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Making COP count

COP28: learning a new language for business

Author: ICAEW

Published: 11 Dec 2023

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As more focus is put on the need for nature-positive, socially just transition plans, accountants will need to learn a different way of measuring business performance.

Double entry bookkeeping was central to the business language of the 20th century, but in the 21st century, it’s all about capitals – taking on board natural, human and social capitals in addition to financial success. 

This is the view of ICAEW CEO Michael Izza. “We understand that at the moment we’re asking business people to learn a new language and they’re not going to be fluent straight away,” he said at the transition-planning round table, held on the fringes of COP by Accounting for Sustainability (A4S) and ICAEW. “But even though they aren’t fluent, they still need to use the language. If we wait for everyone to become fluent, it will be too late.”

Delegates at the round table agreed that standards and frameworks should demystify the terminology and process, making sure that it’s practical and accessible. That is the goal of the UK Transition Plan Taskforce (TPT) framework, which also aligns with international standards. It aims to create guidance that helps people get started with the process in a systematic way. 

The TPT was set up with a mandate to create a gold standard for transition plan disclosures, explained Nina Pimblett, Sector Guidance Lead at the TPT. Its outputs will then inform regulation within the UK, she told attendees. 

“The Financial Conduct Authority (FCA) has committed to drawing on the TPT framework as it further develops disclosure expectations for listed companies, asset managers and FCA-regulated asset owners,” she said. “On top of that, the UK government has committed to consulting on the introduction of requirements for the UK’s largest companies to disclose transition plans if they have them.”

‘Transition planning’ and ‘just transition’ have been buzz phrases in 2023 and have dominated conversations at COP28. Just transition refers to the need to shift to net zero in a way that works for all, taking society and nature into account. There is a consensus that we need to break down barriers to progress and accelerate the transition process. 

The equality and inclusion angle was covered in a talk, The Role of Inclusion in a Just Transition, held by EY in the COP28 Green Zone. Máximo Mazzocco, United Nations Development Programme Youth Global Ambassador, talked about why social impacts should make up a critical element of transition planning. “I come from a country, Argentina, where approximately half of the population is poor,” he said. “I will go and talk about climate change and they answer: ‘I didn’t eat today’. And I’m there talking about the climate. It’s such an unrealistic thing for some people – there’s a huge gap. I can assure you in very simple terms that there are people that, right now, are suffering the consequences of the climate and ecological crisis. 

“We need to understand: what do we mean when we say equity or justice or diversity or inclusiveness? Are we taking it on board in every decision that we make?”

IBM is factoring this into its own transition plans. In 2022, the group launched its Sustainability Accelerator, which combines hybrid cloud and AI technologies with IBM expertise to enhance and scale non-profit and government organisations that help people who are especially vulnerable to environmental threats. It aims to select five organisations to assist each year and has committed to spend $30m (in the form of cash, technology and services) by the end of 2025.

Justina Nixon-Saintil, the company’s Chief Impact Officer, focuses much of her work on underserved, marginalised communities. “It’s all focused on: how do we help those communities that are the most impacted by climate change? There was a 2023 IPCC report that said 3.3bn people are in communities that are vulnerable and will feel the most impact from climate change. There’s a lot more that corporations can do, in partnership with governments and with non-profit organisations,” she told attendees.

Amy Brachio, EY Global Vice Chair - Sustainability, spoke on including employees in the process. “If we go through the transformation, practically, that won’t require some new skills to be able to do your job.”

IBM has seen such a demand for sustainability skills from its employees that it set up the Sustainability Pathways programme to facilitate it. “We are providing access to training on how to use data and AI to make the right decisions around sustainability,” said Nixon-Saintil. “How do you connect sustainability to cybersecurity? How do you leverage AI in this space? It’s a free-to-access platform and you actually can take advantage of the learning pathway, obtain a credential and be able to use that to either upskill or reskill yourself.” 

Meanwhile, ICAEW, A4S and CPA Canada held a capacity building round table with senior figures from banking, accountancy, regulation and policymaking to discuss how the profession can gain the skills – and leverage their existing knowledge – to be able to prepare and assure non-financial information. 

These skills are in demand: while hiring slowed globally overall, jobs requiring green skills have grown by 15%, according to one delegate, who said: “Transition is just as disruptive to the workforce as technological revolution,” one delegate said. 

The profession’s role in the sustainability agenda is as guardians of data, attendees agreed. People are wary of greenwashing and want to be able to trust data – they want it to be rigorously assured. “This speaks to one of the core skills that accountants have,” said another delegate. 

As part of capacity building, the round table heard that some work needs to be done to introduce consistency in the definitions of non-financial terminology. For example, one delegate from a major accounting firm said that their clients had different ideas of what counts as Scope 3 emissions: “When it comes to capacity building, that’s an issue. We’re still learning and clients are still learning what all of this really means.”

The challenge for the private finance sector, delegates agreed, is to get to a point where every professional financial decision needs to take sustainability into account. As a result, everyone within professional finance needs to have some knowledge of sustainability.

It was also agreed that supporting SMEs is another critical element of ensuring transition plans happen. More focus needs to be on the SME market – and accountants are well placed to help them if they have the knowledge. In Canada, delegates heard, 95% of economic activity comes from SMEs, which means that business owners need some sustainability skills as well. For example, farmers should think about soil health and the impacts of pesticides.

The role that boards will play will also be significant. When recruiting to the board, organisations need to look to fill sustainability skills gaps. Thankfully, we are seeing a desire to upskill and provide tools to ease adoption of new standards. Mid-career professionals are looking to embrace these skills with one eye on future leadership roles.

Accessibility to the right data is another challenge that needs to be addressed if chartered accountants are going to be able to deliver to new standards. The global Net-Zero Data Public Utility has been set up to be “the mothership of all data related to climate and net zero”. The proof of concept was launched during COP28. Its company-level climate data will be open sourced and free to use. 

Sarah Reay, Climate Change Manager at ICAEW, has been on the ground at COP28 and notes: “It has been encouraging to see just transition central to COP discussions both in negotiations and at the many sessions I have taken part in. The profession will be a key enabler of the just transition and help to deliver credible transition plans, but there is a language barrier and knowledge gap that needs to be overcome so we can move at pace.”