Driving sustainable value

The sustainability agenda was gathering speed before Covid-19. There were the public divestments from oil, the lithium-source fretting, the Sustainable Development Goals, Task Force on Climate-related Financial Disclosures, International Integrated Reporting Council, Global Reporting Initiative, World Business Council for Sustainable Development, B-corps, and a general sense that the majority of business had woken up to the reality that climate consciousness and broader sustainability wasn’t the preserve of the ‘good’ any more, but an imperative for even medium-term corporate success.

Then came the pandemic, and the crushing irony that a crisis likely caused by insufficient regard to sustainability might drop the anchor on an agenda finally gaining some pace. Companies in dire straits, many of them unable to trade at anything like the level of previous years, would be tempted to abandon expensive sustainability agendas just to keep moving. But with limited time to halt, and in some cases attempt to reverse, acute problems such as climate change, abandoning the agenda is not an option.

From their position at the centre of financial planning and decision-making, accountants have a key role to play in upholding the sustainability agenda, and not just in the largest organisations. They are uniquely placed to understand the capacity of their organisation to keep its sustainability commitments and make new commitments too. ACCA’s offices in the Americas held a virtual panel discussion in November, to explore the ways in which finance professionals in the region can have sustainable impact and contribute sustainable value in their organisations.

Speakers at the conference outlined a number of avenues and toolkits that exist to assist them in this.

Rule 1

Learn the lesson of the pandemic: all unsustainable behaviour eventually has consequences

Melanie Richards, founding director of CSR Solutions in Trinidad and Tobago, suggested that Covid-19 should be a clarion call for those not interested in sustainability in the first place. Speaking from ACCA’s panel, she said: ‘The pandemic has brought to light inequalities. It’s made problems like gender inequality very tangible. For example, many men can see their wives take on the burden of home schooling.’

These more concrete, interlinked manifestations of unsustainable behaviour should, she hoped, encourage companies, no matter how small, to abandon the day-to-day crisis mindset and think about what decisions they can make to build more sustainable ways of working.

And these decisions should involve serious investment in long-term solutions. ‘Awareness and verbal commitments are not the same as financial commitments,’ she said. Accountants are well placed to provide information to help management make and meet financial commitments.

Rule 2

Use risk management planning to encourage sustainable thinking

Sandra Richtermeyer, dean of the business school at University of Massachusetts Lowell, agreed with Richards. She urged accountants to use their role in enterprise risk management (ERM) planning as a way of encouraging the maintenance or assumption of sustainable principles and behaviour.

‘You can link ERM processes really clearly with environmental, social and governance risks,’ she said. ‘Even where organisations are not strategically mature, and aren’t thinking about the big picture of sustainability, the concepts and techniques of ERM are well understood – accountants can use it as a common language to discuss sustainability.’

Richtermeyer said that accountants wanting to keep sustainability front and centre in strategic planning should make sure they discuss it in terms of improving and strengthening how an organisation deploys its resources. Her message was clear: the language you use to talk about sustainability internally has to be concretely strategic, and the greater good will follow.

Rule 3

Make sure you can be understood easily

Will individual action by some accountants at individual businesses be enough? Stathis Gould, director of advocacy at the International Federation of Accountants (IFAC), suggested that more might be needed at the business level to implement sustainability reform.

Accountants, he said, needed more support from institutional shareholders. ‘The message should be that shareholder primacy and doing the right thing are not mutually exclusive,’ he added.

But that message will only be heard by asset managers if it’s in the right language. ‘Many of these emerging sustainability risks can be hard to quantify, or the methods of quantification are less mature than other methods used in the financial statement,’ Gould pointed out. ‘That can lead to them being impenetrable to non-experts.

‘We need accountants to make a bridge between evaluating something scientifically and then making it understandable not only externally to investors, but internally too, so that decisions can be based on that information.’

Accountants, Gould argued, become translators, holding the key to understanding. ‘It’s critical that the finance function has as many cross-function conversations as possible,’ he said. ‘The science, and how you record it, can be daunting. It’s up to accountants to demystify that so that it can literally be taken into account.’

So accountants do have tools, rules and avenues at their disposal to help them protect the sustainability agenda. The most important rule, however, is to learn from the pandemic. Unsustainable behaviour has concrete consequences; how bad do you want them to be?