ICAEW SE Pillars of sustainability: practice questions with answers

Question 1

Rothbury Brewing is reviewing four actions in its sustainability plan. Which action belongs mainly to the economic pillar of sustainability?

1. A Installing a system that recycles and reuses the water used to clean its brewing vessels and bottling lines
2. B Paying a real living wage to all its employees and on-site contractors
3. C Sponsoring youth football teams in the towns where its breweries operate
4. D Widening its customer base so that it no longer relies on one supermarket for half its sales

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Answer: D. The three pillars (often expressed through Elkington's triple bottom line of people, planet and profit):
- Environmental: use of natural resources, emissions, pollution, biodiversity.
- Social: people, including employees, communities, human rights, health and fair pay.
- Economic: the long-term financial viability and resilience of the organisation, and its contribution to the wider economy.

Many actions touch more than one pillar; the question asks which pillar each action mainly serves.

Question 2

Drayford Textiles runs a dye works that draws large volumes of water from a river in an area already under severe water stress. Drayford is considering doing nothing about its water use. Which is the most likely consequence of inaction?

1. A No consequences for Drayford, because water stress is an environmental issue that does not affect a company's own operations
2. B Lower costs, because water becomes cheaper as it gets scarcer in a water-stressed area
3. C River wildlife and local supplies suffer, and Drayford's abstraction may be restricted in dry spells, disrupting production
4. D Better river ecology, because the dye discharged by the works dilutes as river flows fall

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Answer: C. Water stress occurs when demand for water approaches or exceeds the available supply. Effects of inaction include:
- environmental: lower river flows, damage to aquatic habitats, more concentrated pollution;
- social: pressure on local drinking water and agriculture;
- business: restrictions on abstraction, higher costs, production disruption and reputational damage.

Actions such as water recycling, efficiency and catchment partnerships reduce these risks.

Question 3

Halsey Farms switches from intensive ploughing and heavy use of artificial fertiliser to cover crops and minimal tillage. Which is the most likely environmental effect of this change?

1. A Higher run-off of fertiliser into nearby rivers, because the soil is disturbed less often
2. B Healthier soils that store more carbon, with less fertiliser washing into nearby rivers
3. C A guaranteed rise in crop yields in the first season after the change
4. D Lower biodiversity on the farm, because cover crops crowd out insects and soil life

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Answer: B. Regenerative practices such as cover crops and minimal tillage are actions to address environmental challenges in farming. Typical effects:
- better soil structure and fertility, and more carbon stored in the soil;
- less erosion and nutrient run-off, so cleaner rivers;
- more soil life and on-farm biodiversity.

The economic effects (yields and costs) vary and can take time to emerge, which is one reason farmers may need support during the transition.

Question 4

The last deep coal mine in the Corrandale valley is due to close, and 1,200 mining jobs will be lost. Which approach best reflects a 'just transition'?

1. A Plan the closure with workers and the community, with retraining, redeployment and investment in new local industries
2. B Keep the mine open indefinitely to protect the 1,200 jobs, whatever the effect on the region's emissions
3. C Close the mine immediately and compensate its shareholders in full, leaving the workers to find new jobs elsewhere on their own
4. D Move coal production to another region where wages are lower, so that Corrandale's own emissions fall

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Answer: A. A just transition means moving to a low-carbon economy in a way that is fair and inclusive, so that workers and communities who depend on high-carbon industries are not left behind. The idea is recognised in the preamble to the Paris Agreement.

Typical features: social dialogue with workers, unions and communities; retraining and redeployment; social protection; and investment in new local industries.

Question 5

Oxbury Energy holds licences to extract gas reserves that it expects to produce over the next 30 years. Analysts warn that tighter climate policy and falling demand could mean much of the gas is never extracted. What is this risk usually called?

1. A Greenwashing
2. B Carbon leakage
3. C The rebound effect
4. D Stranded assets

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Answer: D. Stranded assets are assets that suffer unanticipated or premature write-downs, devaluations or conversion to liabilities. In a climate context, fossil fuel reserves, power plants and related infrastructure may be stranded by climate policy, technology change or shifts in demand.

The economic effects reach beyond one company: investors, lenders, pension funds and regions that depend on such assets can all suffer losses, which is why delaying action can increase the eventual economic cost.

Question 6

The chief executive of Lowfield Bakeries tells the board: 'For us, economic sustainability just means hitting this year's profit target.' Which response best corrects the chief executive?

1. A Economic sustainability is about staying viable and creating value over the long term, not one year's profit
2. B Economic sustainability is about maximising national GDP, so a single company's profits are not relevant to it
3. C Economic sustainability means giving up profit altogether so that resources can go to environmental projects
4. D Economic sustainability means keeping cash in the bank and avoiding investment that could reduce profit

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Answer: A. The economic pillar concerns the ability of an organisation (and the wider economy) to keep creating value over the long term. For a business this includes:
- lasting profitability and financial resilience;
- investment in assets, skills and innovation;
- managing risks such as dependence on a few customers or on volatile energy prices.

A focus only on this year's profit is short-termism, which can undermine economic sustainability.