Six proposals for the world of tomorrow
Covid-19 has highlighted many of the changes we need to make in the world of tomorrow. Professor Delphine Gibassier from Audencia explains the steps companies can take to better prepare for current and future changes.
The world is changing and the pandemic has once again highlighted the need for change if we are to overcome future challenges. A change in the language of business is essential, as well as the equation of a diversity of capitals (human, intellectual, societal and environmental) rather than being solely guided by financial results and financial accounting.
Some companies are already ahead of the game, such as Danone, which changed its status to “Company with a Mission” last year. But many others are lagging behind. But this strategic and global shift would not be effective without an integrated and multi-capital vision or strong teamwork and a transversal approach.
This multi-capital vision is a strategic approach for financial teams who initiate commercial partnerships with sustainable development teams. Here are six suggestions for sustainability teams to reflect on the changes that finance teams are going through and how they can benefit from this move.
1) A wider field of vision
While companies have been publishing their reports using economic, social and governance (ESG) indicators for many years, often using the Global Reporting Initiative, measuring overall performance is now the responsibility of the finance team.
Many organizations are now broadening their field of vision from a mono-capital point of view to a multi-capital point of view. Finance teams can now become business partners of sustainability departments, integrating sustainability into financial accounts.
To do this, they must move from accounting solely in terms of financial capital to their environmental and social capital, among others. For example, an agri-food company Olam now assesses their capital according to seven measures: financial, social, human, manufactured, natural, intangible and intellectual capital, with a view to creating long-term value. Some, like Danone, focus on their health capital, others, like Vivendi since 2013, work on their cultural capital.
More … than 1,500 companies around the world have adopted a integrated reports model, using a six capitals model. Many “multi-capital” accounting models have been developed under the impetus of the Framework for International Council on Integrated Reports, and the Coalition of Capitals, a grouping of organizations which encourages the integration of several types of capital in the decision-making process of the systems.
2) A new compass
Thanks to Kate Raworth’s’Donut” social and planetary boundaries (a concept she defined in 2017), companies must operate with an awareness of the planet’s environmental limits and basic societal needs, such as access to health or education for everyone.
Companies such as L’Oréal have designed their new sustainable development plan around planetary borders. To achieve these bold goals, finance teams are now also embracing the Donut “compass” to guide their organization in the right direction.
Already today 1,040 companies commit to taking action to achieve the goals of climate science (specifically, not to exceed a temperature rise of 2 to 1.5 ° C), but everyone should use this compass and follow suit. Some examples of companies using the Donut Compass include Olam in its multi-capital accounting, mentioned above, or the agribusiness company Alpro, which, through its work with WWF, helps create methods for calculating water. and planetary diversity to limit the impact of companies on the planet’s resources, flora and fauna.
3) transformative accounting
Sustainability teams should help finance teams adopt their new accounting as transformer, and orient their new accounts towards the future. It is no longer a question of looking in the rearview mirror, but rather towards the horizon.
Thus, the performance indicators will have to be reoriented towards the actions and governance necessary to guide the organization. Indicators of past performance are no longer sufficient to understand whether companies are meeting the challenges of tomorrow – this is what the IIRC framework demand since 2013, the Climate-Related Financial Reporting Working Group since 2017, with the need to work on future scenarios, including the objective of the Paris 2 ° C agreements. The World Benchmarking Alliance has also helped by developing Seven system transformations to compare companies to the SDGs (including decarbonisation, urban system and agro-food system).
4) Heads of value
CFOs will become Chief Value Officers (CVO), acting as business partners focused on multiple value creation, and sustainability directors. CVOs share the results of their multi-capital accounting with the leadership and management teams to aid in the long-term sustainability strategy of the company. The CVO will guide the evolution of its organization’s economic model towards a more resilient model, in line with CSOs. All this is not a simple utopia, but already a reality for several companies such as the agri-food company Olam, the energy company SSE or the renewable energy company Orsted, which have created innovative accounting models, with Financing for sustainability teams. Association Sustainability accounting created a Chief Financial Officer Leadership Network CFOs who become CVOs in the UK, Canada and the US. These new breeds of CFOs must in the future work closely with the CSOs of their companies.
5) Multi-capital accounting
Both large companies and small and medium-sized enterprises (SMEs) need to embark on the path of multi-capital accounting. Today, the tools are available and customizable for each company: for example, the ACT Initiative, supports companies in their low carbon transition for SMEs. New accountants, trained in multi-capital accounting, will be able to support SMEs in this new world. This will significantly improve the ability to embark SMEs on the path to sustainability.
6) Reformed training
Radically reformed training is essential to prepare this new generation of accountants, management controllers, internal and external auditors, and Chief Sustainability Officers can offer advice in the transition to sustainable development. We no longer need to train ourselves in techniques that put blinders on future managers. On the contrary, we must train them in the skills and tools that will enable them to support companies in the world of tomorrow. The first training in the world dedicated to the transformation of the accounting, control and audit teams is now available on Audencia.
Delphine Gibassier, Lecturer in Sustainable Development Accounting, Audencia
Audencia Nantes School of Management
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