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Are Finance Professionals Leveraging Their Opportunities?

Sustainability progress survey reports the CPA’s role is valued, but underutilized.

January 31, 2011
from AICPA Communications Team

Over the past several years, legal and regulatory requirements have been the strongest drivers for businesses to “go green” and lessen their impact on the environment. But today, corporate sustainability programs are evolving as more and more organizations recognize the business advantages of sustainability programs — how they can manage reputation risk, generate cost savings, ensure long-term profitability and competitive advantage, as well as reap greater shareholder value.

These changes also mean there is increasing opportunity for finance and accounting professionals to take on greater leadership roles in their organizations.

“CPAs have an important role to play incorporate sustainability programs,” said AICPA Vice President of Members in Business, Industry & Government, Carol Scott, CPA, MBA. “These initiatives need to be managed rigorously, and demand structure and credibility. CPAs are highly skilled at providing quality information and analysis for internal decision-making, as well as scrutinizing external reports that go out into the public domain for their accuracy and reliability.”

Finance Professionals From U.S., Canada and the U.K. Surveyed

To gain insight into this evolution in corporate sustainability and ways CPAs are contributing to these efforts, the AICPA, in collaboration with the Canadian Institute of Chartered Accountants (CICA) and the Chartered Institute of Management Accountants (CIMA), a U.K.-based organization, conducted a survey of leaders from their respective memberships, as well as interviews with sustainability executives, to examine key characteristics of business sustainability.

The survey was conducted in October 2010, and a sample of AICPA, CIMA and CICA industry members were invited to participate; 2,036 responded. Survey participants answered questions, to:

  1. Sustainability drivers and strategy;
  2. Sustainability program scope and priorities;
  3. Measurement, reporting and assurance; and
  4. The finance function’s involvement.

More SMEs Developing Sustainability Programs, but Drivers Are Different

Understanding the overall sustainability landscape is important for understanding how the finance function can best contribute. One interesting insight offered through the survey was the number of small to medium companies that responded — 1,319 respondents reported that they worked for companies with less than 1,000 employees; in contrast, 717 of survey participants said they are employed at large companies with more than 1,000 employees.

According to the survey’s report, the Evolution of Corporate Sustainability Practices: Perspectives From the U.K., U.S. and Canada, there are differences between small and big business when it comes to the factors driving their sustainability efforts. Although compliance with regulatory requirements is the top driver for all sizes of business, for small businesses, a focus on efficiency and cost savings is key, with 19 percent of survey participants from smaller companies identifying it in the number two position. At large organizations, though, managing reputational risk is the second most critical driver according to 32 percent of survey respondents who work at these size organizations.

There is also a contrast between large and small companies when it comes to their sustainability capabilities. According to the survey, 79 percent of respondents from larger companies reported having a formal sustainability strategy, compared to only 33 percent from smaller companies. For those small firms that do not yet have a formal strategy, 23 percent say they have plans to develop a strategy within the next two years. 

In Comparing Nations, U.K. Appears to Be Ahead of the Curve

Gaining perspectives not only about different size firms, but also practices in different countries was another goal of the survey. When it comes to implementing sustainability practices, compared to North American organizations, the U.K. appears to be the leader, although the survey acknowledged that how sustainability programs look and operate varies tremendously by country, industry, company size and individual company.

Taking the strategy question as an example,  88 percent of survey respondents from the U.K.’s CIMA reported that their businesses had a formal sustainability program in place — and another eight percent said they would be implementing one within the next two to three years. In contrast, 67 percent of Canadian CICA respondents and 61 percent of AICPA members said they had a formal program. Twenty-one percent of CICA survey respondents and 11 percent of AICPA respondents said their firms would be implementing a sustainability program within the next two to three years.

Higher percentages of CIMA respondents from large companies (58 percent) also indicated that their organizations had established separate sustainability functions, compared to 45 percent of CICA large company respondents and 36 percent of large AICPA-respondent companies.

Interestingly, even though U.K. organizations have a high percentage of formal sustainability programs, less than half consider sustainability a high priority. When asked the extent to which sustainability is a priority for their company, only 47 percent of CIMA members (U.K.) ranked sustainability as a high priority. In North America, 38 percent of CICA members and 33 percent of U.S.-based AICPA members said sustainability was a high priority for their companies.

Are Finance Professionals Leveraging Their Opportunities?

The interviews of sustainability leaders revealed the important role that finance and accounting professionals have in their organizations’ sustainability programs. But are they leveraging these opportunities? Not enough, according to the survey results: while 56 percent of respondents said that finance does play a role in business case/investment analysis, this investment analysis role is more often a supporting one, according to 35 percent of all respondents; only 23 percent of respondents said it takes a leading role.

After investment analysis, the most frequently identified finance function activities among all respondents are tracking sustainability-related performance measures, at 33 percent. Other finance functions were reported as follows:

  • Reporting to satisfy the requirements of customers — 28 percent
  • Integration of financial and sustainability information systems — 25 percent
  • Internal controls over sustainability reporting information — 24 percent
  • Environmental compliance reporting — 22 percent
  • External sustainability reporting — 18 percent

“One of the conclusions that emerged from discussions with leaders who participated in the survey and interview process is the value that the finance function adds to sustainability efforts,” says Scott. “They recognize that the information CPAs can provide is key to the continued success of their organization. Finance professionals should take note and seek out opportunities within their own companies to help their business — and their careers — move forward.”

To view the report (PDF), visit the AICPA’s Sustainability Accounting, Reporting, Assurance, Tax and Other Resources web page.

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