Sustainability for Accountants Case study

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Background information

You are a senior manager in the sustainability services team at Horizon Limited (Horizon), a mid-tier global business services firm. You are based at Horizon’s Brisbane, Australia office. After qualifying as a Chartered Accountant, you worked for five years in the sustainability team of a listed mining company. During that time, you obtained a Master’s degree in Sustainable Practice, which you completed part-time.

In July 2022, Horizon made the strategic decision to build capacity in its sustainability service division to prepare for increased mandatory sustainability reporting and assurance expected to come in the near future. Horizon has recruited new staff and upskilled existing its staff in sustainability reporting and greenhouse gas (GHG) accounting. This decision was taken following many requests for assistance by both large and small clients to begin and improve their GHG reporting systems and establish their own sustainability strategies. The partners at Horizon are concerned that if they cannot assist clients with their GHG accounting needs, clients may move to other firms that can provide both financial accounting and GHG accounting services.

Due to your extensive expertise in sustainability reporting and GHG accounting, the partners at Horizon have asked you to lead a client advisory team which sits within Horizon’s sustainability services division. Your muti-disciplinary team includes accountants, engineers, lawyers and environmental scientists.

GreenStar Limited

Your team is currently assisting a medium-sized Australian clothing retail chain, GreenStar Limited (GreenStar), with its sustainability strategy, risk management and reporting systems.

You are aware that the global clothing industry is facing reputational challenges due to the industry’s significant negative sustainability impacts in its value chains. These impacts include:

  • the use of virgin fossil fuels (and related GHG emissions)
  • poor human rights and working conditions in factories/agriculture (including some of the lowest paid workers in the world)
  • the use of plastic in fabrics (e.g. polyester)
  • heavy use of water (e.g. to grow cotton)
  • animal welfare issues (e.g. the fur trade).

These impacts are made worse by the growing ‘fast fashion’ business model, where high-fashion design trends are quickly mass-produced and sold at inexpensive prices. The low-cost production methods often produce detrimental environmental and social impacts. In addition, the fast fashion business model results in overconsumption and excessive clothing waste.

GreenStar has been in operation since 2015. It wants to differentiate itself as a responsible fashion retailer and avoid the pitfalls of the ‘fast fashion’ business model. GreenStar’s corporate values, which underpin how the company does business, are as follows:

  • Quality (in products and customer experiences)
  • Responsible (doing good as they do business), and
  • Collaborative (working with employees, suppliers and customers to be responsible corporate citizens).

GreenStar sells its clothing ranges through its own stores and supplies a signature clothing range to a large, listed Australian retailer that has retail stores across Australia and New Zealand. GreenStar has an online store and 15 brick- and-mortar stores across the eastern states of Australia. It has its head office and warehouse in the outskirts of Brisbane. The company uses cloud computing for its financial and operating systems. GreenStar uses a fleet of leased vehicles to transport products between the warehouse and closer stores, and it uses a delivery company and the national postal system for other deliveries.

Investments in other entities

In addition to its own clothing business, GreenStar also has the following business interests:


GreenStar owns 70 per cent of the shares of an Australian supplier, BamFash (which supplies clothing made from Bamboo material). GreenStar has financial and operational control of the company. BamFash sources bamboo materials through suppliers in China, where organically grown green bamboo shoots are harvested, soaked, dehydrated, and pulverised. The bamboo pulp is then extracted and dried, ground into a fibre which is spun into a yarn that is used to make fabric. The fabric is then sent to a clothing manufacturer (also in China) to manufacture BamFash’s clothing. BamFash owns other businesses and a fleet of vehicles for deliveries.


GreenStar owns 20 per cent of the shares in DesignQueen (a New Zealand supplier providing clothing design services); however, GreenStar does not exercise financial or operational control over DesignQueen.

Sustainability strategy

The founders and Board of Directors of GreenStar are inspired by the sustainability work of Patagonia, an international outdoor clothing retailer, and would like to implement a sustainability strategy similar to Patagonia’s. The Board has resolved to seek continuous improvement in environmental and social impacts of GreenStar’s business operations, as well as improvements in its supply chain – both from ‘cradle to gate’ (related to the supply chain needed to get clothing to GreenStar’s warehouse) and from ‘gate to grave’ (related to the use and disposal of its products by consumers).

In their review of Patagonia’s sustainability strategy, the Board also noted that Patagonia discloses information in line with the United Nations Sustainable Development Goals (SDGs).

Using Patagonia as an example, GreenStar has drafted its first sustainability strategy, as detailed below.

GreenStar’s commitment to the SDGs

SDG Description Initiatives to support SDG
  Demonstrate a commitment to continuous improvements across our business operations and supply chain (including manufacturing, distribution and retail channels) to encourage more opportunities for workforce participation and skills enhancement. ·  Development of supplier development policy with a focus on sustainable practices and skills enhancement·  Introduction of an equal opportunity employment policy in retail locations
  Incorporate principles of sustainability and circularity into the manufacturing and sale of GreenStar clothing. ·  Development of a sustainable procurement policy for raw materials·  Incorporation of more recycled materials into clothing, accessories and packaging

·  Education campaigns for customers on how to prolong the life of their GreenStar clothing

  Actively contribute to the reduction of greenhouse gas (GHG) emissions across all business operations and supply chain, including manufacturing, distribution and retail channels. ·  Development of systems to reduce Scope 1, 2 and 3 GHG emissions
  Prioritise environmental protection and conservation by adopting nature-positive business practices that do not negatively impact the environment. ·  Development of an animal welfare policy in relation to the sourcing of animal products used in the manufacturing of clothing·  Incorporation of more certified organic raw materials into clothing designs
  Demonstrate the practicality, market appeal, and environmental benefits of a sustainable approach, aiming to inspire and collaborate with our suppliers towards widespread adoption of sustainable practices in the fashion industry. ·  Development of supplier code of conduct

Further to the above, GreenStar seeks to design clothing that is durable and, where possible, uses materials that have lower environmental impacts, while still meeting high quality and utility standards (such as being lightweight or water resistant). For example, GreenStar is trialling material that is made from recycled plastic.

GreenStar is also committed to reporting a Modern Slavery Statement yearly. In addition, the company is currently investigating the use of Fairtrade Certified products, where a premium is paid for products, with that premium then paid directly to the workers who decide on its use (such as for childcare facilities).

Another key part of GreenStar’s strategy is to help suppliers and customers to reduce overall environmental and social impacts though awareness campaigns. The company uses its website to inform the public about its sustainability initiatives and its environment, social and governance (ESG) initiatives, as well as those of its suppliers and customers. GreenStar also uses it website to communicate its ESG policies.

Sustainability challenges for GreenStar

GreenStar outsources the manufacture of its designs to factories in Bangladesh and Indonesia, while its fabric suppliers are based in Bangladesh, Indonesia, and India.

GreenStar applies a sustainable procurement policy when screening new suppliers. Under this policy, GreenStar screens new suppliers using a specific supplier questionnaire, then conducts a site visit to assess the supplier’s alignment with its sustainable procurement policy. GreenStar also has agents in the foreign countries who conduct unannounced supplier audits and site visits every 6 to 12 months, depending on the risk profile of the supplier.

GreenStar is currently having issues with two significant suppliers, a clothing manufacturer and a textile supplier. According to the agent conducting audits and site visits, these suppliers appear to be ‘cutting corners’, and their occupational health and safety practices and employee working conditions are deteriorating. Also, although the paperwork shows that the workers are all of legal working ages, some workers appear to be underage. In addition, the agent recently overheard workers complaining that they had not received their full wages for the past two pay runs. The agent also suspects that the factory may be outsourcing clothing manufacturing to third parties, which is not allowed under GreenStar’s supplier contracts. Further audit work would be required to investigate these initial findings.

Some of GreenStar’s sustainability initiatives are going well. However, management is concerned that its sustainability strategy may be too ambitious and may not be targeting its most material impacts. Management is also concerned that increased environmental and socially responsible practices are costing more than anticipated, and that GreenStar’s profitability and cash flows are under pressure.

Also, GreenStar’s large, listed buyer has recently requested that GreenStar implement GHG accounting systems to provide the buyer with information for the buyer’s Scope 3 GHG emission reporting obligations, which are likely to become mandatory within the next few years.

As a result of these issues and challenges, management has approached Horizon for assistance in formalising GreenStar’s sustainability strategy and ESG risk management framework.

Part A – Written submission (40 marks)

Scenario 1: ESG risk management

Your team is assisting GreenStar in refining its sustainability strategy and ESG risk management framework. You have explained to GreenStar the double materiality process of engaging with stakeholders to understand an organisation’s most significant impacts on society and the environment, and the most significant impacts of society and the environment on the organisation.

You are meeting shortly with GreenStar to hear the results of its stakeholder engagement process. Based on the background information you already have about GreenStar, you want to document significant ESG risks to discuss with the client.

Scenario 2: Pre-owned clothing initiative

GreenStar’s management is considering a new initiative called ‘Spread the love of clothing’, which involves a one-day flash sale event at five of the largest and most central GreenStar retail outlets. The idea is that, on the day of the event, customers will bring gently used GreenStar clothing to any participating GreenStar store in exchange for store credit. All customers then have the opportunity to buy the pre-owned GreenStar labels on the day. Any unsold items will be donated to local charity shops. GreenStar intends to donate thirty per cent of the profit from the event to a global charity that supports education for children in need.

GreenStar will produce a marketing campaign around this initiative that educates staff, customers and suppliers about clothing overconsumption and the benefits of reused clothing.

Scenario 3: GHG emissions accounting

While GHG reporting is not likely to be mandatory for GreenStar in the short term, the company is interested in voluntary reporting and in better understanding how GHG emissions can be reduced in its own business as well as upstream and downstream in its value chain. Also, GreenStar’s large, listed buyer has requested information from GreenStar to assist with their GHG reporting requirements, which are likely to become mandatory for the buyer in the near future.

Part B – Video presentation (10 marks)

GreenStar would like to upskill its staff, suppliers and customers to better understand what is meant by ‘greenhouse gas (GHG) accounting’.


Prepare a video presentation for GreenStar staff to help them understand GHG accounting (maximum three (3) minutes duration). In your presentation:

  1. Briefly explain the difference between Scope 1, 2 and 3 GHG emissions of the GHG Protocol, providing examples relevant to
  2. Briefly explain how the Carbon Dioxide Equivalent (CO2-e) amount for Scope 1, 2 and 3 would be estimated using activity data, emission factors and Global Warming Potential factors (include an explanation of activity data, emission factors and Global Warming Potential factors).

10 marks

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