The latest from the Intergovernmental Panel for Climate Change – part of the United Nations responsible for advancing knowledge on human-induced climate change: The window for averting climate catastrophe is closing fast. These stark words set a critical backdrop for COP-27, which brings together world leaders to discuss solutions for the world’s climate issues.
Aside from the conversations had and decisions made at the highest levels, what role can the rest of us play to resolve climate issues and address the wider issues of environmental, society and governance that have risen up the public and boardroom agenda over the last decade? This was exactly the topic under discussion at a recent panel event hosted by CIMA South West England and South Wales – Going beyond finance: Our chance to get it right.
Accounting and finance professionals play a crucial role in helping organisations understand how ESG activities affect strategies and business models. The global trend towards reporting on both financial and non-financial information with the same rigor is accelerating. So our panel of experts came together to share their views and advice on how management accountants can deliver impact over input to add value to their organisations.
Panellists included renowned economist, Financial Times columnist and BBC presenter Tim Harford OBE, Chartered Director and Strategic Adviser Nick Sturge MBE, AICPA & CIMA Chief Executive – Management Accounting Andrew Harding, FCMA, CGMA, Global Head of ESG for AICPA & CIMA Dr. Jeremy Osborn, FCMA, CGMA, CPA (Aust.), and Melanie J. Kanaka, FCMA, CGMA, CIMA President and Co-Chair of the Association of International Certified Professional Accountants, representing AICPA & CIMA. Each brought their own unique perspective to the event, covering four key topics:
The Big Picture and the overall impact of ESG issues
Tim Harford kicked off the panel by taking the room back to 1990s Chicago – and a disastrous heatwave. Failures to heed weather forecasters warnings, unexpected and unprecedented use of air-conditioning units that caused power outages, and struggles with mobilising older people to seek cooler temperatures all contributed to 739 people losing their lives in just five days.
What could have prevented such significant loss of life? What did we learn? Better governance, well-funded services, more energy efficient air-conditioning units, improved data transparency, and nicer, safer communities save lives. We all agree that these are things we would want anyway. So then, when it comes to spending to save the environment – a task that has been put off for years – we are also spending to create a better, more liveable, friendlier society. We can kill two birds with one stone.
The impact of ignoring ESG issues is vast, but it goes further than that – with the right investment and planning we can seize opportunities that benefit the environment and our communities.
The problems faced by early stage entrepreneurs
Nick Sturge – who now works with entrepreneurs across the South West and beyond – identifies some of the issues he sees when working with young companies. Despite what we may have been told, he says, many senior leaders are older – in their 40s and 50s – with a background in industry and real insight on what they want to achieve. But this is often lost in translation.
As happens so often, start-ups often focus on the money – believing this is what investors and other stakeholders want to see. In fact, most founders will have started their business to resolve an issue. They have a mission, a purpose, and a passion that drives success. Being forthright about these things is good for the planet, the business and the economy.
The diversity of new businesses is also a strength. There is potential to share knowledge across sectors, taking advantage of the huge amount of energy within start-ups to share examples of best practice and stimulate more growth and better governance through diverse thinking. Diversity is needed in the workforce too, but employers need to work hard at all levels to achieve that.
And from an analysis and data point of view, taking a holistic view of a business is critical. Using the information available nudge CEOs in the right direction, show how everything works together, and demonstrate how this is used to take decisions – balancing profit and purpose – will help companies to appear stronger to investors.
What are businesses doing and what is AICPA & CIMA doing to help?
Andrew Harding is up next. He talks of the transition of the management accounting role from finance and reporting to influence and impact. Before the musings of Milton Friedman in Chicago – the insistence that shareholder value is the only thing that matters – companies were doing more. They had heart, and we are now moving back to that way of doing business.
Does anyone know the answer to fixing the ESG issue? No one puts up their hand. And this is the crux of the issue – no one has a perfect answer – but progress is being made. From more than 200 standards a couple of years ago, there is now one single sustainability standard that sits under the IFRS foundation, putting sustainability reporting firmly within the remit of finance and accounting professionals.
If the data analysis is not right, or the learnings are not built into a strategy, businesses are essentially greenwashing – and with their experience and skillset, accountants can deliver what is needed, and add sustainability metrics onto boardroom scorecards.
To ensure that management accountants have the skills to support their careers and the businesses they work for, AICPA & CIMA has created a new Fundamentals of ESG certificate to help management accountants be conversant, understand the issues, with badging that displays on LinkedIn.
Connecting ESG strategies with core objectives
Sustainability reporting is being brought under the leadership of the finance function because there is a need for better accountability, stricter management of standards, and integrity, according to Dr Jeremy Osborn. Following the creation of the International Sustainability Standards Board (ISSB), new standards are emerging rapidly – and management accountants are perfectly placed to make sure that businesses can make an efficient and sustainable contribution to the global economy.
While progress is being made, many official standards are still too complicated. Under the EU CSR Directive, for example, businesses will need to report against more than 500 metrics – which is hardly practical, when it comes to measurement, analysis and subsequent decision making. The merge of business strategy and sustainability strategy puts accountants front and centre too, as their data and analysis skills can show how sustainability can underpin a wider strategy.
The role of management accountants
Following an earlier speech, Melanie J Kanaka rounds out the evening with key areas where management accountants can help. Within most organisations, the finance function is viewed as a trusted partner – and by providing meaningful data and insights accountants can bring their companies in line with the desired trajectory.
They must also become value creators, by helping to assess the management and financial risks. And ultimately, their role will be to improve transparency in reporting, bringing together all the data to present a more holistic view of a company and its activities.
Looking to hire management accountants to support your businesses own ESG strategy? Contact Robert Half’s excellent finance and accounting team today.
