Why leaders from all sectors need to make sustainability their business
By Ali Catterall, CA magazine
27 February 2020
The narrative around sustainability ensures it will be one of the key targets for 2020, and for many years to come. Here’s why leaders from all sectors need to make it their business.
“Accountants will save the world,” the President of World Business Council for Sustainable Development, Peter Bakker, told attendees at the 2012 UN Conference on Sustainable Development in Rio. Bakker was ahead of the curve: just a few years ago, sustainability issues, such as climate change, were as often as not fled under corporate social responsibility, seen as preaching to the converted. How times change. Sustainability is now relevant to everyone in business.
The idea of ethical accounting isn’t new. Back in 1997, Simon Zadek, Richard Evans and Peter Pruzan published Building Corporate Accountability: Emerging Practice in Social and Ethical Accounting and Auditing. While accounting with a social mission goes back even further; bodies such as the Institute of Social and Ethical Accountability are committed to strengthening the social responsibility and ethical behaviour of the business community and non-profit organisations.
Increasingly, everyone from buyers to supply chain operators and consumers is waking up to the issue. ICAS, too, is determined to make sustainability a key part of best practice. “There is a role for our profession, and it is a topic which is relevant for accountants and finance professionals more broadly, as many ICAS members are currently working in business and are therefore key decision makers,” says Head of Sustainability and Reporting, Anne Adrain. “Sustainability is at the front of our agendas – or it should be.”
But it also requires a mind-shift. “In financial terms, it’s easy to come up with a profit,” says Adrain. “But when you start talking about environmental impacts or impacts on the marine life or the local community, we’re out of our comfort zone a little bit.”
However, we are beginning to see initiatives and emerging resources and sources of guidance that might help. The recent report Toward Common Metrics and Consistent Reporting of Sustainable Value Creation from the World Economic Forum, in collaboration with Deloitte, EY, KPMG and PwC, proposes a common, core set of metrics and recommended disclosures to align mainstream reporting and encourage faster progress towards a systemic solution. In January 2020, ICAS was one of a group of leading professional bodies that published a report by Carol Adams CA, Paul Druckman and Russell Picot that recommended a new approach for entities reporting on their contribution to the UN Sustainable Development Goals (see bit.ly/icas-sdgd-recommendations).
Relevance and risk
Indeed, some may ask, what has climate change got to do with CAs? In order to make the right strategic decisions and think about longevity, businesses have to think about risk and opportunity. For example, are executives considering the impact of climate change on the way they look at their business? If you’re not at least having that conversation, how can you say that you are making informed decisions about the future business landscape of your organisation?
“There is a risk that sustainability and tackling climate change is modelled on middleclass aspirations because of the affordability of making lifestyle changes,” Adrain admits. “We need to be careful not to alienate parts of society, and parts of the world, where people share differing aspirations and do not have the same opportunities or the means to make changes. So, the language and messaging is important in order that climate change and sustainability do not become divisive issues.”
Investors too are increasingly challenging companies on their sustainability goals. In the current era, there is greater demand for transparency and information about where all the money and investment is going. Where sustainability was once just a part of CSR, not fully embedded in the strategy, it’s now integral to internal risk discussions and an important aspect of how the business sees itself.
We also need to know exactly who and where we’re buying from. “This is where we need the accountancy brain,” says Adrain. “For example, how far down the supply chain do you need to go to check items are fully sustainable before you put the sustainable label on it?” Every business needs to be aware of its relationships at every level. The value to a brand, its image and its market position has to be seriously considered. When one leading high street store was found to be sourcing beds from a manufacturer run under unsavoury conditions, the potentially damaging headline wasn’t about the bed manufacturer – it was about the store. From an employee perspective, millennials and Generation Z have a strong wish to be engaged with organisations whose values align with their own. Te climate change agenda has become one of the determining factors when weighing up which company people would want to work for.
Businesses which fail to fully embed these values are going to have difficulty attracting the best talent. The insurance and pensions company, Aviva, for example, is currently adapting its strategy to attract the best young professionals and retain them by demonstrating it lives and breathes these values throughout the organisation. Major publisher Bonnier has pledged to plant 10 trees for every book it publishes in 2020.
Behavioural change
So how do more businesses change decades of behaviour and incorporate sustainability into their strategy? “I think that’s where businesses are struggling,” says Adrain. “[But] this is where chartered accountancy training, which brings the ability to measure and report, can help to provide that credibility. Accountants are good at gathering data, assimilating it and actually interrogating the data, to make sure it’s reliable and consistent, and then using that as the basis of making properly informed decisions.” Meanwhile, the Prince of Wales established Accounting for Sustainability (A4S) is currently trying to encourage CFOs throughout its network to produce useful step-by-step guides on how to get started in this area. “Some large UK organisations are already part of that network,” says Adrain. “SSE is a key player and its CFO, ICAS member Gregor Alexander CA, is actively involved. So there are some people who are leading the way. They have created a space for themselves, where it is safe for them to innovate, develop some of these tools, and distil them into a reporting format for others to refer to.”
And today, there is much optimism for the future. The Accounting Bodies Network, which is part of A4S, is in the process of finalising a climate change call to action for the profession, listing its unique skills, from risk assessment to financially instituted analysis, disclosure and assurance.
Accountants matter to every part of the business: their job is to demystify data and to be truth-bearers. They need to approach sustainability in the same way they would approach any business metric: to normalise it, put parameters around it and give it equal weighting. As perhaps the defining issue of our time, we cannot afford to ignore it. It is simply good business practice.
This article first appeared in the March 2020 issue of CA magazine.