Embedding sustainable business practices: How accountants can help!

Gordon Hewitt highlights the importance of metrics and measurement in the push towards a greener economy.

Accountants have an important role to play in helping companies embed sustainability into their corporate strategies, and are very well placed to do so. A company’s finance function is responsible for producing much of the management information that forms the basis for internal strategy as well as reports for external stakeholders in a business. The CFO not only acts as a steward for the business, but also as a strategist and operator.

When looking to address their environmental and social impacts, companies can only manage what they measure. As a result, it is important that accurate, complete and reliable information on a company’s wider impacts is collected. Accountants have significant experience in the design, operation and audit of data management systems, so they have a lot to offer companies in the bid to measure and manage their environmental and social impact.

Leading companies are looking to apply accounting techniques to value the environmental impacts of their products; this can help them communicate sustainability based on facts. The sports brand, PUMA, is leading the field through its Environmental Profit & Loss (EP&L) report. Using these broader metrics, in 2011 Puma could announce that costs related to greenhouse gas emissions, water use, land use, air pollution and waste along its value chain amounted to €145m. 94% of the company’s impacts related to its supply chain, with over 54% associated with the production of raw materials such as leather, cotton and rubber. This visibility allows the company to focus sustainability efforts on the areas where they will have the greatest impact, and ultimately helps protect profits through a better understanding of supply chain risks and enhanced cost savings. The brand benefits too, of course!  The initiative has been such a success that PUMA’s parent company, PPR (which owns brands such as Gucci and Yves Saint Laurent), is looking to implement an EP&L across all its luxury and sport & lifestyle brands by 2015.

The global accountancy firm, Pricewaterhouse Coopers, provided technical support to PUMA in their E P&L initiative and is not alone in the development of new lines of service that help companies to operate in a more sustainable manner. All of the Big 4 accountancy firms, as well as specialist consultancies such as Corporate Citizenship, provide assurance over non-financial reports (sustainability or CSR reports) and advisory services on how companies can manage their environmental and social impacts.

These services will be of particular value to companies in 2013, considering that the Global Reporting Initiative (GRI) is due to launch the latest generation of sustainability reporting standards – G4, and the International Integrated Reporting Council (IIRC) is launching version 1.0 of its integrated reporting framework later in the year.

Gordon Hewitt is the Sustainability Advisor at ACCA, the global body for professional accountants.