Accounting for sustainability – practical insights

Sustainability is an urgent challenge but it also offers opportunities. As a management accountant, your skills in producing high quality management information for decision making and reporting together with your extensive toolbox of accounting techniques could help your organisation become more sustainable.

Where do you start if you want to integrate economic, environmental and social considerations in managing your organisation? The Prince of Wales has recognised this predicament. His A4S project has been developing practical tools and guidance to help ensure that organisations meet the sustainability challenges of the 21st century with modern, appropriate decision making and reporting systems.

The project’s latest publication, ‘Accounting for sustainability – practical insights’ shows how eight UK private and public sector organisations have applied the guidance developed by A4S. It shows how this guidance can help to embed sustainability more effectively in day to day operations and identify and report the connection between strategic direction, financial performance and sustainability impacts.

Sustainability in their DNA
The organisations are Aviva, BT, EDF Energy, HSBC, Novo Nordisk, Sainsbury’s, The Environment Agency and West Sussex County Council. The case studies were researched and prepared by a prestigious team of business and management academics from UK and continental European universities. Taken together, they show how a diverse range of organisations are seeking to integrate sustainability into their very DNA.

By drawing on these experiences, it is hoped that other organisations will be able to apply the tools and techniques to suit their particular circumstances. As CIMA’s chief executive, Charles Tilley, comments: ‘Accounting for Sustainability provides a rich and diverse collection of case studies to help all those organisations looking for a practical way of addressing the major challenges and risks posed by sustainability related issues.’

Eight highlights
It’s not possible to do all the case studies justice here, but here are my top eight highlights – in no particular order:

• Aviva fostered the sustainability of stakeholder behaviour at different stages of the company’s value chain. This included suppliers and companies in which the investment funds managed by Aviva hold shares. The company extended this initiative by enhancing sustainability considerations in its sustainable and responsible investment products.
• BT articulated the business case for sustainability and tailored it to meet the needs of different employees to embed it effectively throughout the organisation. For example, operational managers needed to be given a sense of ownership of proposed practices, with the benefits arising from their adoption framed in the context of the risks and opportunities for them.
• EDF Energy translated its five key strategic ambitions into measurable working goals for employees. The aim was to achieve a state where employees felt committed to all aspects of sustainability so that it became part of ‘business as usual’.
• The Environment Agency has a well developed management accounting system that captures and records considerable detail regarding non-financial environmental impacts alongside more traditional economic cost information. The case study shows examples of how this information was captured and used in decisions taken at all levels of the organisation.
• HSBC embedded sustainability into its lending activities through the voluntary adoption of the Equator Principles as well as its own sector policies. These helped the group to assess and monitor the environmental and social impacts of large projects.
• Novo Nordisk integrates the reporting of social, environmental and financial performance in a single comprehensive document. The case study looks at how this reporting links to the balanced scorecard and other internal mechanisms and how it has helped to embed sustainability into decision making.
• Sainsbury’s used the A4S sustainability decision making tool to identify and manage sustainability impacts in its supply chain. Alongside other initiatives, it used this tool to embed sustainability in the sourcing of lamb. Although the challenges and opportunities are explained in the context of the food retail sector, these are equally applicable to other organisations.
• West Sussex County Council established a range of policies, performance structures and measurement tools to promote a ‘golden thread’ linking strategies for economic, environmental and social sustainability to the daily work of front line employees.

Common themes
Despite their diversity, the case studies have generated some common themes and the book concludes by summarising the key learnings. For example, it is clear that sustainability must be a strategic objective and that executive commitment is vital. However, the right tone from the top needs to be combined effectively with bottom up approaches to capture insights from employees across the organisation.

The business case for sustainability must be clearly articulated to address stakeholder interests and accounting processes are effective in supporting behavioural change. A particularly interesting insight is that qualitative and quantitative as well as financial and non-financial information are important and have a role to play. Not everything that is important can be measured in financial terms – and metrics may take time to evolve. Their absence should not deter organisations from addressing sustainability issues effectively.

If this has encouraged you to find out more, go to the Earthscan website for details of how you can obtain the book. CIMA members can receive a discount of 20% by quoting CIMA in the voucher code box when placing an order.

Read more about CIMA’s work on sustainability, including further case studies on the role of the finance team in climate change.