The role of the management accountant in business process ...
Sustainability and the role of the accountant
-
Upload
francesca-sharp -
Category
Business
-
view
125 -
download
0
description
Transcript of Sustainability and the role of the accountant
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Sustainability and the role of the accountant
Francesca Sharp, Sustainability Executive, ICAEW
BUSINESS WITH CONFIDENCE icaew.com
Agenda
1.What is Sustainability and why is it important?
2.What is the role of business?
3.What drives businesses to be sustainable?
4.What role do accountants play in sustainability?
5.What has ICAEW been doing?
BUSINESS WITH CONFIDENCE icaew.com
1. What is sustainability and why is it important to us all?
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Definitions – what is sustainability
Sustainability: development that meets the needs of the present without compromising the ability of future generations to meet their own needs (The Brundtland Report)
Sustainable development: the process by which sustainability is achieved and maintained
Sustainable business: a sustainable business is one that adopts business strategies and activities that meet the needs of the enterprise and its stakeholders today while protecting, sustaining and enhancing the human and natural resources that will be needed in the future
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Why is sustainability important: Costing the Earth
All figures are 2010.
Sources: Costanza et al, World Bank, Earth Policy Institute, There is a debate regarding the total economic value of ecosystem services
BUSINESS WITH CONFIDENCE icaew.com
2. What’s the role of Business?
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
The social responsibility of business is to increase profits.
- Milton Freedman, New York Times, 1970
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
It may be in the long-run interest of a corporation that is a major employer in a small community to devote resources to providing amenities to that community or to improving its government. That may make it easier to attract desirable employees, it may reduce the wage bill, or lessen losses from pilferage and sabotage, or have other worthwhile effects.
- Milton Freedman, New York Times, 1970
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
3. What drives businesses to be sustainable?
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Premium will increasingly be
defined in terms of sustainability
and environmental compatibility
- Dr. Norbert Reithofer, Chairman, BMW board
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Businesses need to think about the
way they can use their resources
differently and their impact on natural
capital. We are not talking about
abandoning capitalism – we are talking
about redefining the way business is
done so that it has a viable future.
Ian Cheshire, Group Chief Executive,
Kingfisher
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
People always think that to do
the right thing costs you more.
That is not true at all. It can
actually ignite innovation and
lower your costs.
Paul Polman, CEO, Unilever
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Corporate social responsibility
is not just about managing,
reducing and avoiding risk, it is
about creating opportunities,
improving performance, making
money and leaving the risks far
behind.”
Sunny Misser, CEO, AccountAbility
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
How do markets work to drive sustainability?
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Market Activities
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Corporate Strategy
Supply Chain Pressure
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Corporate Strategies
Unilever•Proactively committed to a bold sustainability strategy, reaching the following targets by 2020:
– Halve their greenhouse gas emissions, water usage and waste
– Source 100% of agricultural raw materials, sustainably
– Link more than 500,000 smallholder farmers and small-scale distributors into supply chain.
Benefits•Drives consumer preference
•Wins with customers (i.e. retailers, with sustainability agendas of their own)
•Fuels sustainable innovation
•Grows markets (developing countries, with domestic sustainability challenges)
•Generates cost benefits (energy/waste reduction = save £)
Source: Sustainable Living Plan Report, November 2010
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Supply ChainsMcDonald’s
• The McDonald’s supply chain is a complex web of direct and indirect suppliers.
• Whilst the company isn’t necessarily known for its sustainability credentials in
other areas of its business it is in supply chain.
• High standards for quality, safety, efficiency and sustainability are laid down for
supplier, which are extended to their suppliers’ suppliers and so on.
• Overall, McDonald’s and its suppliers are collectively focused on three areas of
responsibility: ethics, environment, and economics.
• To guide the creation and oversight of issues related to sustainability, an
additional global governance structure was created in 2007 called the
Sustainable Supply Steering Committee (SSSC).
• The SSSC is responsible for guiding McDonald’s toward its vision for sustainable
supply by identifying global priorities and ensuring progress in ways that
complement local priorities and efforts. In addition, each of its global product
leaders takes the lead to include product-specific sustainability initiatives in their
strategies.
• Because of its size and power McDonald’s is able to put pressure on suppliers to
adopt more sustainable practice
Source: www.otterbrewery.com & NBA 2010
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Stakeholder Engagement
Voluntary Codes
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Stakeholder Engagement
Coca-Cola•Built a bottling plant in India in 2006
•It heavily drained the aquifer and negatively affected the ecosystem
•Affected the health of its own employees and local people
•Effectively lost its licence to operate, sales fell off and share value declined
•Coca-Cola learned hugely from this exercise and when the company entered the Chinese market they worked with local communities on water usage, sharing with them their lessons in efficiency.
Source: www. googguide.com
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Voluntary Codes
Supermarket Industry in the UK •In 2006, the UK supermarket industry collectively targeted tohalve the use of plastic carrier bags by 2009
•In order to promote the use of reusable carrier bags:
– M&S started charging 5p for each plastic bag
– Tesco introduced a Green Club cards points scheme
– Waitrose started selling ‘Bags for Life’ for 10p
– Sainsbury gave away over 15 million ‘Bags for Life’
Benefits•After one company commits to reducing waste, competitors follow
•Creates competitive pressure to cooperate
Source: The Independent
Source : The Independent)
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Rating and Benchmarking
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Rating & Benchmarking
PUMA• Puma’s environmental profit and loss account: new
way to rate and benchmark companies.
• Forward looking – whilst arguably not the case yet but hopefully it will encourage more companies to head in that direction & then allow these companies to be compared.
• This will enable investors and other stakeholders to see what environmental impact the companies they deal with have
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Taxes and Subsidies
Tradable Permits
Requirements and
Prohibitions
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Taxes and Subsidies
Green Car Subsidies•In 2009 Lord Madelson, (Business Secretary) and Geoff Hoon (Transport Secretary) announced a new subsidy for electric cars
•Consumer subsidies of £2000 - £5000 for every hybrid or electric car purchased
Benefits•Provides incentives for consumer adoption of low emission cars
•Stimulates economic growth of the clean tech industry in the UK
Sources: www.FT.com
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Tradable Permits
European Union Emissions Trading SchemeLaunched in 2005 it is the first large emissions trading scheme in the world, and remains the biggest
It was launched in combat climate change and is a major pillar of EU climate policy.
As of January 2013, the EU ETS covers more than 11,000 factories, power stations
The installations regulated by the EU ETS are collectively responsible for close to half of the EU's emissions of CO2 and 40% of its total greenhouse gas emissions
Benefits•Introduces effective market mechanisms to promote sustainability
•Creates new markets for “allowances”
•Requires cooperation among high impact public and private stakeholders
Source: www.decc.gov.uk
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Requirements and Prohibitions
Community Interest Companies•Community interest companies (CIC) are a new type of limited company designed specifically for those wishing to operate for the benefit of the community rather than for the benefit of the owners of the company.
•Designed for “social enterprises” that want to use their profits and assets for the public good
Benefits•Tax benefits
•Unique legal identity for “social enterprises”
•Rewards companies that are making positive social and environmental impact
Source: www.cicregulator.gov.uk/
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
4. What role do accountants play in sustainability?
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
The role of accountants is to capture, report and communicate
accurate and reliable decision-useful information and to assure
that information so that people can trust it.
Information and Reporting
Assurance process
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Can Accountants Save the World?
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Inspiring innovation and debate
about the future of the profession
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
5. What has ICAEW been doing?
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Thought leadership programme
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Convening the debate: asking the right questions
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Natural Capital Coalition
1. Valuing Natural Capital in Business: Towards a Harmonized
Framework - This outlines the Protocol project, provides a high
level summary of the stock take and a proposed straw man/draft
outline for the Natural Capital Protocol as a starting point.
2. Valuing Natural Capital in Business: Taking Stock- Existing
Initiatives and Applications – This is a more detailed compilation
summarising existing initiatives to provide a baseline on the
existing landscape. This is intended to be a useful resource to
demystify the growing volume of initiatives in this space.
www.naturalcapitalcoalition.org
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Outside insights: other people’s views
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Turning questions into answers: guidance
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Qualifications
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Representation
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
ICAEW Sustainability Policy
As a professional membership organisation, we represent a common voice for our members and the profession. We believe that the successful business of the future will be a sustainable business.
As a profession we support economic development and prosperity and as an organisation our vision is to have a net positive impact on the economy, society and environment.
We will achieve this by:
• The way we work, embedding sustainability in everything that we do;
• Making sustainability the cornerstone of our reputation and influencing others to adopt the same goal
• Ensuring that sustainability is at the heart of our qualifications, our capacity building activities and the continuing professional development of our staff and members.
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
ICAEW Community of Interest
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Get in touch
www.icaew.com/sustainability
www.icaew.com/bsp
www.thefinancelab.org
www.auditfutures.org
A world leader of the accountancy and finance profession
BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014