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Sustainability and Shareholder Value

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Sustainability and Shareholder Value

by Chartered Institute of Management Accountants, 06 February 2012
topics:
Management
tags:
CIMA financial reporting sustainability sustainability standards

Today’s corporations face increasing expectations for taking an active role in meeting the world’s environmental and social challenges. The accounting profession, too, has a critical role to play in helping to meet these challenges.

 

As businesses and other organisations rise to the occasion by adopting and implementing sustainable business practices, it will be essential for finance and accounting professionals to assume a greater leadership position in sustainability, and bring their skills to bear to ensure the long-term viability of their organisations.

 
Accountants are actually well-placed to oversee the integration of sustainable business practices into the DNA of their organisation. They have the skill sets to provide the information, analysis and options to inform the right decisions and ensure organisations are creating strategies that mitigate environmental and social risks and focus on the long-term. In their role as information providers, accountants can be very influential; they can change mind-sets and influence decision making processes and reporting.
 
Corporate sustainability programs are evolving. Companies and their executives are increasingly recognising the importance of sustainability to the future of their businesses. While many corporate sustainability initiatives began because organisations felt they had to (in response to compliance requirements) and/or that they should have them (in support of corporate values statements), more organisations now want to deploy sustainability programs to reap greater shareholder value.
 
Rather than treating sustainability efforts exclusively as a response to legal and regulatory requirements, more organisations are now integrating sustainability activities into how they manage reputation risk, generate cost savings and ensure long-term profitability and competitive advantage.
 
Corporate sustainability programs are also expanding in number across the spectrum of company size and industry sector. No longer solely the domain of the smokestack industry or large multinational conglomerates, organisations of all types and size are increasingly implementing sustainability programs and practices. However, how these efforts look and operate varies tremendously by country, industry, company size and individual company.
 
As with any rapidly evolving business discipline, organisational sustainability has yet to settle upon a standardised definition or approach. ‘If you walk into a room and start talking about sustainability you will find very quickly that almost everyone has an opinion and a different level of education related to sustainability’, notes Steve Leffin, Director of Global Sustainability for US based UPS’ corporate plant engineering. ‘This is largely because sustainability comprises a complex array of issues.’
 
To produce a snapshot of this evolution, the American Institute of Certified Public Accountants (AICPA), Canadian Institute of Chartered Accountants (CICA) and the Chartered Institute of Management Accountants (CIMA) conducted a survey of organisational leaders who are members of these associations. The survey, which defines sustainability as ‘the consideration of environmental and/or social issues in the value creation process along with the financial performance of the enterprise’, asked respondents questions in four areas:
 
  • Sustainability drivers and strategy
  • Sustainability program scope and priorities
  • Measurement, reporting and assurance
  • The finance function’s involvement

  

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