How does the accountancy profession add value through sustainability?

ACCA’s Education Global Forum

External motivation for having a sustainable business comes from many sources including government, regulators, employers’ sources of capital such as banks and most recently ‘green’ investors. These investors are looking for the social and environmental impact of everything a business does. To recognise this, business systems and models need to reflect sustainability models. Corporate identity can be an internal driver, but it is these external motivators that will support a drive to more sustainable business.

To date, the accountancy profession has taken a reactive approach and has been slow to the party, meaning others are doing the reporting in this sphere. The perception is that sustainability only becomes ‘our problem’ if there is a related reporting requirement. Currently there is no framework for reporting on sustainability and, as a result, many entities report sustainability outside the financial statements (FS) report. It is perceived that there the desire to be forward looking and with financial statements being short term in nature there is an opportunity to utilise integrated reporting and thinking to understand the conflicts and to responsibly set targets to hold business leaders to account.

Despite a desire to be to be transparent, there are perceived barriers to reporting at a global level. These include transparency as a potential blocker due to human rights, local rules, etc. There is a perception of current unreliability of sustainability data which makes reporting and comparability a real problem. For example, ‘climate’ is an area in which it is extremely difficult to get consensus. A further perceived barrier is the danger that if reported in the FS, an opinion may be perceived to be expressed and litigation may ensue, hence the reason for keeping sustainability within the management commentary section of financial reports. 

There is debate as to whether comparability is still the ‘gold standard’ and whose role it is to manage the reporting. It often is done by non-accounting functions and there is no real coherence on the way forwards. There is not even agreement over the conceptual underpinning to what the report should show, suggesting the need for a conceptual framework. Without an agreed framework, ‘creative’ reporting is possible, which has an impact on the reputation of accountants as well as organisations.

How to educate/convey the importance of sustainable practice in organisations to students/staff
From an educational perspective students need to understand (through the qualifications they take) how sustainability is measured, the impact on the future and why reporting on it is critical. ACCA is well placed in this as sustainability and social assets have been part of the curriculum for many years. The ACCA Qualification already has a focus on non-financial reporting aspects in the curriculum, which universities need to include to gain exemptions.

Sustainability encompasses a broad range of processes and ideals and this creates the challenge within education – to focus on understanding SDGs, Global Reporting Initiative (GRI) framework, Sustainability Accounting Standards Board (SASB) or other ESG guidance but this has to be balanced with being too narrow in focus.

Many universities attempt to include sustainability too, but it is very challenging when students are still learning the basics of accounting and technology, which are more critical. Thus, undergraduate courses can only consider principles of sustainability. It was noted that a master’s degree can have a greater focus. However, if ACCA embeds this strongly in the Applied Skills exams it is likely universities will do their best to include this too, to gain exemptions from those exams. (Currently, ACCA’s focus is greater at the Strategic Professional exams, which are at master’s level and from which exemptions are not possible.)

Some universities do cover the SDGs as a mandatory aspect, but many do not. There are examples that show sustainability can be taught in a meaningful way, often as an elective. In one university, students are asked to create their own framework for sustainability reporting and then critically appraise it; another uses guest speakers; another uses a practical assignment in which students create a presentation based on real companies for shareholders showing the CSR commitment, and how it benefits the organisation, and why that should make them want to invest.

A challenge raised for curriculum development in the topic of sustainability was that there have been many other things also necessary to incorporate as the syllabus grows in order to keep exemptions, not only with ACCA but other bodies in the relevant jurisdictions. (These have included data analytics, AI and other aspects of technology.) There is already a huge volume that students must deal with in the curriculum and adding sustainability is another factor. It is essential not to forget the nuts and bolts (critical and analytical thinking) of being an accountant first and foremost. Another challenge is that when sustainability and climate change do appear in curricula, the lack of framework makes it harder to teach beyond its basic importance. If reporting, with its various frameworks, was to be included, this would be a very different proposition for teaching.

Training may be needed to get attitude change from top down as well as bottom up, driven by the younger generation and curriculum they should follow. The role of ‘sustainability trailblazer’ in an organisation will be important using business dynamics for decision making.

All staff across an organisation need to understand sustainability and what it means for them as an organisation. Examples that support organisational change are sustainability forums that bring in external speakers as well as having discussions among themselves, sustainability manuals for all staff, accompanied by training and communication so that they understand why they are being asked to follow guidelines – for example, not wasting water, re-using plastic and for some organisations, staff just need reminding that some of what they do is already about sustainability.

Finally, there need to be new roles created such as chief sustainability officer, which require the skills of an accountant before this topic is really taken forwards. At a recent IFAC conference, it was noted that the role of chief value officer, which has similar purpose, is being advanced, albeit gradually.

Sustainability is an area the youth of today are very focused on. Boosting sustainability within the curriculum will improve the image of the profession which enhance the attractiveness of accountancy. Newer professional body members will be thirstier for this and drive future practice if we cover this well in curriculum. As with the reporting of sustainability, the education and training changes required take time and, since capacity is needed to introduce changes, it is likely that this will need to be driven by external forces.

How have plans for change altered over the last year in relation to the principles of sustainable business in the curriculum?
Covid-19 has led to many changes in the past year. Examples include reduced travel, which has helped the planet, and wellbeing of employees has taken front place, more so than in past. It is hoped this will be considered in organisations when a return to ‘normal’ is possible so as not to go back to the old ways and take the best of now and then, which is driving change. It is hoped that sustainability will very much include personal wellbeing, which is currently at an all-time low despite benefits to the environment; this represents a big risk to being sustainable as a business

Many organisations have had to close doors due to the impact of Covid unless they created solutions in technology. Leadership has also changed and organisations must rethink the social capital as well as the technology side, hence linking sustainability and disruptive technologies. These changes in business will filter down and cause changes in curriculum.

Summary
Accountants need to be driving up value reporting in the organisation. However, the lack of framework and global standards makes it very difficult to provide useful reporting for sustainability purposes. If the profession is to add value through sustainability, then we must have a framework for measuring and reporting it.

As accountants we are in a good position to understand the conflicts that businesses face in reporting sustainability. By linking financial statements and sustainability with reference to shareholder value, this will support business resilience and longevity in an increasingly short-term and competitive business environment.

In summary, as the accountancy profession, we need to drive the link between long term commercial value and a business that has sustainable attitude, in which integrated thinking is essential. As accountants we have a hugely important role to play in the sustainability debate, not just to be involved but to show leadership in an area that really matters and to be a force for good.

WHAT’S NEXT AT ACCA IN SUSTAINABILITY?

Practical Guides
Over the next few months, the Education Global Forum will be releasing a series of practical guides for accounting roles (leader, performance manager, corporate reporter and assurer) on how to better embed natural capital management strategies within the role. These are 'simple' guides aimed at those new to the topic.

CPD
A suite of CPD on the topic is being released over the next few months. Each module will comprise approximately three to five hours’ CPD.

A full certificate is in the planning for release in 2021. This will comprise all the individual modules and an assessment,

SDGs
ACCA is embedding several of the relevant United Nations Sustainability Guidelines (SDGs) across the organisation and raising awareness of all staff. This is evidenced through the delivery of our strategy.

WHAT’S NEXT AT IFAC IN SUSTAINABILITY?

IFAC recently reported: ‘Reiterating the themes of its September 2020 call-to-action, Enhancing Corporate Reporting: The Way Forward, IFAC calls for the creation of the new board alongside the IASB under the IFRS Foundation. The proposed board would address the urgent and growing demand from investors, policy makers and regulators for a reporting system that delivers consistent, comparable, reliable, and assurable information relevant to enterprise value creation, sustainable development, and evolving stakeholder expectations.’

Contributors
This article was drawn from insights from ACCA’s Education Global Forum (EGF). ACCA is committed to delivering professional accountants that the world needs. Key to achieving this is understanding the factors that affect the content, delivery and assessment of training and education, and how best this can be supported.

This approach will ensure learners are able to develop a sound base of knowledge and skills that will support them throughout their accounting career and lifelong learning. EGF members use their expertise to:

• advise ACCA on relevant educational matters
• consider the future of educational delivery and assessment for the next generation of learners
• look at ways to share best practice in educational delivery and assessment and contribute to shaping the future of the qualification
• look at innovative delivery and assessment models and ways in which to support learners globally, reflecting the changes in the world of education and work
• debate how to effectively ensure a lifelong learning approach to educational delivery
• contribute to debates on CPD and its application in supporting professional accountants, and
• contribute to the relevant work of ACCA on the above matters.

The following EGF members contributed to this article and ACCA would like to thank them for their ongoing support and insights:

• Chair, Professor Kenneth Henry, Florida International University
• Professor A J Kreimer, Temple University, US
• Professor Alan Parkinson, UCL, UK
• Catherine Edwards, ACCA
• Professor Dan Herbert, Birmingham University
• Professor George Baah, Quinnipiac University, US
• Dr Gladys Bunyasi, KCA University, Kenya
• James Cumming, BPP University Business School, UK
• Dr Jane Towers-Clark, ACCA
• Dr Kate Ringham, Oxford Brookes University, UK
• Professor Mary Bishop, consultant, UK
• Meera Eeswaran, Asia Pacific University, Malaysia
• Nandika Buddiphala, Commercial Bank of Ceylon, Sri Lanka
• Professor Recep Pekdemir, Istanbul University, Turkey
• Sharon Machado, ACCA UK (as forum member)
• Stuart Pedley-Smith, Kaplan, UK