New insights on accounting for sustainability practices

The Chartered Institute of Management Accountants, the American Institute of Certified Public Accountants and the Canadian Institute of Chartered Accountants have released a landmark survey measuring the state of accounting for sustainability in the UK and North America.

CIMA, AICPA, and CICA surveyed organisational leaders from their respective memberships and conducted interviews with sustainability executives from leading organisations to examine key characteristics of business sustainability, and the level of finance function involvement in corporate sustainability initiatives.

Charles Tilley, CIMA’s Chief Executive, commented: “We are pleased to see CIMA’s members spearheading green practices, with 81% of our respondents from large companies reporting that their organisation’s sustainability strategies address climate change. Our joint work with the AICPA and CICA through the Prince of Wales’ accounting for sustainability project enables us to share our research and best practice with the other member bodies. We hope this research will inspire and inform further progress in this important area.”

The three accounting organisations are all founding members of the accounting bodies’ network of the Prince’s accounting for sustainability project, which is meeting in London today.

“Canada’s CA profession is well positioned to illuminate the relationship between effective social and environmental stewardship and bottom line performance,” said Lisa French, principal, guidance and support at CICA. “We have long been active in this field and our participation will grow as more organisations recognise that ongoing business success requires sustainable practices. Sustainability is not a one-size-fits-all proposition and accountants can help organisations develop the required infrastructure for effective strategic planning and corporate reporting.”

AICPA senior vice president for member competency and development, Arleen Thomas, said: “As companies both large and small incorporate environmental and social considerations into their strategies for long-term business success, US CPAs and other professional accountants have an important role to play. The survey report highlights the important work that we have to do in the accounting profession, which is why the AICPA is taking a leadership role in the US and collaborating with CIMA, CICA and the Prince’s project to provide global thought leadership and services to help our members develop skills and competence in sustainability accounting and reporting.”

Business sustainability is about ensuring that organisations implement environmental, social and economic strategies that contribute to long-term success. Organisations that act in a sustainable manner not only help maintain the well-being of the planet and people, they also create businesses that will survive and thrive in the long run.

Leading companies recognise that sustainability performance translates to successful bottom line business performance, and that investors are attracted to companies that act in a sustainable manner with a focus on long-term profitability and competitive advantage.

Key findings

Compliance with regulatory requirements remains the most common driver of business sustainability (34% of large organisations and 24% of smaller organisations, respectively) with profitability and other strategic factors reported as being increasingly significant. After compliance, the next most critical drivers differed between large and small companies:

• 32% of large organisations identified managing reputational risk
• 19% of smaller companies identified cost cutting efficiency.

Large companies have more robust sustainability capabilities: 79% of larger companies currently have a formal sustainability strategy, compared to 33% of smaller companies. However, an additional 23% of smaller companies have plans to formulate a strategy within the next two years.

The finance function’s contributions to organisational sustainability programmes are highly valued, yet underdeveloped:

n56% of respondents said that finance play a role in business case/investment analysis

n33% are tracking sustainability related performance measures.

UK-based organisations appear to be ahead of the curve in terms of implementing sustainability practices and finance function involvement compared to North American organisations.

In an increasingly global community, where economic, environmental, and social issues transcend national and corporate boundaries, 21st century solutions will require a coordinated response by the public and private sectors. Long-term business success will require that sustainable practices be deeply embedded in the ‘DNA’ of all organisations.

As companies innovate to better secure their long-term viability, the accounting profession will play an important role. Accountants can serve as leading agents for change by applying their skills and competencies to develop sustainable strategies and facilitate effective implementation, accurate measurement, and credible business reporting. The study is available online.

Big 4 issue joint statement

The world’s four biggest accounting firms this week issued a joint statement supporting announcement of cooperative agreement.

The statement was issued by Jim Turley, Chairman and CEO of Ernst & Young, BDO, Deloitte, Grant Thornton International, KPMG, and PwC.

“Over the last several years, regulation of the auditing profession has evolved substantially with independent oversight of audit firms now in place in many jurisdictions around the world. Independent oversight has made an important contribution to audit quality and investor confidence in financial markets.

“The global nature of corporate activity demands that audit regulators share information and cooperate across borders. Therefore, we are encouraged by today’s announcement of a cooperative agreement between the U.S. Public Company Accounting Oversight Board and the U.K. Professional Oversight Board. We are pleased it will enable audit firm inspections to move forward and hope it will be followed by similar arrangements among other regulators which we encourage and support.  

“Such cooperation benefits not only the regulators and registered audit firms but also investors, whose investments today increasingly cross borders.”