Presentation by Stathis Gould, Senior Technical Manager at IFAC, at the Institute of Cost Accountants of India's National Cost Convention, New Delhi, India, March 2012.

1. Sustainability, Organizations,
and Accountants
Institute of Cost Accountants of India
53rd National Cost Convention, March
16 2012
Stathis Gould, IFAC
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2. Research Findings
CFO Role in Sustainability on the Rise
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3. Sustainability Framework
Embedding Sustainability & the Role of Accountants
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4. Business case
The Sustainability Business Case In General
• Customers demand it
• Pre-empt regulatory threats
• Sustainability is good business:
– Enhanced reputation
– Higher profit
– Lower cost
– Closer ties with customers and suppliers
– Managing risk and opportunity
• Sustainability doesn’t have to be about the grand gestures
that change the world – it can be about smaller initiatives
that have a local impact.
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5. Business case 2
What is the Business Case in your Organization?
• Engage stakeholders
• Scope of the business case
• Articulating costs and benefits and financial impact
• Accountants can:
– Identify sustainability related expectations and the key issues
– Link business case to strategy
– Assess financial impact
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6. Material Factors
Two Sector Examples of Material Sustainability
Factors
• For an extractive company:
– Climate change impacts
– High risk operations
– Health and safety
– Community impact and relations
• For a bank:
– Customer satisfaction
– Key staff competencies and talent management
– Executive remuneration
– Exposure to sovereign debt
– Emissions relating their investments
– Financing sustainable projects
– Providing banking services to underserved groups
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7. Sustainability Framework
Vision and Leadership
• A sustainable long term vision and sustainable leadership
• Example: Unilever
Our vision is to create a better future in which people can improve their quality
of life without increasing their environmental footprint.
• Reinforcing governance structures
• Example: ITC
A sustainability management structure that helps to mainstream sustainability
into business strategy.
• Example: Tata Consultancy
Remuneration linked with the organization’s performance in sustainability.
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8. Sustainability Framework
Effective Stakeholder Engagement
• To develop an understanding of what sustainability means
for organizations, and how it can contribute to value
creation and the viability of their operations
• Example: MTR, responsible for Hong Kong’s mass transit
railway
Identifies and prioritizes its stakeholders in relation to how they affect MTR’s
business sustainability over time.
• Example: Nexen, upstream oil and gas company
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9. Sustainability Framework
Effective Stakeholder Engagement
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10. Sustainability Framework
Establish Goals and Targets
• To demonstrate commitment and to show progress
• Strategic targets and break them down so that they are
meaningful for individual subsidiaries, divisions, and
departments
• Example: L&T Engineering and Construction
Set targets for energy, water, health & safety and human rights and established a
monitoring review mechanism
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11. Sustainability Framework
Integration with Risk Management
• Understanding sustainable drivers and issues from risk
management processes
• Dealing with sustainability factors to “de-risk” business in
eyes of investors
• Risk to opportunity
• Example: Walmart, Retailer
Sustainability program arose out of risk management process
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12. Sustainability Framework
Engagement of Suppliers & Procurement
• Working closely with suppliers to improve sustainability
performance
• Sustainable procurement
• Example: Westpac Bank
Supplier assessment and screening process, and supplier code of conduct
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13. Sustainability Framework
Energy Efficiency and Waste Minimization
• Initiatives that reduce environmental impacts also generally
reduce operating costs:
– Identifying large environmental costs that could be reduced
– Monetizing procedures for costs, savings, and revenues
– Small (and no cost) changes can lower energy costs and reduce carbon
emissions
– Carbon footprinting and accounting
• Example: IBM
Saved 15% to 40% of their annual data center energy consumption with less
than a two-year payback. For a typical 25,000-square-foot data center paying
$0.12 per kilowatt hour for electricity, this can translate into as much as $1
million in annual energy savings
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14. Sustainability Framework
Improving Information to Support Decisions
• To make improvements, good quality information is
required
• Conventional accounting does not capture all relevant
costs and benefits. Consider tools such as:
– Environmental management accounting
– Full cost accounting
– Material Flow Cost Accounting
– ABC/M
– Integration into investment appraisal
– Life-cycle analysis
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15. Sustainability Framework
Integrated Management Control
• Embedding into management control cycle:
– Planning
– Performance management/measurement
– Internal control and audit
– Integrated systems
• Example: Proctor & Gamble Planning and Control System
of Objectives-Goals-Strategies-Measures
Incorporates sustainability factors into the day-to-day management and running of
an organization using plan-do-check-act (PDCA) cycles
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16. Sustainability Framework
Reporting
• IFRS and management commentary
• Sustainability (Global Reporting Initiative India Focal Point)
• Integrated Reporting (IIRC)
Specific issues to think about:
• Who are users and what are their needs?
• Materiality and value to whom?
• Reporting is more than the hard copy annual report
• Integrated reporting requires integrated thinking and
management in the organization
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17. Sustainability
Mervyn King Interview with IFAC
The greatest shareholder today is no longer the wealthy
family, but it is the individual via his or her financial institution
and pension fund. The same individual is also the employee
of the company; the customer who chooses between the
products of company A or company B; the voter for the
government of the day and for the trustee of the pension
fund. In addition, the individual is also a citizen of a country
who expects his or her neighbor to act as a decent citizen,
and as a consequence today, the individual citizen expects
the corporate citizen to act as a decent citizen.
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18. IFAC Professional Accountants in Business
Questions?
• IFAC Sustainability Framework available at
www.ifac.org/PAIB
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