This article was first published in the April 2015 international edition of Accounting and Business magazine.

Sustainability and accounting always used to be firmly on different sides of a definite divide. Sustainability folk busied themselves in one silo; accountants hammered out the figures in another. There was no real connection. And neither side ever deigned much to talk to each other. Then, as the stories of our childhood might have it, along came a prince and transformed the world.

This was the founding of what is now the Prince of Wales Accounting for Sustainability Project (A4S), back in 2004. 

And to confirm the transformation, the annual forum of the project in December 2014 heard, for example, the finance director of the UK’s National Grid, Andrew Bonfield, telling the audience that 15 years ago he, as a CFO, had been part of ‘a world chasing the bottom line’, but that world had now gone. 

‘We cannot remain immune,’ he said. The skills and motivations of the accounting community were changing and had to change more. Corporate reporting now had to tell the full story and not just that of the figures. This new world, said Bonfield, ‘impacts our customers, the public attitude towards us, and consumer attitudes’. Even investors now wanted to be in there for the long term.

"Corporate reporting now had to tell the full story and not just that of the figures."

It was a far cry from the early days of the project. The prince has long argued that accountants needed to do something about what he described at the forum as ‘the constraints of an increasingly crowded planet’. He gave an interview on the subject for BBC’s Panorama back in 1989. 

ACCA set up an annual environmental reporting award in 1991. Roger Adams, then ACCA technical director, recalls sitting under the Natural History Museum’s blue whale at the award ceremony. But the real change came when the prince took aside his then principal private secretary, Sir Michael Peat - of the family that represent the ‘P’ in Big Four accounting firm KPMG - and berated him about the ineffective nature of his profession (see box). 

The prince subsequently spoke at the annual dinner of the ICAEW; shortly afterwards the then ICAEW president, Paul Druckman, started to chair the small group charged with putting the prince’s vision into words and action.

In a small attic room (which had once been Prince William’s bedroom) in Clarence House, the committee got to work. ‘Sir Michael,’ recalls Druckman, ‘brought it down to very simple language. To him, company reporting had gone wrong and that enabled us to go down the route of value creation rather than just sustainability.’

That was the key to early deliberations and, in 2007, the first report was published. This was where history was made in creating a reporting model that brought together financial, narrative and sustainability reporting under one roof so that the combined effects of these information streams could influence strategy and decision-making directly. 

By 2011 what became the International Integrated Reporting Council (IIRC), with Druckman in command, spun out of the project and rapidly went international. ‘Without A4S and the intervention of the prince, we would not be having this conversation now,’ he said. ‘It made things happen.’ 

The prince told Druckman that it felt like being a father whose children were leaving but would always come back for money. In the words of the project’s executive chairman, Jessica Fries: ‘In an incredibly short time, integrated reporting has gone from a few ideas in that first report from the project that were tested by a few companies, and been turned into global momentum, transforming reporting now and in the future.’

"Integrated reporting has gone from a few ideas... and been turned into global momentum, transforming reporting now and in the future."

Since then, the work and culture of the A4S project have also been transformed. ‘If you look at the attendee list for the project’s annual forum back in 2007, you see it had a lot of people from the sustainability world,’ says Fries. ‘[With 2014’s] list, the culture has changed. The finance community now takes a direct interest. 

It is people from the finance teams, or heads of investor relations - not sustainability experts - who are there.’ 

The fostering of networks in the CFO community, and building both understanding and enthusiasm there, has become the driving force for the A4S project. ‘One of A4S’s most powerful roles,’ says Neil Stevenson, managing director, global implementation, with the IIRC, ‘is galvanising business leaders with the idea that this is an important part of their role. They need to understand that sustainability is part of their role because it makes business success.’

That idea was at the heart of the 2014 forum, which celebrated a decade of progress but focused on building momentum within the CFO community. ‘Leadership, energising networks and ensuring that the next generation of accountants are trained with all of this at the heart of their role’ is the key for Stevenson. And that was reflected at the forum. 

Richard Mayfield, CFO for retail giant Walmart EMEA, warned businesses that ‘in 10 years your supply chains may have dried up’. And that sort of attitude deals with the basics of power and other fundamental resources, like water, as well as, for example, ensuring that suppliers remain resilient and reliable. 

As one CFO responding to the discussions pointed out: ‘We ask all our suppliers to impose the living wage.’ John Rogers, CFO of Sainsbury’s, said: ‘If we don’t embrace sustainability, we won’t have a business in 15 years’ time.’

Expansion

Decisions were taken. The CFO leadership network, which has been nurtured and built by A4S, will be expanded worldwide. ‘A4S needs to be a catalyst and a contributor to CFOs and their world,’ says Druckman. And the momentum is growing. As one seasoned observer suggested, success would be measured by having the majority of FTSE 100 companies’ CFOs on board and contributing. ‘We are a good way down to that mark,’ says Fries, ‘and it gives us a strong basis on which to work.’ 

The world of the CFO and the finance leader is where the culture is changing. 

It makes the link to the board and it ensures reporting is relevant to investors. The acorns planted in the discussions back in that regal bedroom are growing into mighty oaks. 

Robert Bruce has been involved as a journalist and board and committee member of what is now the Prince’s Accounting For Sustainability Project for most of the past 10 years.

CFO network: commitment to act

Launched at the 2013 A4S Forum, the Chief Financial Officer Leadership Network is the first grouping of its kind to focus on the role that CFOs play in integrating environmental and social issues into financial decision-making.

It was brought together to demonstrate leadership on how companies should respond to challenges including climate change, a rising and ageing global population, rapid urbanisation, and increased consumption - all of which are putting unprecedented pressure on natural resources and the fabric of society. 

The network aims to focus on developing and sharing successful strategies so that these become the ‘norm’ across all businesses. This will include improved modelling of future risk and uncertainty, as well as engagement with investors and other stakeholders to increase their understanding of the commercial benefits of sustainable business models. 

Members are committed to act as leaders in this area and to engage the wider CFO community; to work to achieve tangible outcomes towards more sustainable business models; to share experiences of ‘successful’ and ‘unsuccessful’ projects in embedding sustainability within decision-making and accounting; to develop guidance to improve transparency in decision-making, including ways to embed sustainability into capital expenditure appraisal and to better model risk and uncertainty.

They also contribute to the development of improved methodologies for the measurement and valuation of natural and social capital in order that they can be taken into account in decision-making processes; and to improve investor engagement on the commercial benefits of sustainable business models.

Prince of Wales exhorts

‘Work to achieve the cultural shift required in your own organisations to convince your board and senior leadership of the importance of a truly sustainable model. Reach out to your suppliers and customers, and work with them to transform their approaches alongside your own. Seek to convince your peers. I understand that if every one of you here manages to convince just five others to start accounting for sustainability, and then each one of them engages another five each year, in five years’ time we could reach all of the three million accountants in the world. For obvious reasons five years is too long. So each of you needs to rush out and convince 10. And then accountants really will be helping to save the world!’

How the Prince of Wales’ project came about

Sir Michael Peat, then principal private secretary to the Prince of Wales, was not in his bath when he had his ‘eureka’ moment. He was, he says, reclining in his office when the phone rang. It was the prince, asking for an urgent meeting. He gave me a look, he recalls, of ‘middling to heightened aggression’. ‘All you accountants are useless,’ the prince apparently told him, and went on to point out that ‘climate change was the biggest market failure ever’. That was in 2004. Ten years on, it has all changed.

As the prince recalled in his speech to the 2014 Accounting for Sustainability Forum, which celebrated a decade of progress and transformation: ‘As a profession with such strong ethics, and with the link between sustainability and financial success clear even at that time, it was evident that the way accounts were prepared and decisions taken was a barrier to achieving the right results - right for the bottom line, right for society and right for the environment which provides our life support.

As I said at the time, we need 21st-century tools to address 21st-century challenges. With that challenge, my Accounting for Sustainability Project was born.’

Prince of Wales’ advice for CFOs delivered to his Accounting for Sustainability Forum in December 2014.