Accountants and botanists combine forces for a sustainable future

By Tessa Shaw

Accountants and botanists have come together to develop Australian carbon accounting data and modelling that will help organisations make better decisions for economically beneficial and sustainable futures.

In a unique collaboration, researchers from the University of Melbourne’s Department of Accounting and School of Ecosystem and Forest Sciences worked with the Royal Botanic Gardens Melbourne and Chartered Accountants Australia and New Zealand (CA ANZ) to understand how best to capture, manage and report on carbon storage and sequestration, with hopes of developing a sustainable future for Australia.

Closing the gap

Trees make an invaluable contribution to reducing the effects of climate change by mitigating carbon dioxide accumulation in the atmosphere. Through photosynthesis, trees act as a carbon sink, absorbing atmospheric carbon dioxide, and storing it in solid or liquid form. This is known as ‘carbon sequestration’.

An estimated 45 per cent of the earth’s carbon is stored in forests that cover 30 per cent of the earth’s land mass.

However, data on urban trees in Australia has been lacking. Most research into tree carbon sequestration is US-centric, and research in Australia and New Zealand has typically focused on plantations.

A few years ago, students from the Faculty of Business and Economics were given the opportunity to begin a carbon audit for the Royal Botanic Gardens Melbourne, in order to close this gap. It quickly became clear that approaching it from a single discipline-based perspective was not going to provide a thorough exploration of the issues. As a result, a unique opportunity for collaboration between accountants and scientists was born.

In partnership with CA ANZ, researchers, Associate Professor Brad Potter and Professor Naomi Soderstrom, both from the Department of Accounting, and Professor Ian Woodrow from the School of Ecosystem and Forest Sciences, were awarded an Australian Research Council (ARC) Linkage Project grant to develop a process-based model of the carbon cycle of the Royal Botanic Gardens and explore the best way to report this information to decision-makers.

A match made in heaven

Stakeholders like hard numbers and reliable information, particularly when it comes to costs, but turning information on trees and carbon sinks into dollar values is difficult.

A dendrometer, , which measures the expansion rate of tree trunks. These devices give continuous trunk expansion rates which are more accurate than periodically measuring trunk size using a tape. Trunk size is measured as DBH: diameter at breast height. It is a standardised way of measuring trunk size at 1.37 m above the ground, and is used in the biomass/carbon equations.

That’s where the botanists come in. Professor Ian Woodrow brings a wealth of expertise about the differences in growth rates of various tree species in different environments and, as Associate Professor Potter refers to them, "some very expensive toys".

According to Professor Woodrow this study is one of the world’s largest measurements of urban tree growth, and a first for Australia.

“You could pull numbers out of the air on Melbourne’s trees, but it would be drawing on data from elsewhere or data that’s roughly estimated; it’s not well-established by actual measurements.”

This interdisciplinary project helps solve the problem by allowing the researchers to create a model that is relevant for Australia. Like butter and vegemite or wine and cheese, botany and accounting are a winning combination.

“Scientists have it in their DNA to be able to measure things, but reporting isn’t something they’re as comfortable with,” says Associate Professor Potter. “Reporting is more comfortable for us, but we don’t do science.”

How does it work?

The Royal Botanic Gardens houses just about every urban tree planted elsewhere in Australia, so the data is highly transferrable.

“The gardens had the foresight to document the plant sizes, location and health 30 years ago, providing us with a solid baseline,” says Professor Woodrow. “This historic data coupled with the scope of the sampling regimes will enable fluxes to be estimated with considerable accuracy.”

With our model, you can predict, with great certainty, that the pine tree you plant, for example, in suburban Brunswick will grow at a certain rate and lock a certain amount of carbon.

Accounting for sustainability

Accountants help companies measure, understand and communicate how sustainable their activities are. They can help organisations set targets to become more sustainable. They can also provide assurance that an organisation is meeting the standards adopted by governments, regulators or investors.

A complex urban ecosystem, the Royal Botanic Gardens stretch the limits of existing approaches to carbon accounting, which have primarily focused on carbon emissions from energy use and transport.

As the climate crisis makes sustainability reporting more urgent, this research provides a model to accurately account for the quantity of carbon sequestered by a variety of tree species of different ages in Australia.

Applying insights gleaned from the model provides a more complete understanding of their greenhouse gas-related activities and inform strategic decisions.

Making better decisions

“A unique feature of this project is the opportunity to understand the nature and extent to which such enhanced information affects decisions made by users,” says Professor Soderstrom.

RBG Lake
The University of Melbourne’s Dr Jason Goodger takes lake sediment samples for carbon analysis.

When information is expressed in financial terms such as revenue or cost, accounting standards tell us that the materiality of a piece of information is determined by its relative importance to the base figure. For example, an expense that is 10 per cent or more of total expenses would be deemed ‘material’. However, when information such as carbon emissions is reported in non-financial (qualitative or volumetric) terms, determining what is and is not material is more problematic.

“Adding to this complexity is the different ways that different stakeholders determine materiality,” adds Associate Professor Potter. “For example, donors to an organisation prioritise social and environmental performance ahead of financial performance. Institutional investors, on the other hand, tend to prioritise financial factors and therein we find discrepancies in perceived materiality.”

“Developing this model has been a significant achievement for us,” says Professor Soderstrom.

The successful design of these new reporting methods will enable the findings from this project to support environmental sustainability at an organisational level.

Vision for the future

Advancing our understanding of how non-financial information such as carbon emissions can be used in an organisational context will be vital in achieving real impact and environmental change.

Understanding the total ecosystem in terms of tonnes of carbon dioxide absorbed on a continuous basis as a basic measure, environmental economists will be able to consider valuing and monetising this impact. The usefulness of this information comes from the fact that it can be integrated with costs and other benefits on operating an entity to derive the total impact on an economy.

Because urban forest strategies will play a significant role in achieving carbon neutrality, Professor David Cantrill, Chief Botanist at the Royal Botanic Gardens Victoria, who has been instrumental in the project since its conception, wants to see all parklands adopt the model.

“They [councils, governments and organisations] need to understand their ‘carbon cash flow’; that is, to understand how their carbon balance sheet is working,” he says. “Generally, they have had no idea, because they’ve never needed to.”

“With our work, we enable a more precise measure of the carbon sequestered as trees grow,” says Associate Professor Potter.

Given the importance for many firms of managing their carbon footprint and that capturing carbon is a key element of that strategy, this has potential implications for not only how some firms will manage their environmental footprint in future but there are real consequences for financial position and performance for a diverse array of entities.

Thanks to this research, we now have the opportunity to determine the best way to measure carbon capture and report the results in more meaningful ways to decision-makers, contributing significantly to a sustainable future.

Read the full White Paper on the CA ANZ website to learn more about the model and how it can be employed.