Is the typical finance team measuring carbon?

Regulations are on the way and there is pressure from customers and employees to account for carbon. So how are finance teams responding?

The UK Government is taking its first steps towards making climate-related disclosures mandatory in annual reports. Large businesses, investment funds and pension scheme providers will be expected to disclose their environmental impacts under the proposed Sustainability Disclosure Requirements (SDR).

While this will only affect larger entities in the first instance, it is likely to extend to smaller ones over the coming decade. Even without a mandated requirement, companies are under considerable pressure from investors and customers to put more information into Environmental, Social and Governance (ESG) reporting.

There is no unified approach to monitoring and measuring these factors. While environmental reports were once seen as the domain of the marketing team, ESG reporting now requires the rigour of the finance function.

Many finance functions are only just starting to look into ESG reporting in a big way. Our panel of members explain how they’re approaching environmental and social issues.

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At a governance and planning level, we can make a difference

Clare Elliott, FMAAT, CFO, ILUX

ESG factors are important for any business to consider, regardless of size. I think it’s easy to downplay these in a small business. Large corporates tend to do a lot more advertising around ESG, putting many more messages out in the public domain. Internally, SME’s are doing exactly same – although perhaps many people don’t realise they are considering ESG to quite the extent they are.

While ESG has become a bit of a buzzphrase, it’s actually always been important in business. It’s a big selling point to attract good employees and ideal clients. That’s why finance should be heavily involved in such areas. How a business acts and how it is perceived, within the marketplace will heavily influence how successful they are. Companies will want to set themselves goals and targets, to ensure they are continually progressing.

Within our organisation, although we are small, we (as Directors) spend a lot of time ensuring our ESG policies and standards are what we need to be the best in our field, and within our industry in order to attract the best people. Being an IT company, we have to consider our impact on the environment with regard to waste. While we don’t produce anything ourselves, we are a reseller of equipment and our clients rely on us to ensure we are adhering to environmental standards. As I said, I think large corporates are the ones who outwardly market their environmental standards, but that doesn’t mean small companies aren’t doing the same things.

Social factors are a big topic at the moment, as unemployment is low. Companies need to be clever with their staff retention and recruitment. Ensuring employees are looked after and happy in their work has been a big factor over the past 18 months, particularly with the big shift in work practices (ie. working from home). Everyone has had to adapt, and companies have had to spend a lot of time and resources on ensuring they are doing everything they can to help. While this may typically involve the HR department more than any other, it all relates back to financial success, and so the two departments would benefit from working very closely together.

As a finance function, governance will certainly be a big area to consider, as the financial implications of tax strategies, corruption, board diversity, etc, are directly within the remit of an FD and their team.

As an FD myself, I want to know exactly how much of our resource is spent on ESG and measure the successes and failures accordingly. That way I can help to plan for the future, and along with fellow Directors, ensure the company is heading towards a better future.

Our analysis supports ESG decisions

Sanjiv Bali, MAAT, Senior Project Accountant, A2 Dominion

Since we are a housing association, environmental and social factors are part of key elements high up on the radar. They form part of the key annual objectives to achieve.

We have specialist teams that discuss and look into these factors and issues and also communicate to the staff through various communication methods such as regular online staff essential newsletters, notifications on the intranet and roadshows and team meetings. Regular monthly meetings are held with Finance team members where they can get involved with these discussions and offer advice and suggestions.

ESG issues are important areas, so it is ideal for Finance to be involved in contributing and providing analysis to measure environmental and social goals. We have been providing factual advice and analytical reports with commentary, which has been part of a huge success around decision making. I believe as we are already in such a sector, the ESG issues will always remain a big part of the work involved that we carry out.

Finance should be the gatekeeper of sustainability issues

Farha Jamadar, FMAAT, Finance Manager, Todd Doors

Discussions around sustainability come from the top. As a timber company, we ensure that we are as green as possible and try to source as much as we can from sustainable sources and trackable timber supplies. We are involved heavily in the investigation and fact-finding of these projects and to see if they are financially viable, CSR is important to the business especially with the various environmental concerns today. 

While I don’t think this topic is on the front of our priority list, there is awareness. We think about any paperwork that is printed, vehicles that we lease and our electricity suppliers. We also perform investigations into green grants and solar panels. 

I think every department should be involved in ESG issues, but finance should be the gatekeeper and provide measurements. This should be produced at the board level so this can be monitored and implemented, and create discussion so decisions can be centred about being ethical and environmentally aware. 

It’s about being in the know, understanding your supply chains and where gaps and wastages are. It can be as small as ensuring our department limits printing to tracking the supply of our timber for our wood. I guess it starts somewhere and then builds as more visibility is shown. Initially, it’s difficult, as this aspect can be seen as not delivering the core needs of the business but it can easily be shown how one wrong move can be detrimental to business. 

I hope to have ESG issues at the forefront of our decision-making process as this should be everyone’s responsibility and businesses, small and big, should all do their part.

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Mark Rowland is a journalist and former editor of Accounting Technician and 20 magazine.

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