“It’s all about the money, isn’t it?” That’s what the CFO of a French conglomerate said to me last week. Phrased as a question, he actually meant it as a statement of the blindingly obvious. Perhaps surprisingly for sustainability colleagues, my answer was a qualified yes – qualified that is by timescales.
We were talking about the ESG factors – environment, social and governance issues that investors are increasingly tracking – which boards should address when considering “le développement durable”.
In that context, if the timescale is this quarter’s earnings, then no: focusing only on the money is not the answer. But if we’re talking about business success that endures, then yes, it is about the money and we should get better at talking about it. For that, we need accountants on board to help. And that’s why, at the start of the year, we cited CFO fluency in sustainable business as one of Corporate Citizenship’s top ten trends for 2019 – and predicted a change in allegiance among finance directors from foe to friend.
My perspective on this question is as a chartered accountant. None of this was covered in my original training, but thankfully, that’s changing. Fifteen years ago my institute published the definite 100+-page guide to the part accountants should play in measuring, reporting and assuring sustainability. (Role of accountants ICAEW 2004)
That same year the Accounting for Sustainability Project was set up by the Prince of Wales, with the clear aim – as valid now as it was then – to make sustainable decision-making “business as usual”.
Two years ago we saw that message embraced at the heart of the City of London, when the Task Force on Climate-related Financial Disclosures (TCFD) published its detailed recommendations for listed companies to provide information to investors, lenders and insurers on their financial risks related to climate change. My only quibble with TCFD, is that the language of risk has negative connotations, whereas we also need to look at opportunities in the quest for business success that endures.
Moves by governments to embed this in corporate reporting are gathering pace, both in the European Union and in the UK, where the Government says it will consider making this mandatory. Once this is embedded in the annual report and accounts, the ball is firmly in the CFO’s court.
My advice to anyone wanting to “speak accountant” when discussing sustainability, is to focus on a simple question – will this result in more money in, or less money out, now or in the future? That puts everything into just four basic categories: income and expenditure, today and tomorrow – things like more sales, costs avoided, stronger brands or greater resilience.
What does this look like in practice? Have a glance at Unilever’s four-point sustainability value framework, which it also uses in its annual report. Yes, risk is there, but the opportunity upside is stronger. (Full disclosure: I’ve been privileged to have consulted with Unilever over two decades.)
For sure this trend towards seeing the finance director as a friend, not a foe, has taken a long time in coming. In business, it still is “all about the money” – just not as narrowly as I was taught all those years ago.
Mike Tuffrey
Co-founder, Corporate Citizenship