The time is now!

World leaders, the US Business Roundtable, scientists, students and the new European Commission agree on the need for immediate action on sustainability. Making our economy sustainable is not about doing good: it is about staying in business and still having a liveable planet for our generation and the next.

It is time to get our priorities right: once we have exhausted our surroundings there will be no ground for business, investors, politicians, or accountants. Therefore, the way the economy operates must fundamentally change. Moving towards a circular economy is the only truly sustainable option and corporate governance is a crucial lever in changing how businesses behave. As professional accountants, we play an instrumental role at all stages of corporate governance: from informing decisions-making and assessing investment scenarios, to designing internal controls, measuring performance, reporting and providing assurance.

The recent publication, 10 ideas to make corporate governance the driver of a sustainable economy identifies ten ways that boards and policymakers/regulators can use corporate governance to contribute to sustainability. Boards can – and should – transform their business to a circular model. Policymakers and regulators have the power to leverage one the greatest drivers of change: markets.  They must support and accelerate systemic transformation. The paper aims to challenge them and provoke thoughts with ten recommendations that:

• suggest changes in boards’ roles and practices
• propose legislative and non-legislative actions by EU and national policymakers/regulators

What (more) can accountants do?

In business, accountants are found in roles that are key to effective corporate governance: from CEOs and Chief Financial Officers (CFOs), to roles in accounting, reporting, internal control or tax.  Accountants are well placed and have the right skill set to identify where a business could improve its practices.

As part of our recommendations, the paper states that the people and processes in boards must change. The board will need to define its collective profile fit for its work and evolve individual board members’ roles for sustainability to be put at the heart of business.  

Such new roles could incorporate a Chief Value Officer. Professor Mervyn King[1]has challenged the shareholder-centric governance model by advocating for the accountant as a key changemaker, moving from CFO to Chief Value Officer. The role of Chief Value Officer would entail a broader perspective on value creation and fully integrate environmental, social and governance (ESG) factors with financial performance. The role would help transform how the business is run and ensure that the business model shifts towards a truly sustainable one. Many qualified accountants, including those currently acting as CFOs and CEOs, have the education and skills to take up such new roles.

The accountancy profession has further leveraged its expertise in the field of non-financial information and now has a long-standing experience on how to help companies make the right changes to reduce their environmental footprint – and costs. Accountants can help businesses to report on their performance in an integrated way using the IIRC’s integrated reporting <IR> Framework. This will help to measure transformative progress and share experience on issues that are of public interest. 

In an advisory capacity, accountants can and should help businesses to e.g. obtain adequate financing, make strategic investment decisions, enhance business information systems, adapt to their competitive challenges and regulatory environment. These are essential elements that need to be functioning in tune with the imperative of systemic change.

As external auditors, accountants are subject to specific and stringent independence requirements. They can provide assurance on information reported by businesses with the highest guarantee of independence, objectivity and competence, rooted in the IESBA Code of Ethics. They can offer an independent expert opinion, e.g. on the process used to collect and analyse the data; on the reliability and exhaustivity of the data as well as on many elements of the data being reported. With this information at hand, investors and other stakeholders can gain confidence that businesses which have committed to sustainability are following through on these goals. This plays an important role in fighting the plague of greenwashing.

Change starts today! 

Good business decisions start with reliable information. As businesses change their benchmarks for success, accountants contribute by: measuring impacts, disclosing information, and bringing credibility. 

There is no time to lose, private and public actors need to act decisively to create a sustainable economy. Read more about how corporate governance can become a diver of a sustainable economy and let us know your thoughts and comments on the paper by email to iryna@accountancyeurope.eu  by 1 November.