Using the Social Fabric Matrix to Establish Corporate Accounting Consistent with Normative Criteria Regarding Climate Change

F. Gregory Hayden

Forum for Social Economics, 2018, vol. 47, issue 1, 64-86

Abstract: During the past 30 years, an elaborate literature has developed to integrate the concepts about social norms with the concepts of law. During that same period, climate change impacts became more pronounced and citizens became aware of and concerned about those impacts. This paper explains how the rules governing corporate accounting need to be revised in order to change the accounting systems of production corporations, so those systems reflect social norms and climate change impacts. The paper uses the social fabric approach to explain why the accounting change is needed and how it should be organized in order to allow public agencies to effectively carry out environmental rules and regulations. The double-entry accounting system currently used by production corporations is not structured to record the contribution of their investment and production activities to climate change. The Federal Reserve and US Treasury, as the world's most powerful monetary authorities, need to be involved in bringing about climate change remediation, but that is not possible without an accounting system that provides relevant indicators. Today regulators and corporations are impeded by an accounting system that does not take into consideration the ecological impacts. This paper explains how new accounts that record ecological impacts can be designed and integrated into traditional accounts (without converting to single-entry accounting) in order to demonstrate the environmental impact of particular corporate activities and to provide monetary authorities with the socio-ecological indicators for effective climate change remediation.

Date: 2018
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DOI: 10.1080/07360932.2014.1002517

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