Professor Carol Adams CA on the importance of sustainability standards
By CA magazine
4 May 2023
Following the recent sustainability summit, we speak to Professor Carol Adams CA. Now Chair of both the GSSB and ICAS Sustainability Panel, she tells Karam Filfilan why sustainability standards should be at the heart of the profession and how being autistic influences her work
The relationship between business, society and the environment has never been more complex – nor more hotly debated. The environmental, social and governance (ESG) category was first coined by the UN back in 2005, when a report titled Who Cares Wins set out “recommendations by the financial industry to better integrate environmental, social and governance issues in analysis, asset management and securities brokerage”.
Put simply, its aim was to get the finance industry to examine risks such as rising temperatures, labour disputes and corporate malpractice and weigh their potential impact on profits. The language – profits, risks, opportunities – was deliberately designed to appeal to financial professionals, moving away from the less strategic term “corporate social responsibility”.
It worked. According to McKinsey, there was a fivefold increase in searches for ESG between 2019 and 2022, while more than 90% of S&P 500 companies now publish sustainability reports of some kind. An average of 68% of the top 100 companies in each country use GRI standards, a recent KPMG survey found. Yet, as interest continues to grow, doubts remain about the effectiveness of interventions, not least in the fact that there are no universally adopted standards for measuring and reporting sustainability performance.
Taking the chair
Someone who has dedicated a large part of her career to changing this is author, consultant and non-executive director Dr Carol Adams CA. Currently Chair of the ICAS Sustainability Panel and Professor of Accounting at Durham University, Adams was recently appointed Chair of the Global Sustainability Standards Board (GSSB), the independent body that sets sustainability reporting standards for the Global Reporting Initiative (GRI).
Having spent seven years on GRI’s stakeholder council – including two as Chair – Adams felt it was the right time to step up when predecessor Judy Kuszewski’s second term ended. “It’s an exciting time for sustainability reporting and there is a great deal happening,” she says. “I’m keen to use my expertise to make a difference through a robust set of standards which help organisations contribute to sustainable development.”
Adams’ 30-year career in sustainability research has included roles such as technical expert to the UN’s SDG Impact Standards, project adviser to the government’s implementation taskforce on social impact investing, and founding Editor of the Sustainability Accounting, Management and Policy Journal, alongside her advisory work.
Her career in accounting, however, began in 1981, with firms now folded into KPMG, before her interest in sustainability and social justice led her to a master’s in accounting and finance at the London School of Economics in 1990. “When I started my career, you never heard sustainability mentioned in terms of accountants, the big firms and advisory. My master’s gave me a much broader education around the influence of accounting and the connection between organisations and society,” she says.
Adams’ early research focused on challenges for women and ethnic minorities in employment, partly through examining company reports. Here, she says, it’s as important to examine what companies don’t talk about in their annual reports as what they do. Many organisations at the time simply ignored conversations about equal opportunities and societal change.
“What struck me then – and still does – is that it’s not logical to discriminate against anyone on the basis of race, gender or whatever else. There is no evidence to support it. It doesn’t make people happier, it doesn’t increase societal wellbeing and it doesn’t bring economic benefits. So why do it?” she asks.
Unequal impact
From there, it was an obvious move for Adams to begin researching the impact of environmental and sustainability issues on business and employees. After all, climate change affects some segments of society and some geographical areas more than others. A 2021 study by University of North Carolina researcher Angel Hsu examined how the level of heat stress in the US correlates with race and poverty. It found that “people of colour” (defined as all Hispanic people, and all people not identifying as white alone) endured greater summer heat impacts in 169 out of 175 of the largest urbanised areas in the continental United States. Black people were exposed to 3.12°C higher temperatures in urban neighbourhoods, compared with 1.47°C for white people.
Adams believes it is important for the accountancy profession to look beyond its immediate sphere of influence and connect more broadly with other areas of business. In doing so, it will be better placed to deal not only with the challenges affecting organisations, but also those affecting wider society in the future. She credits her ability to look at the bigger picture, working logically through information in an evidential way, in part to being autistic, which was diagnosed several decades into her working life, in 2020. An estimated one in 70 people are autistic, though boys are far more likely than girls to be diagnosed in childhood.
“I tend to think of the big picture and look for connections between different phenomena, ideas and events to see a way through complexity,” she says. “I’m a strategic thinker. I naturally focus on evidence and logic when making decisions, so I can’t imagine an autistic person getting caught up in groupthink. That links to my earlier point on how I see social justice issues and discrimination.”
For Adams, being undiagnosed and autistic means “not understanding yourself and not being understood”. She sees her diagnosis as a “difference” and a “strength”, but agrees that autistic people can miss out on opportunities or not play to their strengths due to different communication styles and ways of thinking.
Influence of accountancy
When it comes to sustainability reporting, Adams believes that the accountancy profession is well placed to affect business strategy due to the complementary skillsets between the two. “Accountants’ training means that they know what good quality data is, what appropriate evidence is, the data controls required to make sure data is accurate and what the assurance process looks like,” she says.
“Secondly, accountants also know how to present data and what information management needs to make decisions. A chief financial officer is in a position to decide what qualitative and quantified information the board gets to form strategy. They are influential in deciding how resources are allocated and can make compelling business cases for environmental and sustainability projects,” she adds.
The challenge for accountants is that historically the profession hasn’t trained its professionals to have the skillset – or the desire – to consider sustainability issues. That, argues Adams, is starting to change, with organisations such as ICAS working on embedding sustainability throughout the curriculum. Another change is the increasing alignment between different sustainability standards. Back in March 2022, for example, GRI and the IFRS Foundation announced a collaboration agreement which will see GSSB and the International Sustainability Standards Board (ISSB, a standard-setting board of the IFRS Foundation) coordinate their work on standard-setting activities.
In practice, this will see the ISSB standards focus on investors and capital market disclosures, while GSSB standards will focus on sustainability reporting for all key organisational stakeholders. Adams sees these as the two main global standards that will inform regulation in the future. “What’s important is that these two key foundations work together to make it as easy as possible for organisations to use both sets of standards, as they do want to report on both,” she says.
Ultimately, sustainability reporting is going to become more important to businesses as they navigate challenges and respond to opportunities. Setting robust standards which include reporting on processes is key to getting your strategy right. “For long-term success organisations must also think about the risk of environmental issues,” says Adams. “Don’t just think in terms of financial risks. Consider the impact of climate change on product development or the potential for reputational risk from poor labour issues.”
“Standards have the ability to help organisations collect the right data to make decisions and inform strategy,” Adams adds. “The process of determining what to report, the governance oversight of this and the journey of incorporating that thinking into strategy is vital in making any kind of transformation. It encourages organisations to focus on the challenges of sustainability.”
More light, less heat
Two other members of the ICAS Sustainability Panel on acquiring expertise and depoliticising the debate.
Ken Weldin CA:
Why did you join the ICAS Sustainability Panel?
I am a long-time observer of the sustainability movement and how it drives towards maximum impact and acceptance. I’m particularly interested in the mid-market angle, ensuring the debate isn’t solely serving multinational emitters or financial institutions. Everyone has a story to tell about their impact and how they can help to make positive change and solve society’s problems – a broad goal perhaps but one that we should all still aspire to.
What would you like the panel to achieve over the next year or so?
I would like us to help improve the accessibility of the topic and, where we need to, help depoliticise the debate. At times the global sustainability conversation has become more complicated than it needs to be, so I feel ICAS can play an important role in ensuring those who are interested, willing to learn and keen to put their organisation’s best foot forward do not get left behind.
What do you feel you’ve gained from being a member of the panel?
A lot! It’s great to be in these discussion with genuine sustainability experts. The panel has a diversity of experience, which will allow ICAS to put forward a proactive, relevant and thoughtful perspective focused on promoting transparency and continuous improvement.
David Wilson CA:
How and why did you join the ICAS Sustainability Panel?
I had an informal interview with ICAS’ Director of Policy of Leadership and then submitted a written application. I became a member because I wanted to give back to ICAS. I also felt my experience of implementing the UK government’s net-zero strategy and my voluntary work on environmental issues could be useful to the panel.
What would you like the panel to achieve over the next year or so?
I would like it to be recognised by the executive management of ICAS as a useful source of external advice and independent insight on the full spectrum of sustainability issues. As experts on different aspects of sustainability, we can support the work led by the Director of Sustainability to implement the sustainability strategy and ensure that ICAS achieves its strategic ambition to become a net-zero organisation with a strong voice on sustainability issues.
What do you feel you’ve gained from being a member of the panel?
I’ve enjoyed learning from panel members with diverse experience, including ESG investment, sustainability reporting and education. I’ve also enjoyed volunteering with ICAS and gained a lot of satisfaction from making a small contribution to its success.
What advice would you give an ICAS member who may want to join the panel?
Think about your motivation for wanting to join, what you can contribute and what you hope to gain. It’s also worth speaking to ICAS’ member engagement team to learn more about opportunities to join the panel and be introduced to existing members.
globalreporting.org/standards/global-sustainability-standards-board
Listen to our podcast with Prof Carol Adams CA discussing sustainability reporting