Counters face up to green beans

By Robert Bruce
Published: September 1 2008 03:00

The outsider's perception of accountants would be that they are far from being the greenest of professions when it comes to taking action on climate change.
Once upon a time that perception would have been true. But it is changing.
The reason is simple: figures. Good intentions on environmental matters might pass them by but if accountants have figures to measure, then they can see how they affect an organisation's overall strategy.
Roger Adams, executive director, policy, at the Association of Chartered Certified Accountants, (ACCA), is a veteran in this field.
"It has gone from an empty page to a crowded landscape in 15 years", he says. "Then, finance directors looking at annual reporting would not have thought about environmental or social factors except for issues such as the Exxon Valdez oil spill disaster. Apart from a rarity like that, you would have seen very little."
That has now changed and, if anything, finance directors are swamped by initiatives, programmes and frameworks.
"There are so many initiatives," says Jan Babiak, global climate change and sustainability services leader at Ernst & Young. "The problem is that there are so many standards and different people want different things from financial reporting."
Mr Adams says: "If I were a finance director, I would wonder what really applies to me at the moment."
Mark Bromley, head of business performance at EDF Energy, says: "We set up our sustainable future project in 2006 using corporate social responsibility (CSR) as a driver of business performance.
"We pledged to cut carbon intensity from our generation activities by 60 per cent by 2020 and were looking at radically transforming the culture of the business. We wanted to find a good methodology for reporting."
He became involved in the work of The Prince of Wales Accounting for Sustainability Project and - before the project's report was published last December - started taking elements of it, in particular the connected reporting framework, which it devised and advocated, into their financial reporting systems.
"The connected reporting framework was fully aligned with our thinking," he says, "and we used the framework as a dynamic management reporting tool."
The aim of the framework is to ensure that sustainability measures are not isolated in a CSR report, but are connected to the mainstream of financial reporting and have a consequent knock-on effect on corporate strategy.
"The reporting of sustainability issues is not embedded in many businesses," says Mr Bromley. "Now we can see if we are delivering."
Louella Eastman, group CSR director at insurance group Aviva, was a member of the steering committee of the Accounting for Sustainability project and pioneered the use of the connected reporting framework within the group.
"Last year, we decided to use the environmental indices in the report and we had to partner with finance as we didn't normally collect the information. The learnings were profoundly more interesting than I expected."
The connection of the two disciplines produced strategic change.
"It became a discussion about cost," she says, "and, for example, we moved our cleaners on to a day-shift from evenings and told the security staff to switch the lights off." It was a simple action but it brought about serious financial change.
"We have 30,000 employees in the UK," she says, "and the change translates into significant savings."
The change came from connecting the CSR information and personnel with the finance function. "It was astonishing. It made the information more useful and gave us insights," she says.
"We didn't have all the data required and it was helpful in challenging the business. Carbon moved on to senior executives' objectives."
All this practical action has cheered Paul Druckman, one of the leaders of the Accounting for Sustainability project and now chairman of its successor body, the Accounting for Sustainability Forum.
"An awful lot of time, energy and thought has gone into something which is meaningful and is along the lines of what we recommended," he says. "An unexpected result of the exercise has been the level of connection between finance departments and CSR, both in terms of understanding what they are doing and arriving at the final numbers."
Another company that adopted parts of the connected reporting framework was BT. "It was the first time we had aligned the non-financial and financial data," says Chris Tuppen, chief sustainability officer. "It gives us more profile, for example, with CO 2 emissions and total energy costs, landfill taxes, and giving us a net cost for dealing with our waste."
"We have acceptance from other companies that this is a valid way forward," says Mr Druckman, "and we are with them through 2008 to help them, and help them help each other, to put it into practice."
Janice Lingwood, client director at corporate communication consultancy Addison, points to the example of pharmaceutical group AstraZeneca. "It got rid of its sustainability section in the annual report and put the important sections into the main figures," she says.
"Instead of being a bolt-on, it has become embedded properly. If you show how sustainability links with strategy, it becomes more fundamental to understanding the business."
But that trend needs to be connected with a gathering together of objectives. And that probably needs regulation, either governmental, or from existing standard-setters such as the International Accounting Standards Board, (IASB).
"We need clear targets and strategies," says Helenne Doody, sustainability specialist at the management accountancy body, CIMA. "Reporting can help drive change, but the big problem is the lack of consistency in reporting as there is no formal guidance. The government should provide it. There are so many carbon calculators. We need an international standard."
"Accountants tend to follow regulation," says Richard Spencer, manager, corporate responsibility, at the Institute of Chartered Accountants in England & Wales. "Society's demands are changing. The consensus is that we will have mandatory reporting. Most people accept that. So we need a reporting model that is valuable and useful."
David Philips, corporate reporting leader at PwC, says: "Connected reporting is the way we are going, but it probably needs the impetus of regulation."
At present, it is a question of accountants increasingly managing the information and allowing organisations to see the true strategic effects of sustainability figures.
"You have to manage a business across all its stakeholder groups and meet their requirements," says Mr Bromley. "It is not a sudden cultural change. But it brings together very different people.
"It has to be embedded. Clear communication is vital. And you have to have encouraging managers." Robert Bruce was on the board and steering committee of The Prince's Accounting for Sustainability Project.
Copyright The Financial Times Limited 2008