting the idea that technological innovation or human-made capital can fully compensate for environmental degradation.<ref>{{Cite book |last=Neumayer |first=Eric |url=https://china.elgaronline.com/view/9781781007075.xml |title=Weak versus Strong Sustainability: Exploring the Limits of Two Opposing Paradigms, Fourth Edition |date=2013-04-30 |publisher=Edward Elgar Publishing |isbn=978-1-78100-708-2 |doi=10.4337/9781781007082}}</ref>
* For each capital, '''impacts are measured and benchmarked against an ideal good state'''.
In this context, a sustainable organisation will be defined as one that has the capacity to maintain in a good state (or bring to a good state) all capitals affected by its activities. Both the state of the capital and the impact of the organisation on this capital can be defined scientifically through relevant metrics, grounding the concept of sustainability in scientific evidence.

===Phases===
[https://www.cerces.org/methodologie-care The methodology described hereunder is the second iteration (V2) of the C.A.R.E methodology, dated December 2023.]
{{collapse top |Phase 1: identification of capitals}}

The objectives of this phase are to identify the environmental and human capital entities impacted by the functioning of the organisation under study, on top of the traditional financial capital. In the context of C.A.R.E., a capital will be defined as a material or immaterial entity that is <ref>{{Cite web |title=Qu'est-ce que CARE? |url=https://www.cerces.org/care |access-date=2025-02-03 |website=CERCES |language=fr}}</ref>: 

# utilised and consumed by the organisation within its operational framework
# existing independently of the company's activities
# and acknowledged as requiring to be preserved.

With the exception of financial capital, that can be considered of generic use, other capital entities will be specific to the organisation. Only capitals impacted by the organisation will be retained. The materiality of these impacts will be assessed accordingly.
{| class="wikitable mw-collapsible mw-collapsed"  width=100% 
|-
! colspan="2" scope="col" style="background: LightCyan;" |Examples of capital entities
|-
|-
! colspan="2" scope="col" style="background: LemonChiffon;"  |Financial capital
|-
|'''Financial resource'''
|Financial resources is a capital common to all organisations, needed for every company's operations (procurement, wages, taxes, etc.), and whose protection is needed to ensure the long-term survival of the company.
|-
! colspan="2" scope="col" style="background: LemonChiffon;"  |Environmental capitals
|-
|'''Soil type'''
|Such as a crop field: for a farm, soil needs to be kept in a state that allows for the production of crops and the feeding of the water table through the filtration of rainwater.
|-
|'''Water type'''
|Such as a river: for an industry, '''water''' pumped clean from the river, used in an industrial process, and ultimately flushed back to the river with added chemical components, particles, etc.
|-
! colspan="2"  scope="col" style="background: LemonChiffon;" |Human capitals
|-
|'''Physical health'''
|for a physically demanding activity, work can result in musculoskeletal disorders among staff. Such issues should be addressed through proper training, appropriate equipment, etc.
|-
|'''Knowledge'''
|for intellectually engaging activities, knowledge needs to be maintained and updated in order to cope with the latest technologies and updates in the corresponding domains
|}

{| class="wikitable mw-collapsible mw-collapsed" width=100%
|-
! colspan="2" scope="col" style="background:LightCyan ;"  width=100% |Examples of non-capital entities
|-
| scope="col" style="background: LemonChiffon;" |''Entities that are not utilised and consumed by the organisation''
|During this identification phase, the first step will be, in all cases, to assess the materiality of the organisation's impact on the potential capitals. If there is no impact, or if the impact is minimal (non-materiality), the entity will not be considered as a capital. A river that borders a commercial or industrial zone will or will not be considered as a capital depending on the activities happening in the commercial zone. If there is no pumping of water from the river, no discharge of liquids or solids into the river, no chemical contamination from leakages, etc., the river need not be regarded as a capital.
|-
| scope="col" style="background: LemonChiffon;" |''Entities that do not exist independently of the activities of the company.''
|An artificial forest, specifically planted for the production of wood (thus not existing independently of the company's activities), will not be considered a capital entity. Nevertheless, the soil on which this artificial forest is grown does exist independently of the company's activities and is indeed utilised and consumed by the organisation to grow the trees; it acts as a physical support for the trees and as a source of fertility. It needs to be preserved once trees are cut, either to allow for a new plantation or to return to a natural state.
|-
| scope="col" style="background: LemonChiffon;" |''Entities that are not acknowledged as requiring preservation.''
|Extracted ores or mineral oils do not require preservation (otherwise they would not be mined), thus cannot be considered as capitals. However, the mined zone and its ecosystem do qualify as a capital, as they are impacted by the mining activities and need to be preserved on environmental and human grounds: biodiversity, carbon capture, filtration of rainwater, food and economic activities for local populations, etc.
|}
{{collapse bottom}}

{{collapse top |Phase 2: Insertion of capitals in the business model }}
The entities identified as capitals are brought into the business model of the organisation. This phase allows for the proper understanding and measurement of:     

* The way capitals are mobilised and impacted by the different activities of the organisation. The degradation of the capital is measured and expressed in a biophysical unit that is specific to the capital.
* and which corresponding value is then created for the organisation. At this stage, the value created might not be measurable but can still be "taken into account" via a qualitative description.

{| class="wikitable mw-collapsible mw-collapsed"  width=100% 
|-
! colspan="2" scope="col" style="background: LightCyan;"|Examples: Inserting capitals in the business model
|-
! colspan="2"  scope="col" style="background: LemonChiffon;"| Financial capital
|-
|'''Financial resource'''
|The organisation mobilises its financial resources to buy equipment. Through this process, its financial capital is degraded, and the value of its fixed assets increases accordingly. A similar reasoning can be applied to the purchase of products and services or any other activity mobilising the finances of the company. In line with the principles of historical cost accounting, the degradation of the financial capital is measured in monetary units (i.e., the cost) and is equal to the value created through the process.
|-
! colspan="2"  scope="col" style="background: LemonChiffon;"|Environmental capitals
|-
|'''Soil type'''
|A crop field is negatively impacted by the frequent movements of heavy equipment for the ploughing, seeding, and other cultural practices required for the cultivation of the crop. The negative impact can be measured through the number of rotations on the field, the increase of the soil's compaction level, or the decline of its water retention capacity. The value created is that of a crop correctly managed.
|-
|'''Water type'''
|A factory uses fresh water pumped from a lake for further use in its production process and flushes the dirtied water back in the lake. The degradation level of the water can be expressed in cubic meters of dirty water or in volumes/masses of chemicals and/or physical particles contained in the flushed water. The value created is that of the products that are now clean from chemical substances and dust.
|-
|'''Climate'''
|A transport company uses the atmosphere for the storage of gases emitted by its vehicles. These gases participate to global warming, thus negatively impacting the climate. The corresponding degradation of the atmosphere linked to the use of these vehicles can be expressed in tonnes of CO2 equivalent generated by the burning of fuel. The value created is that of products made available at their destinations.
|-
! colspan="2"  scope="col" style="background: LemonChiffon;"|Human capitals
|-
|'''Physical health'''
|A farmer spends time carrying bags of fertiliser on his back from the truck to the storage room. This task negatively impacts his health and can lead to musculoskeletal disorders. The impact of this activity on his health (the degradation) can be expressed in hours of work or in tonnes of fertilsers brought to the storage room. The value created is that of fertilisers stored and protected from bad weather and theft.
|}
{{collapse bottom}}
{{collapse top | Phase 3: Protection activities }}

At this stage, capitals are identified, and degradations are measured. The organisation now has to plan for a series of activities meant to protect the capitals. 

C.A.R.E. proposes the following taxonomy for the classification of these protection activities:
* '''Avoidance activities''': are activities happening within the operating activities of the organisation. They are aimed at reducing the intensity of use (and thus degradation) of a given capital. These activities involve an adaptation, or modification, of the business model.

* '''Preservation activities''': are those happening outside of the operating activities of the organisation. They do not modify the business model of the organisation nor impact its operating financials. These preservation activities can be further divided in two groups:
** '''Preventive activities''': are activities that prevent the capital considered to be impacted, without altering the business model
** '''Restoration activities''': are activities that happen after the capital has been impacted. In a way similar to the preventive activities, these activities do not alter the business model.
* '''Capital access activities''': are necessary to build a proper knowledge of a given capital, the conditions of its preservation, and its monitoring
This taxonomy highlights the fact that the organisation now has the responsibility to engage in preservation and capital access activities that are outside of its business and operating model. 

{| class="wikitable mw-collapsible mw-collapsed"  width=100% 
|-
! colspan="4"  scope="col" style="background: LightCyan;"|Classification and examples of protection activities
|-
!  scope="col" style="background: LemonChiffon;"| Operating activities
! colspan="3" scope="col" style="background: LemonChiffon;" |Non-operating activities
|-
| rowspan="2" style="text-align: center;  vertical-align:top;" |'''Avoidance'''
| colspan="2" style="text-align: center;"|'''Preservation'''
| rowspan="2" style="text-align: center; vertical-align:top;"|'''Access to capitals'''
|-
| style="text-align: center;|'''Prevention'''
(or preservation ex-ante) 
| style="text-align: center;|'''Restoration'''
(or preservation ex-post) 
|-
! colspan="4"  scope="col" style="background: LemonChiffon;"|Definition
|-
| rowspan="2" style="vertical-align:top;"|Avoidance activities are happening within the operating activities of the organisation, with the objective to reduce or cancel the impact of the activity on the capital 
| colspan="2" style="vertical-align:top;"|Preservation activities are those aimed at protecting the capitals and that are happening outside of the operating activities of the organisation.
| rowspan="2" style="vertical-align:top;"|build the knowledge of a given capital and allow for its follow-up.
|-
|style="vertical-align:top;"|Preventive activities are happening ''before'' the capital is impacted. 
|style="vertical-align:top;"|Restoration activities are happening ''after'' the capital has been impacted. 
|-
! colspan="4"  scope="col" style="background: LemonChiffon;"|Examples
|-
|style="vertical-align:top;"|
* Replacement of a diesel-powered engine by an electric-powered engine: reduction of GHG emissions
* On a tractor, replacement of standard tires by low-pressure ones: reduction of compaction
|style="vertical-align:top;"|
* Implementation of pollutant treatment from a factory before discharge into the river (the capital considered here is the river).
* Longer work breaks for workers on production lines
|style="vertical-align:top;"|
* The organic matter content of a crop field is improved thanks to the seeding of a green fertiliser during the intercropping period.
* An employee that got hurt during their work benefits from a leave period that includes a follow-up by a physiotherapist.
|style="vertical-align:top;"|
* Soil analysis
* Water analysis
* Greenhouse Gas Inventory
* medical report
|}
{{collapse bottom}}

{{collapse top | Phase 4: Value chain and investments}}
An organisation is not fully respectful of its socio-environmental commitments if it does not incorporate into its approach the impact of its relationships with its partners on non-financial capitals. The C.A.R.E. model incorporates the monitoring of such impacts arising from the value chain to later bring them into the organisation's income statement and balance sheet.

'''Suppliers'''

The previous phase leads to the identification of non-financial debts and of the corresponding activities allowing for the write-off of these debts. Then, products and services bought from suppliers also have an impact on non-financial capitals. Unless the supplier itself is applying the C.A.R.E. methodology, the selling price would include only the financial cost of production and a profit margin, ignoring its real environmental cost. The transaction between the organisation and its supplier then carries de facto a nono-financial debt that is not covered by the price paid.

In order to ensure the sustainability of its supply chain, the organisation then has to 
* estimate the environmental debt contracted, but not cleared, by its supplier
* and bring into its plans the protection activities that will allow for a cancellation of this debt.

That approach, based on the detailed understanding of the organisation's supply chain, can appear cumbersome. A way to circumvent this issue is through the use of sectorial statistical values that can help to evaluate the ecological impact of the product bought. For example, the carbon intensity of electricity generation (i.e., greenhouse gas emissions per kilowatt-hour) can be used to estimate the supplier's ecological debt linked to its energy supply.

'''Clients'''

On the downstream side of its activities, the organisation proceeds with the reclassification of its production and services. Following the terminology adopted during phase 3 of the C.A.R.E. methodology, activities and the corresponding profit accounts are split along the following:

* Operating revenues
** Standard operating revenues
** Revenues for avoidance
* Revenues of preservation activities

'''Finance'''

These are money allocated by the organisation to other entities. Depending on the final objectives and the conditionalities of the funds invested, these can be accordingly reclassified under the following categories:

* Financing of operations
** Standard activities
** Avoidance activities
* Financing of preservation activities

{{collapse bottom}}
{{collapse top | Phase 5: Preservation expenses}}
In this phase, C.A.R.E. is here building a link between the degradation of capitals, expressed in the corresponding biophysical units, and the cost of their preservation, expressed in monetary units.

The organisation negatively impacts non-financial capitals (phases 1 and 2). Part of this impact can be reduced or cancelled through '''avoidance activities''' (phase 3), as activities that can be included in its operating activities. The residual negative impacts, including those linked to the supply chain (phase 4), must then be addressed outside of the business model, through '''preservation activities''' (phase 3).

These preservation activities need to be addressed by the organisation and covered by its turnover. A corresponding part of its revenues should then be allocated to these preservation activities. Such amounts are called '''preservation expenses''': they are mandatory savings that need to be secured to ensure the proper execution of preservation activities.
 
It is to be noted that such a method exempts us from conducting a monetary (or any other quantitative) assessment of the capitals themselves, and the only capital-related value to be considered is that of their preservation.
{{collapse bottom}}
{{collapse top | Phase 6: Bringing sustainability accounts in the General Ledger}}The objectives of this phase are to incorporate the information generated in the previous phases into the general ledger through:

* the creation of new accounts
* the determination of amounts to be recorded in these accounts
* the reallocation of accounting entries
* potentially, the reevaluation of accounting values

The main steps are the following: 

* '''Results of phase 1''' : Creation of a series of liability accounts, named after the capital they represent:
** river
** staff
** climate
** soil
* '''Results of phase 2''': Creation of expenses and/or asset accounts.
** Expense account for the consumption of water used for the cleaning of products (immediate consumption).
** Current asset account for a crop field used for the production of wheat (seasonal).
** Fixed asset account for a plot of land used for the construction of an office (pluriannual use)
* '''Results of phase 3''': Creation of expense and/or asset accounts to be used for the requalification of activities depending on their nature.
** Asset/Avoidance account for an electric-powered engine replacing a fuel-powered one
** Expense/Preservation account for a green fertiliser used during the intercropping period
** Expense/Capital Access account for soil analysis
* '''Results of phase 4''':  Creation of liability, asset, expense and revenue accounts, reevaluation of expenses
** Liability accounts: Inherited ecological debt
** Expense/Preservation account: preservation of inherited ecological debt
** Revenues/Avoidance account: sales of solar-powered equipment
** Revenues/Preservation account: sales of reforestation services.
** Asset: loans for avoidance and/or preservation activities
* '''Results of phase 5''': Determination of monetary values (preservation expenses) to be allocated to the newly created accounts
** Financial debt owed toward each of the capitals for the previous exercise
** Financial debt owed toward each of the capitals for the current exercise
** Reallocation of amounts following results of phase 3
{{collapse bottom}}
{{collapse top | Phase 7: Accounting statements}}The accounting statements proposed by C.A.R.E. are made up of the following three documents:
* Balance sheet
* Income statement
* Annex 

'''The C.A.R.E balance sheet'''
is similar in its form to a standard balance sheet. It integrates the non-financial capitals used by the organisation by listing them
On the right of the balance sheet (liabilities): as the amounts due to regenerate the impacted capitals in their original or "good" status
On the left of the balance sheet (assets): listing each one of the organisation's assets including their specific non-financial footprint

'''The C.A.R.E income statement''' 
is similar in its form to a standard income statement. Expenses and revenues are split along operating and non-operating (preservation and access to capitals) of the organisation. The comsumptions of non-financial capitals are added to the traditional consumption of financial capital. The yearly profit or loss of the organisation is calculated after taking into consideration the consumption of both financial and non-financial capitals. A positive C.A.R.E net income means that the organisation has cleared all of its debts owed to its financial and non-financial capitals

'''The C.A.R.E annex'''
includes the traditional annex to the financial statements. It also documents extensively the implementation of the C.A.R.E. method within the organisation, listing all impacted capitals and their treatments (nature and measure of impact, protection strategies, etc.). A requalified fixed assets schedule is added to the annex.
{| class="wikitable mw-collapsible mw-collapsed" width=100%  valign="top"
|-
! colspan="2" scope="col" style="background: LightCyan;" |Example of Balance Sheet
|-
! colspan="1" width = 50%|'''Assets'''
!'''Liabilities'''
|-
! colspan="2" scope="col" style="background: LemonChiffon;"  |'''Operations'''
|-
|valign="top"|'''Fixed assets for operations'''
* Assets without non-financial footprint
** including assets for avoidance

* Assets with non-financial footprint
** including assets for avoidanceCurrent assets for operations

* Assets without non-financial footprint
** including assets for avoidance

* Assets with non-financial footprint
** including assets for avoidance
'''Current assets for operations'''
* Assets without non-financial footprint
** including assets for avoidance

* Assets with non-financial footprint 
*Etc.
|valign="top"|'''Financial Debts'''
* financing of operations

* financing for avoidance on environmental capitals

* financing for avoidance on human capitals
* inherited ecological debt

'''Environmental Debts'''

* debts toward climatic system
* debts toward soil
* debts toward water bodies
* debts toward biodiversity

'''Human debts'''

* debts toward employees
* debts toward impacted communities
|-
! colspan="2" scope="col" style="background: LemonChiffon;"  |'''Preservation'''
|-
|valign="top"|'''Fixed assets for preservation'''
* Assets without non-financial footprint

* Assets with non-financial footprint

'''Current assets for preservation'''

* Assets without non-financial footprint

* Assets with non-financial footprint
|valign="top"|'''Financial Debts for preservation'''
'''Environmental Debts for preservation'''

'''Human debts for preservation'''
|-
! colspan="2" scope="col" style="background: LemonChiffon;"  |'''Available and receivables'''
|-
|valign="top"|'''Financial resources'''
* Available

* Receivables
'''Environmental resources'''

'''Human resources'''
|valign="top"|
|}

{| class="wikitable mw-collapsible  mw-collapsed" width=100%  valign="top"
|-
! colspan="2" scope="col" style="background: LightCyan;" |Example of Income Statement
|-
! colspan="1" width = 50%|'''Expenses'''
!'''Revenues'''
|-
! colspan="2" scope="col" style="background: LemonChiffon;"  |'''Operations'''
|-
|valign="top"|'''On Financial capital'''
* Including unpaid ecological debt
* Including costs for avoidance
'''On Environmental capitals
* Supplied by climatic system
* Supplied by soils
* Supplied by water bodies
* etc.
'''On Human capitals'''
* Supplied by staff
* Supplied by impacted communities
|valign="top"|'''Sales'''
* Standard sales 
* Including sales contributing to avoidance along value chain
|-
! colspan="2" scope="col" style="background: LemonChiffon;"  |'''Preservation'''
|-
|valign="top"|'''Consumption of financial resources'''
* Including unpaid ecological debt
* Including decent wages
'''Consumption of environmental capitals''' 
* within preservation activities
'''Consumption of human capitals''' 
* within preservation activities
|valign="top"|'''Sales contributing to preservation'''
* Preservation of environmental capitals
* Preservation of human capitals
|-
! colspan="2" scope="col" style="background: LemonChiffon;"  |'''Access to capitals'''
|-
|valign="top"|'''Access to financial capitals'''
'''Access to environmental capitals'''
'''Access to human capitals'''
* Including implementation of the C.A.R.E methodology regarding non-financial capitals
|valign="top"|'''Profits from access to natural capitals'''
'''Profit from access to human capitals'''
* including implementation of the C.A.R.E methodology in other organisations
|-
! colspan="2" scope="col" style="background: LemonChiffon;"  |'''Income'''
|-
|'''Total Expenses'''
*Net income (loss)
|'''Total revenues'''
*Net income (profit)
|}
{{collapse bottom}}

{{collapse top | Phase 8: Integrated analysis}} 
At this stage, the organisation has accounted for all non-financial capitals needed for its activities. It monitors their corresponding consumption and potentially arranges their preservation. Three of the historical functions of accounting are fulfilled:

* '''Taking into account:''' The things that count (here, the capitals) have effectively been taken into account.

* '''Accountability:''' The organisation now clearly bears the responsibility for their use.

* '''Counting''': These uses have also been monetised and can then be counted.

This last phase aims to fulfil the fourth major function of accounting in its historical sense, '''reporting'''. It replaces traditional financial analysis and management control by building analytical tools to evaluate the organisation's multi-capitals performance. 

At this level, the organisation has the capability to build and manipulate its own specific tools, indicators, aggregates, or ratios. Such tools should be built while keeping in mind the specific needs of the organisation on subjects such as:

* '''Solvency''': solvency measures the organisation's ability to reimburse its debts. As the very functioning of the organisation is conditioned by the advances it receives, not being able to reimburse these advances would mean that the organisation is impeding its future operational capacities and thus its survival. A sustainable organisation is one that pays all its debts.

* '''Comparability''': tools should allow for comparability of the organisation with other organisations of similar characteristics. It should also allow period-to-period comparison.

* '''Cost analysis''': the C.A.R.E. model brings into the cost structure new types of costs that were previously ignored. This forces the organisation to rethink management control and specifically to reanalyse the actual profitability of the products and services it offers.
{{collapse bottom}}

== Actors ==

==== Genesis ====
The concepts on which C.A.R.E relies were first introduced in 2012 in the book "Comptabilité et développement durable"<ref>{{Cite book |last=Richard |first=Jacques |title=Comptabilité et développement durable |date=2012 |publisher=Economica |isbn=978-2-7178-6146-4 |series=Gestion |location=Paris}}</ref> . It was followed in 2015 by the publication of an article advocating for a new integrated accounting framework, "The Triple Depreciation Line instead of the Triple Bottom Line: Towards a genuine integrated reporting"<ref>{{Cite journal |last1=Rambaud |first1=Alexandre |last2=Richard |first2=Jacques |date=2015-12-01 |title=The "Triple Depreciation Line" instead of the "Triple Bottom Line": Towards a genuine integrated reporting |url=https://linkinghub.elsevier.com/retrieve/pii/S1045235415000234 |journal=Critical Perspectives on Accounting |volume=33 |pages=92–116 |doi=10.1016/j.cpa.2015.01.012 |issn=1045-2354}}</ref>. This Triple Deprecation Line model was then proposed as an alternative to the [[Triple bottom line]]<ref>{{Cite journal |date=1999-03-01 |title=Cannibals with forks: the triple bottom line of 21st century business |url=https://doi.org/10.5860/choice.36-3997 |journal=Choice Reviews Online |volume=36 |issue=7 |pages=36–3997-36-3997 |doi=10.5860/choice.36-3997 |doi-broken-date=6 February 2025 |issn=0009-4978}}</ref>, or TBL, critisized for systematically favoring financial performance behind the apparent equilibrium between the economic, social, and environmental dimensions of its model<ref>{{Cite journal |last=Robins |first=Fred |date=2006 |title=The Challenge of TBL: A Responsibility to Whom? |url=https://onlinelibrary.wiley.com/doi/10.1111/j.1467-8594.2006.00258.x |journal=Business and Society Review |language=en |volume=111 |issue=1 |pages=1–14 |doi=10.1111/j.1467-8594.2006.00258.x |issn=1467-8594}}</ref>. 

Since then the C.A.R.E. project has been developed, supported and promoted by a community of private, public and civil society organisations.

==== Main actors ====

* '''Chaire de Comptabilité Ecologique'''

The project is led in its scientific dimension by the [https://www.chaire-comptabilite-ecologique.fr/?lang=en Ecological Accounting Chair] , hosted by [[AgroParisTech]] and [[Université Paris-Dauphine]]. This chair is in charge of research activities around sustainability and its integration in accounting systems at the [https://www.chaire-comptabilite-ecologique.fr/References-Organizations-scale?lang=en organisations], [https://www.chaire-comptabilite-ecologique.fr/References-Ecosystem-centered-scale?lang=en ecosystems], and [https://www.chaire-comptabilite-ecologique.fr/References-National-scale?lang=en national] levels.

* '''CERCES'''

The [https://www.cerces.org/ CERCES] (Cercle des Comptables Environnementaux et Sociaux) , an organisation that brings together professionals trained or interested in the methodology, responsible for the promotion of the C.A.R.E. accounting framework and its implementation in organisations. The CERCES regularly proposes an [https://www.cerces.org/formations-introductives introductory training on C.A.R.E. principles and methodology].

* '''Institut De Formation en Comptabilité et Gestion Soutenables'''

The [https://www.institutcgs.fr/ Institut de Formation en Comptabilité et Gestion Soutenables]  proposes a series of courses, including an [https://www.institutcgs.fr/formation-%C3%A0-c-a-r-e in-depth training on the C.A.R.E. methodology].  These courses are aimed at professionals interested in carrying out C.A.R.E. missions in private and public organisations. The Institute also proposes courses on CSRD.

* '''Endrix'''

[https://www.endrix.com/nos-offres-expertises/comptabilite-durable-la-methode-care/ Endrix] is a chartered accountants company based in Paris that has historically been associated with the Chaire de Comptabilité Ecologique and the development of C.A.R.E. The company provides interested companies with experts trained in the implementation of the C.A.R.E. methodology.

== Connections with other accounting models and sustainability reporting frameworks ==

==== Ecosystem-centered accounting & National accounting ====

The Ecological Accounting Chair combines scientific research and experiments on ecological accounting models at three different levels<ref>Feger, C., Levrel, H., Rambaud, A. November 2021. [https://www.chaire-comptabilite-ecologique.fr/IMG/pdf/input_paper_ngfs-ecological_accounting_feger-levrel-rambaud_1_.pdf “Ecological Accounting : How to organize information for biodiversity conservation decision and action at the national, business and ecosystem levels?”]. Working Paper, Ecological Accounting Chair & AgroParisTech, Paris, France.</ref>. In addition to the C.A.R.E. model, an accounting framework for organisations, the chair also works on national accounting, where it proposes an "Unpaid Ecological Costs" approach. Between national and organisational levels, the chair also supports an ecosystem-centric management accounting model, meant to organise the strategic and collective management of shared ecosystems.

==== Corporate Sustainability Reporting Directive ====
The C.A.R.E. model<ref>[https://www.chaire-comptabilite-ecologique.fr/IMG/pdf/care_-_report_-_extended_version-2.pdf Natural capital visibility in financial accounting] (2019)</ref> and the Corporate Sustainability Reporting Directive ([[:fr:Directive_CSRD|CSRD]]) share several convergences in their approach to sustainability accounting and reporting. Both models emphasise the integration of environmental and social issues into corporate reporting, incorporating these issues in the balance sheet and income statement. They also embrace the concept of "double materiality," standardising and comparing sustainability reporting, and extending financial principles to natural and social capitals. Both models emphasise transparency, reliability, auditability, and integration with financial reporting.

==Notes==
{{reflist|group=note}}

== References ==
<!-- Inline citations added to your article will automatically display here. See en.wikipedia.org/wiki/WP:REFB for instructions on how to add citations. -->
{{reflist}}

==External links==
* [https://www.chaire-comptabilite-ecologique.fr/?lang=en Ecological Accounting Chair (Chaire de Comptabilité Ecologique):  official website.] .
* [https://www.cerces.org/ CERCES: a professional association in charge of the promotion and implementation of C.A.R.E.] 

== Further readings ==

* [https://www.afd.fr/en/ressources/how-can-accounting-reformulate-debate-natural-capital-and-help-implement-its-ecological-approach How can accounting reformulate the debate on natural capital and help implement its ecological approach? (2023)]
* [https://www.afd.fr/fr/ressources/credits-carbone-et-marche-carbone-volontaire-analyse-critique-au-regard-des-politiques-climatiques-et-des-sciences-de-gestion-proposition-dun-cadrage-comptable-ecologique-des-credits Crédits carbone et marché carbone volontaire. Analyse critique au regard des politiques climatiques et des sciences de gestion. Proposition d’un cadrage comptable écologique des Crédits carbone. (2024)]
* [https://chaire-double-materialite.org/publications.html On the subject of double materiality and how this concept is incorporated into national accounting standards and international reporting standards (in French). (2025)]