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Taking the Lead on Sustainability Efforts

By Kristine Brands, CMA
November 1, 2019
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Strong leaders go beyond financial performance to prioritize saving the planet.

 

The headline in Paris’s Le Monde newspaper on July 29, 2019, said: “Earth has its hottest time in 2,000 years” as Europe suffered from a climate-change-induced heat wave breaking high temperature records across the continent. Many parts of the United States also endured stifling heat in July 2019. Though a minority still denies that climate change is upon us, these events are scientific evidence of climate change with real environmental impact—the world is changing. And this could have a profound impact on companies and organizations. How can management accountants provide leadership for their organizations on sustainability initiatives and integrated reporting to address risk caused by climate change?

 

In 2017, IMA® (Institute of Management Accountants) conducted a survey of CFOs to gauge their views on climate change and the activities they’re taking to address the threat. Sixty-five percent of the respondents indicated they think climate change is having an impact on the environment, but only a minority of the participants planned to take action to address the threats posed by climate change. The leading initiative—increasing energy efficiency—was cited by only 39% of the respondents, followed by 24% who planned to implement sustainability performance measures. Twenty percent planned to implement stricter pollution output controls, begin measuring their carbon footprint, and encourage green commuting.

 

The weak commitment indicated by the CFOs shows a lack of a sense of urgency to address climate change and sustainability issues. Alison Martin, Zurich Insurance Group’s chief risk officer, provided an explanation for this attitude in June 2019 at The Wall Street Journal’s CFO Network Annual Meeting when she said that CFOs are underestimating climate change because “the issue is often viewed as a slow-moving phenomenon” despite scientific evidence to the contrary. The implications of continued inaction to address the threats and risks of climate change are huge for organizations and must be addressed. Let’s look at how management accountants can fill the leadership void.

 

MANAGEMENT ACCOUNTANTS AS BUSINESS PARTNERS

 

Bob Laux, the North American lead for the International Integrated Reporting Council (IIRC) and former IMA Global Board member, believes management accountants play a critical role in their organizations for environmental, social, and governance (ESG) leadership. He says they understand their organizations, the information data flows, and how the data can contribute and add value to the organization.

 

Brad Monterio, chief learning officer and vice president of member competency and learning at the California Society of CPAs and an IMA Global Board member, agrees: “Management accountants sit at the nexus point of a new reporting paradigm. Because of this, CFOs have a significant opportunity to fundamentally change and improve how the market determines value of a company—they can do so by embracing processes, standards, and best practices around sustainability reporting, integrated thinking, and integrated reporting that research has already shown to lead to better indicators of value.” Management accountants can act as business partners by facilitating integrated thinking at the leadership level to change an organization’s mind-set about sustainability issues.

 

Organizations can no longer simply focus on financial measures to assess company performance. The trend in performance reporting is broadening beyond its traditional focus on financial results. Monterio says, “Corporate reporting focused exclusively on financial measures and disclosures is inadequate for the market to determine the true value of a company today. A more holistic approach to deployment of company resources—including natural, human, intellectual, manufactured, and financial capitals—leads to a new reporting paradigm that is a better indicator of value and long-term sustainability.”

 

Laux believes that organizations need a sustainability tone at the top of thinking holistically and encouraging management accountants to provide environmental information to impact long-term value. Failure to do so could lead to value destruction and, worst-case scenario, putting an organization out of business.

 

THE MANAGEMENT ACCOUNTANT’S TOOLBOX

 

Management accountants possess a rich skill set, including cost-benefit analysis, risk assessment, internal controls, and developing and reporting nonfinancial performance metric key performance indicators (KPIs), to take the lead on sustainability issues. They know their organizations and have critical expertise for setting up an analytical framework to measure and monitor progress toward sustainability goals.

 

Laux suggests that management accountants have the analytical discipline to create and analyze appropriate KPIs because they understand the formulas and can drill down into the elements comprising the KPIs—the numerator and the denominator—to explain indicative and predictive factors to manage sustainability initiatives. He encourages organizations to let management accountants be creative when setting up sustainability KPIs because, unlike financial reporting, nonfinancial reporting isn’t one-size-fits-all for organizations—it needs to be tailored to each organization’s goals and objectives.

 

Management accountants are ideally suited to take charge and lead their organizations in sustainability initiatives and integrated reporting. One person can make a difference to raise awareness about sustainability issues in an organization and become a catalyst for change. Be that person and empower your organization to take steps to preserve the world for future generations. As Prince Charles of the U.K. said, “Who better to take the lead and set an example than the accountancy profession which is, in so many respects, the engine room of the corporate world, and indeed, government?” SF

The opinions included are those of the author and not necessarily those of the U.S. Air Force Academy, the U.S. Air Force, or any other federal agency.

 

IMA LEADERSHIP ACADEMY

 

The IMA® Leadership Academy provides leadership opportunities for all members. From leadership assessment to leadership courses offered in person as well as through WebEx to participation opportunities in mentoring, be it reverse or traditional, the IMA Leadership Academy can help you meet your leadership goals and improve your leadership skills. For more information, please visit the Leadership Academy website at www.imanet.org/career-resources/leadership-academy.

 

Kristine Brands, CMA, is an assistant professor of management at the United States Air Force Academy in Colorado Springs, Colo. She is a member of the ICMA® Board of Regents and IMA’s Technology Solutions and Practices Committee. You can reach Kris at kmbrands@yahoo.com.
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