Accounting for Sustainability: Gillian Lees Asks Why Financial Managers Are Not Getting More Involved in Helping Firms to Deal with, and Benefit from, Climate Change Strategy
Lees, Gillian, Financial Management (UK)
"Climate change is a long-term issue, so mitigating it and adapting to it is a marathon, not a sprint." So said the senior sustainability expert of a global drinks company that participated in CIMA's recent research project on the subject. For such companies, managing the effects of climate change has been a strategic imperative for years. And, like it or not, carbon dioxide emissions and their management will become a critical issue for business as carbon accounting moves from a voluntary reporting process to a legislative compliance regime.
With China and India having signed a five-year deal on measures to counter climate change and the US set to pass its own laws within months, the international community is moving closer to agreeing a global climate-change treaty. Despite this and the widespread acknowledgment of the need for action, few businesses can claim to be ready for regulation. In CIMA's international survey of financial managers and sustain ability professionals in conjunction with Accounting for Sustain ability (A4S), only 38 per cent of respondents said that their businesses were well placed to deal with the effects of climate change, while 20 per cent admitted that the issue was not on their organisations' agendas. This is a worrying statistic, particularly because 88 per cent also agreed that business had a key role to play in mitigating the effects of climate change.
The principle of strategic intent is crucial to ensuring that sustainability is integrated into long-term decision-making. The survey found that in those firms where climate change was a strategic priority, respondents were a third more likely than those without a strategic focus to have implemented initiatives for adapting to it. Delivering long-term value has always been a fundamental corporate goal, but the clear reluctance of so many organisations to grasp the nettle suggests that some still believe that tackling climate change and delivering high returns to shareholders are mutually exclusive. On the contrary, those firms that have led the charge have shown how to create value-enhancing opportunities through targeted action.
Businesses can be proactive or wait to be pushed. Whichever way, many compelling forces, including those from investors, customers, staff, regulators and competitors--along with spiralling energy costs--increasingly dictate that they must act in a more structured way, modelling and evaluating their risks and opportunities.
Management accountants can make a difference here by providing vital intelligence to influence strategic decision-making. In the survey, 80 per cent of respondents felt that the finance function had a key role to play in managing sustainability initiatives, but only a third of financial managers said that they were involved in these formally, while a fifth reported no involvement at all. A big barrier hindering firms from acting appropriately is the lack of robust measures associated with climate change-surely a mandate for finance to step in. Yet many accountants did not perceive this mandate, citing a lack of time, resources and specialist knowledge as reasons for not getting involved.
A number of respondents also felt that their roles didn't suit the climate-change agenda. Some sustainability professionals suggested that their finance colleagues were too focused on immediate targets to adapt to the long-term perspective that accounting for sustainability requires. Such views are the most likely reason why many accountants felt that little attempt had been made to establish a role for finance: nearly a third felt that their organisations' CSR/climate-change teams simply hadn't consulted the finance function. …