Sustainability and accountancy

What will a future in which sustainability is increasingly a business fact, as opposed to an option, look like for accountants?


Sustainability is a hot topic – not only does it have royal backing (with The Prince of Wales being patron of the Accounting for Sustainability (A4S) Project), but UN Secretary-General Ban Ki-moon says 2015 is the ‘year of sustainable development’, when the UN sets out its course for a sustainable future. In New York in September 2015, the International Conference on Sustainable Development will bring together governments, academia, business, NGOs and the UN to determine how we move forward from the Millennium Development Goals (MDGs) to Sustainable Development Goals (SDGs).

‘This is a great subject and one that we, as accountants, should be at the forefront of,’ believes Nick Shepherd FCCA, president of EduVision, a management consultancy in Canada.

‘If we don’t embrace these changes we face the reality of becoming increasingly irrelevant in terms of decision making.’

In August 2014, ACCA and A4S conducted a survey of 4,737 ACCA students from 126 countries around the world called Sustainability and Business: the Next 10 Years (see 'Related links'), asking for their views on sustainability and how it will affect their profession in the years to come.

‘Overwhelmingly, students believe there will be a significant shift towards incorporating sustainability into business in response to climate change and population growth and I couldn't agree more that this is a necessary shift business needs to take to adapt to our changing world,’ said Claire Braithwaite, CFO of impact investors advisers ClearlySo.

Expected key issues

By and large, the views shared by students is that a decline in natural resources, increases in the global population, climate change and water scarcity will all be key issues, particularly among students from Africa, Asia Pacific and the Caribbean – areas in which such issues are being felt most severely on the ground. Furthermore, instability in financial markets was another key factor expected to impact business, which is no surprise given the vast majority of the world is still suffering the fallout from the global financial crisis seven years on.

All this culminates in the belief that accounting and finance professionals will need to improve and expand upon the decision-making intelligence they provide business, with sustainability becoming integrated into their workings and advice far more so than presently. Yet while ‘there appears to be “intellectual awareness” that these issues will impact decision making in the future and that accountants will need to step up to a larger role,’ Shepherd has concerns.

‘My guess would be that when one scratches beneath the surface and asks “so what might be different in what we have to do?”, there may be some scratching of heads.’

Skill sets

Braithwaite believes finance professionals will need to understand the businesses they are servicing on a far deeper level, which will require a diversification of skill sets.

‘As an industry we'll need to incorporate new reporting models quickly and iterate these so they are fit for purpose to help managing the risks of the business,’ she says.

Furthermore, Braithwaite sees natural capital becoming incorporated into financial reporting and finance functions being expected to provide not only financial data about their organisation but impact data as well.

‘Over the next 10 years markets will increasingly start to adjust so that pricing incorporates externalities, and it will be the finance function that steps in to help the business adjust their business and pricing model to incorporate this,’ says Braithwaite.

And while there have been some great strides made in the areas of intellectual capital management, CSR and the measurement of non-financial performance, Shepherd feels this should be central to current teaching and a key priority for the student population, ‘as it indicates a growing trend in our shift from traditional financially-based measurement systems to ones that more clearly reflect the other important capitals being employed in an organisation’s business model.’

However, he points out that ‘we obviously have more work to do in getting the message out. It is particularly sad that this seems to be the situation given the leading edge work that ACCA has done in this area over the last 15+ years – especially with participation in the development of models such as the SIGMA project, which provided some core aspects of the ongoing work of the International Integrated Reporting Council.’

"There was a time when we could say that there was either a complete lack of knowledge, or at least room for doubt, about the consequences for our planet of our actions. That time has gone. We now know all too clearly what we are actually doing and that we need to do something about it urgently. Better accounting must be part of that process"

The Prince of Wales - Patron of the Accounting for Sustainability (A4S) Project