AAT has produced new ethical guidance on sustainability – here’s what it looks like in action.
Managing environmental, social & governance (ESG) risk is not just shaping the future of the planet, it is big business, too. In fact, it is so big that PwC announced this summer its investing $12 billion over five years on a recruitment, training and technology drive to expand into the ESG advice sector.
PwC – and the rest of the big four accountancy practices – recognise that there is money to be made in advising companies as they transition to net zero carbon emissions as agreed in the 2015 Paris accord on climate change.
Have you read AAT’s new ethics guidance?
All AAT members are bound by AAT’s Code of Professional Ethics, so have you seen the four new guidance notes?
More legislation is emerging from policymakers worldwide as they strive to reverse climate change, and corporates are firmly in the crosshairs.
And it is not just the Government that expects corporates to do more on ESG; investors to expect to see comprehensive reports that demonstrate a commitment to managing greenhouse gas emissions.
Accountants are central to helping companies meet these demands. Recognising this, AAT has produced a new ethics guidance note on sustainability, which states: “Some people still cling to the notion that [ESG] is a matter for governments – that individuals, and even businesses, do not have access to the levers of change. This is wrong. While political leaders can help through policy, public investment, tax regimes and legislation which outlaws the worst environmental offences, it is the case that most global value and resources are held in the private sector.”
A force for good
Mazars is among the accountants that are incorporating sustainable business practices into their own operation and offering advice to clients on how to run a more responsible business. The firm has a five-pillar approach to sustainability based on the UN Sustainable Development Goals (SDGs). These are: integrity and responsibility; doing business for good; people at the heart of business; reducing climate and environmental impact; and community involvement.
Fiona Revell, director of operations at Mazars, says: “A successful sustainability strategy depends on getting support from the top and we are really driven by the executive and our senior people. Our CEO and COO are both championing and challenging us, and they will ask if we are doing enough.”
The AAT code acknowledges that the ‘vastness and complexity’ associated with implementing a sustainable approach can seem overwhelming and recommends that members accept that they ‘can’t change everything alone’.
The guidance says: “A small gain is still a gain. Multiply that small gain across millions of like-minded individuals and organisations and change soon becomes inevitable.”
Revell agrees that taking small, incremental steps – certainly at the beginning of the journey – can ensure long-term sustainability success.
Revell says: “At first we felt that we were only doing little things, but when you start small you build up, get traction and reach a point where you can be more ambitious.”
Among the smaller steps taken, Mazars engaged with suppliers including the external caterers insisting that they use no plastic and remove all single-use packaging from sale.
At the same time, the organisation has attempted to reduce the amount of paper it uses by monitoring printing and insisting clients receive electronic documents where possible.
The AAT code also points to the importance of demonstrating a sustainability strategy to new the future workforce, noting ‘there are increasing expectations among recruits that businesses show demonstrable social value through their policies and activities. If you want the best team members, then you need to meet those expectations’.
This is borne out at Mazars. Mhairi Poole, Senior Operations Manager at Mazars, gave a sustainability presentation to a student intake that placed significant importance on the firm demonstrating its ESG credentials.
Poole says: “They asked some really challenging questions about our sustainability approach, which showed how important this topic is to the younger generation coming through.”
Client health check
The AAT guidance note also suggests accountants help clients get up to speed on ESG.
William Hughes, Business Sustainability Consultant at Mazars, says the firm offers sustainability consultancy services that starts with an assessment of a company’s current position which should uncover any gaps.
“We developed an ESG health check which asks 35 questions. This is educational for the client and identifies where the gaps are from which we can build a sustainability strategy.”
Hughes is clear that successful ESG approaches only work if the company is fully committed to improvement.
He says: “This is very strategic; if there is no real strategy there is zero value to be gained. If we engage with a company and they point us to the PR department without having a discussion, that raises is a red flag because it shows a lack strategy and the possibility they may be greenwashing.”
Mazars also ask for input from the client’s internal and external stakeholders to garner views on what they consider to be material sustainability issues. Once the key sustainability issues are understood, and the impact on the business is clear, achievable goals are put in place to limit ESG risk.
Hughes adds: “If your business model and strategy can’t deliver those goals, then you are potentially going in the wrong direction.”
Having a realistic sustainability strategy will be critical for all businesses if they want to remain viable as the world transitions to net zero. And as the AAT code says, accountants will be central to achieving that aim.
The AAT Sustainability Checklist
1. Ask how your organisation and your client organisations could benefit and help society and sustainability.
2. Make a start, however small.
3. Ensure that your organisation thoroughly researches all options when venturing into new areas or projects, this may mean putting the brakes on developments but will be cost-effective in the long run.
4. As accountants know: ‘what gets measured gets managed’, so start measuring.
5. Conduct regular risk assessments, including suppliers and third parties.
6. Do your CPD: clients want and need your expertise, governmental funding and policy changes may offer innovation and growth initiatives.
7. Set science-based targets.
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Gill Wadsworth is AAT Comment’s news writer.