While Richard Carter was working at Adnams Brewery his CEO, Andy Wood, told him that he wanted the company to do more to measure and report on its environmental impacts. To Wood, it made sense this would sit with finance – if you can add up the money, you can add up the carbon.
The company was already doing a lot of work to improve its environmental footprint and Wood trusted Carter to figure out the details. It wasn’t just about measuring carbon emissions; it was also water use, waste production, the impact on biodiversity and many other things. It was a big task and Carter threw himself into it.
This was a decade ago when the issue was much less understood. There weren’t many examples of companies who had got it right. Carter and his team had to develop a new framework for Adnams and he admits it was a steep learning curve. “We learned an awful lot from the National Trust,” says Carter. “What they don't know about sustainability and energy management really isn't worth knowing.”
Carter managed to work out how to measure sustainability as effectively as finance, using tools such as life cycle analyses and environmental gearing. Finance and sustainability became Carter’s career. He now works as a lecturer in accounting, finance and sustainability for West Suffolk College and is a director at the Institute of Environmental Management and Assessment (IEMA). He is also running a series on sustainability and finance, digging into the different aspects of sustainability, including measurement and reporting.
Three factors are increasing the need for businesses to take sustainability seriously. The UK government’s 2050 net-zero target will require businesses to make some huge changes to the way they work. Mandatory TCFD reporting is being introduced for certain large entities at the end of this year, starting a roll-out of mandatory reporting across large organisations over the next few years. Investors also want to see non-financial information in company reporting and are putting more pressure on businesses of all sizes to take a serious look at their environmental and social impacts. Finally, the business case is becoming very strong; businesses need to address their impacts to ensure they remain resilient.
Accountants are best placed to take on this work, Carter believes. “There's no doubt to me that this is squarely a finance function. This is about risk. It's about longevity. It's about numbers. We need the scientists to help us understand this, and behavioural change specialists to get people on board. But I think finance can comfortably lead it.”
It is a mindset change, however. Carter explains that there are elements of sustainability reporting that are less certain than the financial data that accountants are used to looking at. It takes some thinking to create a reporting framework for it. However, there are some indisputable fundamentals, such as nutrient cycles or greenhouse gas emissions, that are easier. Where there is some uncertainty, you have enough of an idea to work with.
“Churchill said perfection is the enemy of progress. Just because we don't know it all, doesn't mean that we shouldn't be taking action,” says Carter. “The precautionary principle is fundamental to sustainability management, so we have got some frameworks, we've got the science, we have some environmental management systems, we've got reporting conventions. It is all there. The challenge is getting accountants to think in this slightly broader way.”
Accountants have a lot of questions to answer when getting started with sustainability. You need to consider every action the organisation takes, Carter explains. That includes the effect on nutrient cycles, the waste produced and how it’s dealt with, the social implications of its activities. You need to understand how a multitude of factors relate to each other – if you try to fix one, will it have a detrimental impact on another?
Getting my head into that new space was the big challenge, but it can be done. It still all comes down to the bottom line. Everything we're looking at in environmental sustainability comes back to that. If we don't start addressing these issues, the cost of adapting to the changing climate is going to be horrific. You might not have a business in 10 years. So it really is commercially driven.” The first step that accountants need to take is to get some basic sustainability knowledge. Choose courses that are recognised – IEMA is a good place to start.
You then need to start thinking about the business case for sustainability. Of course, this is central to the work of the finance team and the organisation. You want to create a resilient and efficient business as a result of the changes you make.
Finally, you need to start collaborating, says Carter. Collaboration is included in the UN Sustainable Development Goals. “It’s such a significant step, that we're setting up a network at West Suffolk College to get local businesses involved. They can come and talk to each other, bounce ideas around, identify the challenges. If one person's already achieved something, let's use that elsewhere.”