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Sustainability Reporting: What It Means For Finance

by Cesar Bacani, 03 August 2011

topics:
Auditing Risk Management

tags:
CIMA corporate social responsibility environment financial reporting narrative reporting sustainability

As Executive Director, Education, at the Chartered Institute of Management Accountants (CIMA), Robert Jelly is at the forefront of research on finance, accounting and related matters.

He sat down with CFO Innovation’s Cesar Bacani on a key initiative at CIMA – the seemingly inexorable move towards sustainability reporting, which CIMA believes should be part of tomorrow’s balance sheet. Excerpts:

I read the CIMA report, Tomorrow’s Balance Sheet, and I think it’s useful in that it gives a progress report of what’s happening. It just seems rather woolly to me.

You’re absolutely right, and that is because this is just Stage 1 in a much longer process. Part of what CIMA does is to try to find good, if not best practice, and work with those organisations to help promote and refine sustainability and corporate reporting it.

What is happening is I think there are two extremes. Some countries and governments want to basically impose rules on this whole area of reporting. What South Africa is trying to do, for example, is to put numbers to the issue of sustainability and the impact [of business activities] on the environment and society.

The reasons for that are obvious because there is a huge issue around natural resources in that country. But the challenge for the accounting profession is that not all of this can be expressed in numbers, in terms of an old model [of accounting], if you like.

The other extreme is people simply trying to explain [sustainability] in terms of narrative. That’s still quite woolly.

So what does CIMA want to happen?

To some extent, we’re neutral. Our key goal is to identify best practice, to provide a forum whereby people can come right to the table [and discuss the best way forward]. We’re not doing this on our own. In the UK, we’re working with the Prince’s Trust. The Prince of Wales is supporting the whole sustainability agenda.

What are the best practices you’ve identified so far?

I think it’s just about openly reporting on a narrative basis. The best practice is in being very transparent.

Then there is establishing key performance indicators or KPIs. For example, if 60% of your workforce is receiving anti-viral treatment for HIV, then you may target 70% next year. It’s not just what you have done in the past; it’s also about your future KPIs.

What do you expect these things to be in a year’s time, in five years’ time? CIMA itself, in our own annual reports, are trying to do that. We are not yet reporting it, but we are looking at, for example, energy use, we are looking at water use, at our carbon footprint.

Interestingly, carbon management has found a way of adding a price [to a company’s carbon footprint through emissions trading]. This has an impact not only on the environment and sustainability [but] also as applied to risks. People haven’t really put a price on the risk of cleaning out the environment.

Having societal responsibility comes at a price. Companies will have to build that in. The best example of that is if we want to buy a car that is more environmentally friendly as a consumer, we are likely to pay more for it. There will be a price to pay.

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