Sustainability and the ICAS Code of Ethics: Organisational culture
Ann Buttery, Head of Ethics, ICAS Policy Leadership, highlights the fifth in a series of extracts from ICAS’ new guidance paper ‘Guidance to the ICAS Code of Ethics: Sustainability’ in relation to organisational culture, including responsibilities with regard to values of equality, diversity and inclusion.
Sustainability, the CA and The Power of One
Society is changing. There is an ever-growing emphasis on sustainability, and Environmental, Social and Governance (ESG), at government and regulatory level as well as increased societal expectations for organisations to behave responsibly.
Whilst the “E” is clearly important, sustainability is not just about climate change - the importance of societal matters (the “S”) as well as governance and ethical corporate cultures (the “G”) are of equal significance. Organisations need to be thinking about the impact of sustainability/ESG on their organisation and the impact of their organisation on the environment and society.
The accountancy profession has a responsibility to act in the public interest. Ethics is the conscience of organisations, it is at the core of driving behaviours, and is the key to long-term thinking and trust. The golden thread of ethics and The Power of One weaves through sustainability and ESG. There is a need for all CAs to be aware that sustainability/ESG is not a niche topic that they can ignore. Every CA has their part to play in their own sphere of work around ethics and sustainability.
CAs must always ensure their obligations to the five fundamental ethics principles enshrined within the Code of Ethics (the “Code”) are met: integrity; objectivity; professional competence and due care; confidentiality; and professional behaviour. The new guidance to the Code seeks to assist CAs by signposting a number of areas of the Code where provisions could relate to sustainability related matters.
This extract is the fifth of a series from the guidance and highlights how the provisions within the Code in relation to organisational culture, including responsibilities with regard to values of equality, diversity and inclusion, could apply to sustainability. Links to the other extracts are provided below.
Organisational culture
The 2022 ‘role and mindset’ revisions to the Code inserted new application material into Part 1 of the Code (which applies to all professional accountants) to highlight the importance of an ethical organisational culture, including paragraphs 120.13 A2 and 120.13 A3 which state:
“120.13 A2 The promotion of an ethical culture within an organisation is most effective when:
a)Leaders and those in managerial roles promote the importance of, and hold themselves and others accountable for demonstrating, the ethical values of the organisation;
b)Appropriate education and training programs, management processes, and performance evaluation and reward criteria that promote an ethical culture are in place;
c)Effective policies and procedures are in place to encourage and protect those who report actual or suspected illegal or unethical behaviour, including whistle-blowers; and
d)The organisation adheres to ethical values in its dealings with third parties.”
120.13 A3 Professional accountants are expected to encourage and promote an ethics-based culture in their organisation, taking into account their position and seniority.”
For Professional Accountants in Business, the following material is also provided in Part 2 of the Code:
“200.5 A3 The more senior the position of a professional accountant, the greater will be the ability and opportunity to access information, and to influence policies, decisions made and actions taken by others involved with the employing organisation. To the extent that they are able to do so, taking into account their position and seniority in the organisation, accountants are expected to encourage and promote an ethics-based culture in the organisation in accordance with paragraph 120.13 A3. Examples of actions that might be taken include the introduction, implementation and oversight of:
- Ethics education and training programs.
- Management processes and performance evaluation and reward criteria that promote an ethical culture.
- Ethics and whistle-blowing policies.
- Policies and procedures designed to prevent non-compliance with laws and regulations.
- Policies, procedures and training designed to promote and uphold a culture of fairness, including respect for values of equality, diversity and inclusion.”
Organisations need to drive trust and ethical behaviour is key (the “G” of ESG). The material in the Code recognises that it is imperative that leaders of organisations act with integrity and behave professionally, setting the appropriate ‘tone at the top’. The Board, and management, must lead by example. The Code also makes clear that professional accountants at all levels have an important role to play in embedding a culture of ethics within their own particular sphere of influence in an organisation. In addition, as noted below, ICAS has also emphasised in its Code the actions that CAs might take so values of equality, diversity and inclusion are embraced within an organisation’s culture.
The provisions are in line with the themes of ICAS’ The Power of One, recognising the importance of individual ethical leadership within organisations. The Power of One Organisational culture and values publication echoes the sentiments in the provisions highlighting the importance of a culture of ‘doing the right thing’ with ethical values being genuinely ‘lived’ by the organisation.
The provisions also highlight the importance of speak up mechanisms within organisations as discussed in the ICAS research papers Speak Up? Listen Up? Whistleblow? and publication Organisational culture: The importance of listening. (this is discussed further in “Pressure to breach the fundamental principles”).
Equality, diversity and inclusion
An element of the “S” and the “G” of ESG that is specifically highlighted within the ICAS Code of Ethics is the CA’s responsibilities in relation to values of equality, diversity and inclusion. With effect from 1 January 2021, the following changes were incorporated into the Code to highlight the importance of CAs respecting values of equality, diversity and inclusion:
1. An addition to the application material in Subsection 111 in relation to the fundamental principle of Integrity -
“R111.1 A professional accountant shall comply with the principle of integrity, which requires an accountant to be straightforward and honest in all professional and business relationships.
111.1 A1 Integrity involves fair dealing, truthfulness and having the strength of character to act appropriately, even when facing pressure to do otherwise or when doing so might create potential adverse personal or organisational consequences. Fair dealing includes respecting values of equality, diversity and inclusion.”
2. An addition to the requirement in Subsection 115 in relation to the fundamental principle of Professional Behaviour (see “Professional Behaviour”); and
3. As noted above, an addition to the application material in Section 200 in relation to organisational culture and Professional Accountants in Business.
Find out more
The guidance signposts the following other areas of the Code where provisions could relate to sustainability related matters (please note that these areas are provided by way of example and should not be considered an all-inclusive list):
- Sustainability and the ICAS Code of Ethics
- Preparation and presentation of information – integrity and objectivity
- CAs shall not knowingly be associated with misleading information
- Internal controls
- Inquiring mind
- Reliance on the work of others or on the output of technology
- Financial interests, compensation and incentives
- Professional competence and due care, confidentiality and professional behaviour
- Acting with sufficient expertise
- Non-compliance with laws and regulations (NOCLAR)
- Professional appointments
- Assurance
- Pressure to breach the fundamental principles
- Having the strength of character to act appropriately
- Speak Up? Listen Up? Whistleblow?
ICAS ethics resources
Find out more about the ethics resources ICAS provides to support its Members below.