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?

1. What is
sustainability
and why is it
important to us
all?

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

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

2. What’s the
role of
Business?

The social responsibility of
business is to increase profits.
- Milton Freedman, New York Times, 1970

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

3. What
drives
businesses
to be
sustainable?

Premium will increasingly be
defined in terms of sustainability
and environmental compatibility
- Dr. Norbert Reithofer, Chairman, BMW board

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

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

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

How do markets work to drive sustainability?

Market Activities

Corporate
Strategy
Supply Chain
Pressure

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

Supply Chains
McDonald’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

Stakeholder
Engagement
Voluntary
Codes

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

Voluntary Codes
Supermarket Industry in the UK
•In 2006, the UK supermarket industry collectively targeted to
halve 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

Rating and
Benchmarking

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

Taxes and
Subsidies
Tradable
Permits
Requirements
and
Prohibitions

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

Tradable Permits
European Union Emissions Trading Scheme
Launched 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

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/

4. What role do
accountants play
in sustainability?

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

Can Accountants Save the World?

Inspiring innovation and debate
about the future of the profession

5. What has ICAEW
been doing?

Thought leadership programme

Convening the debate: asking the right
questions

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

Outside insights: other people’s views

Turning questions into answers: guidance

Qualifications

Representation

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.

ICAEW Community of Interest
www.icaew.comBUSINESS WITH CONFIDENCE www.icaew.com
Getting our members to think
about their work on social mo-
supporting them in doing so.
10% reduction in paper
consumption in 2011
Research-comparison
(annually) between mem-
bers and non members
Disseminating messages
about the support we give
to members to achieve
their sustainable goals.
Using the shared values with/ in our
membership and to ICAEW to support the
development of key public policy issues.
Financial capability
community project ‘At
house with Money’
Next Generation (ACA)
Financial capability community
project ‘At house with Money’
Unltd* Future
(Sustainable Social
Entrepreneurship
Premium positioning of
ICAEW as leaders in sus-
Financial capability-
Schods Programme ‘use
your expertise’
The Finance Innovation Lab

Get in touch
www.icaew.com/sustainability
www.icaew.com/bsp
www.thefinancelab.org
www.auditfutures.org
francesca.sharp@icaew.com

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