Climate Change and the Finance Team

by Irene Teng, CIMA, 20 May 2011

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CIMA climate change management accountants strategy sustainability

CIMA’s survey, Accounting for climate change, has found that 80% of respondents think that the finance function should be involved in climate-change initiatives.

Primary drivers for implementing climate change initiatives

The survey showed compliance and conformance to be significant drivers for climate change initiatives, with just 29% saying that competitive advantage or performance alone was the primary driver (although regionally, the percentage ranged from 14% for Australian respondents to 64% for Chinese ones).

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But in many cases, it’s not as simple as drawing such clear distinctions.

‘Carbon is raw material and energy — and they both cost money,’ explains Chris Harrop, Marshalls. ‘We all need to be saving as much money in the current economic downturn as possible. More people are actively seeking environmentally and socially beneficial products, so consumers are pushing, too. And both government and key stakeholders are pushing us to reduce carbon footprints, improve ethical sourcing, responsible sourcing and improve biodiversity. So, we either get with it or it will hit us in four or five years and the costs of implementing then will be far, far higher.’

CIMA has found that companies are at vastly different stages in their sustainability journey, often driven by the historic degree of regulation of their business, stakeholder and consumer pressure, innovation, and sometimes the personal ideologies of their CEOs. The range of motivations and benefits often depends on the sophistication of an organisation’s approach.

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The degree of adoption for some sectors may have been influenced by the early recognition of the likely value creation opportunities or value at risk, which arecalculations made by management accountants. Clearly, the opportunities to exploit their skills in sectors thatare only now facing up to the risks, costs and benefits of climate change action are huge.

Barriers to change

CIMA is keen to understand why finance professionals aren’t more involved in climate change management in many organisations and why more organisations aren’t taking concrete steps to manage, mitigate and adapt to climate change. Worryingly, only 29% of respondents to our survey agree that climate change poses a significant risk to their organisation.

‘There is not enough being done to raise the profile of this within the business,’ said one respondent. ‘We have started to bring our thoughts on to climate change, but only for new business not for current operations,’ said another. A third summed up one of the biggest barriers to action: ‘Other priorities push such issues to the back seat.’

For the finance team, this creates a two-layer problem. First, will the organisation and its people commit to a rounded and forward thinking view of climate change? And second, will they see the value in applying management accounting skills?

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