Businesses have had to adapt to new ways of working as a result of the COVID-19 pandemic, at a time when they already face increasing pressure to report, understand and mitigate the impact of activities on the environment and broader community.
Keeping up requires an organisation-wide approach, and the finance function will play a central role.
Finance and accounting professionals need to move beyond simply measuring and reporting the impact of climate change, environmental regulation, supply chain pressure and rising energy costs. They must focus on understanding those implications and integrating them into financial management and business planning.
Francesca Sharp, Technical Lead Climate Change at ICAEW, says: “Businesses need accountants that can shift mindsets from ‘measurement’ to ‘valuation’. Simply noting that a certain operation resulted in the emission of X million tonnes of carbon isn’t enough. “
“Businesses need to be asking why do those emissions matter? What happens if they increase? Can they be cut? What will it cost? Are there ways to economise without risking unintended consequences? A professionally qualified accountant can address these issues – and also help the wider business understand their implications.”
Shifting to this valuation approach means moving beyond ‘how big is the problem?’ towards ‘what is the problem that needs a solution?’ The question to ask is what is the business doing to absorb any damaging impact? And then, how is it positioning itself to work successfully within the new normal?
Chartered Accountants will lead the way in addressing what factors threaten a company’s success over the next decade. Identifying these dependencies is crucial to build resilience in an age of economic uncertainty and disruption. And resilient businesses will be better placed to spot emerging opportunities.
None of this can be achieved by a company that relies on its finance team to passively measure impact. Chartered Accountants are expected to provide analysis and strategic advice because they have the knowledge, credibility, rigour and ethical approach to give businesses confidence in the strength of their decision-making process.
“External pressure is mounting,” says Sharp. “Make no mistake, policymakers at both national and international level are only just beginning in their journey towards a far more holistic set of guidelines and enforcement tools in this area. And investors are following suit, asking why the company made a certain decision, and what strategy lay behind it.”
ICAEW has been at the forefront of this debate over the past decade and has adapted the ACA qualification to reflect that. We see its role as not simply integrating knowledge and understanding the broader implications of environmental, social and governance issues into organisations, but also seeding this thinking into the mindset of our members.
Ultimately this is about mindset, and embedding the right behaviours. We train students to know what questions to ask, how to behave and how to apply their professional judgement.
Our syllabus and ethical and professional development programmes contribute toward creating ICAEW Chartered Accountants who recognise that sustainability is at the core of what they do, and are capable of actively using their business skills to analyse how to make the new sustainable economy work for their business.