Corporate Responsibility and the Accountancy Profession
Much fanfare has been made lately of the ambitious seventeen Sustainable Development Goals (SDGs), and rightly so. The UN’s 193 member states have spent several years discussing them, and recently committed to them.
Acting responsibly is key to achieving many of the SDGs. The goals make explicit the need for ethics and morals in both the private and the public sector. While the responsibility of businesses can be seen as being to themselves and their owners, clearly there is now a general acceptance that there is also a responsibility to the societies in which they operate.
Corporate responsibility has been hotly debated for years. Prevalent in the 20th century was a perspective articulated by the widely lauded American economist, Milton Friedman, who advised managers that any activities on making a company responsible, whether in fact or perception, should only be for commercial purposes. This perspective was implemented by many in a way that corporate responsibility was viewed as a distraction, which should not interfere with the primary objective of maximizing value to shareholders. However, in recent times, we have seen Jack Welch refer to deploying shareholder value as a strategy in itself as the “dumbest idea in the world”, and Michael Porter of Harvard Business School proposing Shared Value as an approach to reshaping capitalism and its relationship to society.
Irrespective of one’s economic or political persuasion on these matters, a moral challenge can arise from the way the markets focus on financial returns in the short term, perhaps at the expense of the social, commercial, reputational, and, ultimately, financial risks arising over the long-term. This longer-term risk arises through the misallocation of resources to unsustainable business models, for example those that have an over dependency on capitals that might be non-renewable or increasingly scarce.
Globalization and industrialization with the right kind of underlying motivation from governing institutions have brought significant benefits. Over the last 15 to 20 years, economic progress in developing and emerging economies across the globe is a good example of how outcomes for humans have rapidly improved on many levels. However, globalization and industrialization have also led to sustainable development dilemmas, such as inequality, pollution and waste above the absorptive capacity of the earth, social challenges in supply chains, and other ethical and moral challenges. These present societies with challenges and opportunities that the accountancy profession, as an integral part of society, can help governments and businesses to respond to through their work and influence.
The contribution of the accountancy profession and accountants is manifested in IFAC’s vision: The global accountancy profession is recognized as essential to strong and sustainable organizations, financial markets, and economies. The activities of the profession and its members lead to public interest outcomes, and wider societal benefits.
One specific example of where the accountancy profession has a potentially significant contribution to make is climate change, which is a seminal and intractable public interest issue.
Although subject to intense public debate and skepticism from some quarters, it is critical that societies—through the actions of governments, businesses, and citizens—do not take chances with such a significant issue. We can argue endlessly about whether global warming is caused by human activity. But, truly, the only path forward is to respond to the warming of the climate and address issues relating to global carbon emissions reduction. In the end, the result of higher emissions—increased climate risk—presents uncertainty and causes threats and opportunities for governments, businesses, and the societies they serve. Regardless of one’s views on the matter, climate risk is a reality no organization can afford—literally—to ignore.
This is a challenge that the global accountancy profession has much to contribute to, through what we do on a day-to-day basis as part of society, as well as our ability to influence outcomes. It is also why IFAC submitted a letter of support to the UN Framework Convention on Climate Change as it facilitates a new international agreement on emissions reduction targets leading up to the 21st session of the Conference of the Parties, which takes place in Paris in December.
The letter expresses support for a universal agreement and effective international dialogue to encourage the transition toward resilient, low-carbon societies and economies. In it we highlight the significant contribution the profession and accountants can make in helping governments, capital markets, and organizations implement plans for climate change mitigation and adaptation.
The profession has long been on the frontlines of helping others adapt to changes in society; mitigating and adapting to the challenges of climate change will be no different.