In a new report Social and environmental value creation ACCA calls for more concerted action to deal with the challenges of social and environmental value creation. The report has been developed with CFA Institute and is supported with insights from Datamaran.
The report examines the role of business in environmental, social and governance (ESG) issues which are under increasing focus from investors and society more widely. It assesses the current state of corporate disclosures on key social and environmental issues in different regions around the world and outlines five disclosure and decision-making approaches that can support business to create inclusive and sustainable value for society over the long-term.
Social and environmental challenges are becoming more complex. Increasingly, these two issues are seen by government, business and finance as interconnected priorities.
Professional accountants, finance teams in business and investors can support social and environmental value creation in many ways, such as risk analysis of climate change issues, social impact evaluation and assessing the quality of non-financial information. These are key areas for the accountancy profession around the world, and are being incorporated into investment processes including asset valuation, asset allocation, and risk management. Corporate disclosures and wider ESG data serve as the bedrock for these investment processes.
Demands for better disclosures must also be accompanied by a new strategic approach to business model innovation that embraces social and environmental value creation. Natural capital and circular principles, for example, must become part of the mainstream of finance. And as the 17 UN Sustainable Development Goals approach their fifth year anniversary, leaving just ten years to achieve them by 2030, they are becoming better understood as tools for governments, business, investors and civil society to coalesce around in order to improve how economies can deliver inclusive and sustainable prosperity.
Governments and regulators are asking businesses to better manage their social and environmental impacts to support sustainable prosperity creation. Citizens are asking their governments to do more to protect the environment and resolve societal issues. Customers are also asking business and finance to do this. New products and services must be both socially and environmental aware if they are to succeed.
Specifically, businesses are being called on to meet:
1. increasing requirements from governments for better social and environmental performance
2. greater demands for more precise environmental, social and governance disclosures from investors
3. calls from central bank governors to understand the financial stability risk that climate change poses to financial markets
4. changing customer preferences that need new business models to produce products and services that meet new social and environmental expectations.
5. a volatile environmental landscape in crisis and escalating social problems.
Taken together, these provide businesses around the world with a range of relevant approaches to engage with. For professional accountants and finance teams, their involvement in these activities is essential. But to take up the challenges ahead they will need to build on their competencies in four areas.
• To build scientific expertise – with new domains of knowledge and a deeper understanding linked to environmental limits, risks and opportunities.
• To understand societal impact – valuing impact to better define the context and open up opportunity for value creation.
• To collaborate more – working with others from different fields.
• To recognise the interconnectedness of social and environmental issues. Strategies and priorities must reflect this.
Alan Hatfield, Executive Director Strategy and Development, ACCA says: ‘Professional accountants and finance teams can support social and environmental value creation in many ways with their existing skillset and by reaching out across their own organisations. By interacting with wider stakeholders on complex challenges, they will be able to speed up the urgently needed transition to a more socially just and environmental aware future for the global economy. We are committed to pushing this forward by developing professional accountants with an ethical approach, combined with a wider view of business that covers financial, business, digital and sustainability issues.’
4. Different regions
Gary Baker, CFA, Managing Director, Europe, Middle East and Africa, CFA Institute adds:. ‘The global finance industry has the power to utilise the trillions of pounds worth of assets under management to effect societal and environmental change, as well as improving the overall governance of companies. Over the long-term, action in this sphere can only be beneficial for companies and the shareholders and stakeholders they serve. Companies that drive short-term profit and ignore long-term risk will be unsustainable and ultimately will be divested from investment portfolios; capital will be redirected toward more productive enterprises that generate real long-term value creation. Now is the time for our professions to realise the crucial role they hold in driving sustainable businesses, and in leading the financial industry to deliver positive impact on society and the environment.’
Marjella Alma, CEO and co-founder of Datamaran concludes:
‘Ethical business practice is no longer a nice to have, but on many aspects, such as human rights, waste management and climate change, it's the law. However, some companies are still lagging. Our data shows that although the volume of reporting on key social and environmental issues has increased from 2014 to 2019, a number of key areas, such as animal welfare and human trafficking, still receive low coverage. A systematic monitoring of trends, made possible with technology, can help companies stay ahead of the curve and proactively address these issues, fulfilling their commitments and responsibilities. And this starts with better, more strategic disclosure.’
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ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants, offering business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.
ACCA supports its 219,000 members and 527,000 students (including affiliates) in 179 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. ACCA works through a network of 110 offices and centres and 7,571 Approved Employers worldwide, and 328 approved learning providers who provide high standards of learning and development.
Through its public interest remit, ACCA promotes appropriate regulation of accounting and conducts relevant research to ensure accountancy continues to grow in reputation and influence.
ACCA has introduced major innovations to its flagship qualification to ensure its members and future members continue to be the most valued, up to date and sought-after accountancy professionals globally.
Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability.
ACCA will be focusing on the role of accountants in environmental and social issues as part of its ‘Power of ethics’ campaign launching on 25 September, which includes this and other research reports, CPD, events and much more.
More information is here: www.accaglobal.com
About CFA Institute
CFA Institute is the global association of investment professionals that sets the standard for professional excellence and credentials. The organization is a champion of ethical behavior in investment markets and a respected source of knowledge in the global financial community. Our aim is to create an environment where investors’ interests come first, markets function at their best, and economies grow. There are more than 167,000 CFA charterholders worldwide in 164 markets and regions. CFA Institute has nine offices worldwide and there are 156 local member societies. For more information, visit www.cfainstitute.org or follow us on Twitter at @CFAInstitute and on Facebook.com/CFAInstitute.
The only Software as a Service (SaaS) solution for non-financial risk management, Datamaran makes benchmarking, materiality analysis and non-financial issues monitoring robust, evidence-based and resource-efficient.
Entirely unique in its field, the platform provides a data-driven perspective into regulatory, strategic and reputational risks and opportunities.
Customers track 100 non-financial topics by sifting and analyzing millions of data points from publicly available sources, including corporate reports, regulations and initiatives, news and social media.
The insights are applied across multiple business teams.