Accounting firm KPMG has no offices in the South Pole, yet it recently sent to the Antarctic, on various occasions, a manager from the Chinese practice, someone else from India, and two US-based executives.
Accounting, Sustainability and Gender Equality
What’s going on? “The reason for doing that is to create climate ambassadors,” explains Lord Michael Hastings, KPMG International's Global Head of Citizenship and Diversity. “People can see that someone from Beijing is walking in Antarctica, is understanding and experiencing the life of the penguins, but also seeing the rubbish that’s been left behind . . . That becomes a very prominent story for our staff in the Asia-Pacific region, particularly in China.”
Like many other global multinationals, KPMG is getting serious about being a good corporate citizen, particularly from the perspective of the environment and diversity. But it’s a complicated task because, as a partnership, the firm is comprised of independent practices in 144 countries that do most things their way.
CFO Innovation’s Angie Mak spoke to Lord Hastings about KPMG’s environmental and diversity programs, the challenges and successes, and other issues. Excerpts:
Let’s talk about energy usage at KPMG. What have you been doing to save costs?
We’ve been doing the global green programme within KPMG for three years. KPMG's new building in Hong Kong is Platinum quality, which is the highest possible rating you can get for environmental sustainability. A lot of that has to do with the way in which we restrain heat access to buildings and therefore reduce the amount of air conditioning that is necessary and . . . reduces the energy demand that the building sucks out.
We also control water flow through the building, and lighting, so that in rooms unoccupied, the lighting goes out automatically. We’ve also noted the necessity to restrain access to server capacity. Therefore we’ve reduced the number of servers, which reduces cooling and air conditioning demand, but also electricity demand. We also have methods of switching off of computers instantly and automatically, as well as controlling other electrical equipment.
If we don’t adapt to alternative methods of energy production and usage, our habits of energy usage will not be able to contain the damaging effects of weather patterns, which we cannot predict. And that is the great uncertainty around what we’ve witnessed in the course of the last few years. This uncertainty and unpredictability is immensely complex, and I think that the wisest thing any of us can do in a corporate or individual level is to be prepared to restrict and restrain our over abuse of energy demand, and to lead more cautious lives.
KPMG has retrofitted its buildings to become greener. What has been your ROI so far?
We set a target in 2008, that we would reduce our carbon emissions across our top 25 countries. We wanted to reduce carbon emissions by 25% within three years. In fact, we reduced our carbon emissions by 29%, and exceeded our own target.
The most important part of the programme, which of course had to have technical applications of how to better use and control energy demand, was building awareness amongst our people. By doing that, it meant giving them an understanding as to why we’re putting in measures in our buildings to restrict lighting, control access to equipment, ensure that we use water responsibly, manage our waste, and why we moved to new facilities.
When we have the opportunity to determine our own occupation of a facility or to build our own offices, we build them to the best of our environmental designs possible. If you go back five or six years ago KPMG’s facilities would not have been absolutely in the best possible environmental standard, but they are now.
We’re seeing ways in which building designs have been adapting to ensure that we have maximum levels of environmental responsibility built into building plans. We have built this into the framework of our occupied buildings and offices, and we’ve been able to see significant savings of up to 30% all over the world in our building costs.
Not all companies own their office buildings. How does KPMG approach environmental sustainability in rented buildings?
That would be a contract negotiation with the property holder. There are some cases of our buildings in different parts of the world where we got into negotiations with the property holders, and they have agreed to put in facilities that give us the option to control the lighting and electricity, in some cases, filters in the windows to control light and sun access, which impacts the need for air conditioning. If you can also individually control temperatures in rooms, you can have greater control of the heating supply that you need for a building.
All of this has come out of best practice guidance. We can only provide guidance in 144 countries [where KPMG has offices]. We can’t control what every country does nor can we get access to nearly 1,000 buildings that KPMG occupies globally. But we give the guidance of what is possible. It’s for the countries to negotiate that. Thankfully, because we now have 40 countries who report against the target, which was originally 23 countries, we’ve seen all of this best practice applied very rigorously.
You mentioned educating the staff to be aware of sustainability issues. Environmental practices are perhaps not as in-built into the average mindset in Asia as they are in the West.
It came down to the leadership of our senior partners: our chief executives or chairmen in each and every case. They’re the ones who made the decision to adopt the target. They’re the ones who made the commitment to implement the obligations.
Therefore they had to persuade people within their management, and also the people responsible for corporate responsibility around the world, to work in tandem with the executive management to get this done. We had no objections, no obstructions, no difficulty at all. Actually, two of our best carbon reductions locations include a Japanese firm. They’ve been extremely good at controlling how they reduce waste.
I think the general consensus around climate change or the impact of climate measures were so profound, and of course the Asia region, more than any other has been a victim to weather impacts, probably more strongly than any other regions. It’s therefore a straightforward conversation to have in this region, that matters of changes in weather patterns, the impact of it, and carbon, are all colluded issues. If we recognise that reality, what should we do to change that pattern for ourselves?
I think everyone understands that now. It’s not a matter of having to persuade them, but in putting the disciplines in, to ensure the changes are measurable.
Our global board has agreed to set a new target for the next five years. We’ve set a target of a minimum 15% further reduction. We’re going to have an ambitious personal target of 20%, but the hit target is 15% over the next five years.
That’s going to be tough because when you have businesses who have already applied stringent measures to fix their building facilities and engine controls, you probably have gone to margins of what you can achieve. How can you get the next 10-15%? It’s going to be tough to get there.
The only way we can do that is by the better application of technology, and what we’re looking to do in every single case is get better control of our server capacity, and use of computer facilities, because that consumes enormous amounts of cooling demand, and huge amounts of energy. That way, we can reduce further our energy demands.
What were the biggest challenges in implementing sustainability measures in KPMG?
Once our board had made the decision that this was a route we were prepared to go down, it was challenging to say that we were going cut our carbon [footprint] by 25%. That’s a significant slash off the bottom line. The good accountant would recognise that if you reduce your energy, you reduce your costs. Of course, there are accrued financial benefits for KPMG’s finance managers. But the biggest thing was to say, could we do this? With all the travel demands, could we achieve this objective?
Once we said let’s give it a go . . . once we set the benchmark, determined the timeframe and built the fabric of commitment around our global network, there was no difficulty. Everyone was for it.
Have you implemented paperless measures?
No, not yet. We’ve implemented double-sided printing, reducing paper usage, controls on photocopying. We’ve definitely reduced our demand on paper, but we haven’t eradicated it.
What were the first steps to change the mindset of the staff?
To build awareness and then put in the technical aspects of it to reduce the demand. We’ve also done rather radical things. We sent a manager from our Chinese practice to Antartica, along with the director from our American practice. We then sent someone from our Indian firm to go on the same trip to Antartica. In the last two months, another person from our US firm went.
The reason for doing that is to create climate ambassadors. We want to create stories across the firm, which are very vivid and visual. People can see that someone from Beijing is walking in Antarctica, is understanding and experiencing the life of the penguins, but also seeing the rubbish that’s been left behind. They are also seeing the nature of the freezing and cooling, the loss of the landscapes. That becomes a very prominent story for our staff in the Asia-Pacific region, particularly in China.
In addition, we’ve also put in a small amount of investment into backing an electric vehicle, Racing Green Endurance, which drove the entire length of the Pan-American highway for 23,000 kilometres on lithium batteries. The vehicle only needed to be charged for five to six hours a night. That technology was developed by Imperial College in London. We decided to put resources into supporting the testing of that vehicle, to see if it was possible to drive 23,000 kilometres on batteries. It is possible to do it at high speed, so it is perfectly possible to run normal cars on batteries.
Many manufacturers are beginning to apply this technology themselves, but what we wanted to do was place KPMG into the position where we were saying consistently to people in our practice: Look, these technologies that we believe in will change our lifestyles, but also give us creative solutions to the climate dilemma, and will put us in a positive place, where we’re carbon creative.
In a programme called Cycle for Water, we’re also backing two Dutchmen who are cycling the same route, the same 23,000 kilometres, but using bamboo bicycles. BBC is doing the filming, [and news coverage is being done] by CNN.
While the car took four months to complete the journey, the bicycles will take 19 months, but these two guys are cycling to make the point at every stop that water [shortage] is a very, very real issue for our economies and societies.
It’s a hugely important issue in Asia, the drying up of natural resources, and the competition of the demand for water is a massively critical issue. What we want to do is create a story that our people can understand and see. That way, the awareness becomes very practical.
Diversity is also part of your mandate. What are KPMG’s initiatives in this area?
One of the most important things is to measure the extent to which your ambition is being met by either your HR processes or your leadership. Since I’ve been responsible for the diversity portfolio, we’ve taken a global benchmark of our top 25 countries every 18 months. This year, another 25 of our other leading countries have decided they want to join in the benchmark exercise. It’s all of our board countries, in the Middle East, the European area, and all who are part of the Asia-Pacific region.
We’ve had a focus on women’s development and gender progression. In this region, with the exception of Japan, most of our countries have exceptionally high levels of women in senior partnership. The APAC region has the leading proportion of women in senior positions in KPMG, far higher than our European or American groups.
The one exception is Japan, but that is a more traditionally male society, but there has been exceptional progress there in the last two years. Most of the new appointees as partners in the last two years are women, and that is against the standard norm [in Japan].
It’s a reflection of the fact that it’s been more acceptable for women in Asian cultures, with the exception of Japan, to undertake accountancy, mathematical studies, or higher further education. As a consequence of that pattern of learning, Asia-Pacific has emerged as our best region for women’s development.
In a country such as Japan, where it seems it would be harder to have a breakthrough in mindsets, what kinds of strategy would you use to promote diversity in gender?
We need to reflect the educational capacity of women who wish to work in our profession. It’s perfectly acceptable in Japanese society for women to have executive responsibility. It has been a much more classically male society, up until recently. Women’s educational levels are now pretty equal to male, for those who passed through standard school. We need to reflect that in the way in which we recruit and also develop.
The strategy that we have in place is to understand the strength and capacities of women and to see how they can be better promoted more quickly, rather than simply to rely on a long line of progression. By taking a different approach to progression, recruitment and development, which is the responsibility of the executive leadership of our firm in Japan and any of our countries, it’s possible to see women progress faster.
How do you measure your success rate? Do you have a goal or a ratio you want to meet?
No, the ratio is determined by each country. We have a global ambition, to be in the range of having 20% of our partners as female. That’s 144 countries. In most of our Asian countries, we’ve already exceeded that target, with the exception of Japan. In the case of Japan, what we’re measuring is the progression of one measure of 18 months, and how has that policy been better applied in tough circumstances.