Organisational performance has transformed beyond monitoring profit margins to include aspects of environmental stewardship. This has ushered in changes for the roles of management accountants to expand outside of financials to include sustainability policies and environmental, social, and governance (ESG) reporting and decision-making.
‘Sustainability is changing the role of finance’, said Raluca Stroe, MSc, and Research and Development Manager at AICPA® & CIMA®. ‘Organisations are looking beyond short-term financial returns and thus rely on finance professionals to drive the transition to more sustainable and resilient businesses’.
A sustainable business embodies a multi-capital view of value, prioritises multi-stakeholder interactions, and meets current societal needs without compromising the needs of future generations. Organisational long-term success is intricately linked with their broader influence on society and the environment, encompassing both people and the planet.
‘Future of Finance 2.0 Emerging Themes: Organisational sustainability and ESG’, a research paper published by AICPA® & CIMA®, shows how ESG and sustainability intersects with digitalisation and workplace evolution within the accounting and finance profession. As part of the 18-month long project, the comprehensive, global research includes interviews and roundtable discussions with more than 600 individuals.
Management accountants must use the lens of sustainability to rethink their roles, redevelop business strategies, and reshape the future of finance.
Shifting business perspectives through sustainability
As organisations embed sustainability and ESG policies and initiatives into their business strategies, the overall organisational perspective will shift.
‘Our research indicates that the transition to sustainability is not evenly distributed across all businesses, sectors, and industries’, said Dr Martin Farrar, Associate Technical Director. ‘Nevertheless, adoption is on the rise, and it requires a shift in both the business and the financial professional’s perspective’.
To better understand this shift, the research identified three business perspectives within an ESG maturity model — shareholder, stakeholder, and system value. A truly resilient and sustainable business operates within the system value perspective, which focusses on long-term value creation and embeds ESG into the heart of the organisation.
By contrast, in a shareholder perspective, board members and investors focus primarily on financial returns to shareholders, with little understanding of how the pillars of ESG affect their organisation’s purpose or business model. Under a stakeholder perspective, businesses have a stronger focus on ESG and associated risk management, but these are unlikely to be embedded into strategic goals or in the business model.
As an organisation implements more ESG and sustainability initiatives, there will be a natural progression into a system value perspective. Only 1% of research respondents stated their organisations were operating under this model, and 13% stated they were anticipating this shift.
‘Sustainability is increasingly emerging as the fundamental cornerstone of resilient organisations’, said Farrar, and this will help them face higher levels of uncertainties. ‘This is a perspective where the governance and social pillars are aligned and dependent upon the wider environment. The focus is on long-term value creation’.
The futuristic role of the accountant
As organisations create and preserve sustainable value, the finance function is best suited to take on these responsibilities because of their keen financial acumen, familiarity with standards and regulations, and reputation as objective professionals, according to the research.
‘Indeed, they are trustworthy and trusted with [financial] reporting, but the expectations are evolving’, said Stroe. ‘Some of the key duties will include helping their organisations create an enduring competitive advantage by fostering innovation and becoming more involved in circular design of products as well as supporting other sustainability initiatives’.
The research revealed five prevailing themes in the implementation of sustainability practices for the finance function — money/costs, technology, time, data, and metrics. Each theme poses unique challenges, but as accounting and finance professionals better understand sustainable business practices and anticipate these roadblocks, they can boost effectiveness.
From a cost perspective, sustainability initiatives are often more costly and need to be budgeted accordingly. Research participants discussed the time it would take to understand the changing finance role, to thoroughly research sustainability, and to pace initiatives so they remain affordable and effective.
Data will drive decision-making efforts, which will require identifying the right metrics to measure performance. To be successful, accounting and finance professionals will need to boost literacy with new-to-them technology and to coordinate with different groups and stakeholders to get the right data.
Stroe said forward thinking and a system-value perspective will be paramount.
A holistic approach to business
The increased focus on sustainability initiatives is shifting organisations into a more holistic way of doing business. The research found that organisations have altered focus to include resilience and systemic risks, moved towards systems-value thinking, and assessed performance in the wider economy and society while monitoring environmental impacts.
These sustainability initiatives are ushering in a new era of finance.
‘The finance professionals’ role is continuously pushing boundaries and changing alongside evolving requirements and increasing sophistication surrounding sustainability’, said Stroe.
The ‘Future of Finance 2.0 Emerging Themes: Organisational sustainability and ESG’ report will help accounting and finance professionals understand where their organisations are on their sustainability journey. The report also gives a clearer picture of the evolving role of the finance function.
As sustainability gains momentum, investing in your professional development now ensures your commitment to the growth and evolution of the profession. The Fundamentals of ESG Certificate provides an overview of ESG and the key roles the finance function plays. Completion of the ESG and Sustainable Financial Strategy Course gives professionals the necessary leadership skills to advance their organisation’s sustainability initiatives.