Businesses need a sustainable future

Sustainability was once a vague concept to many companies, but most firms now recognise its importance, writes Robert Bruce

The concept of sustainability was once a marginal one on the corporate horizon. Forward-looking papers on environmental reporting would appear from the room on the 23rd floor where blue-sky thinking was encouraged. But it stayed in that part of the accounting mind: reserved for ideas that have nothing to do with the day-to-day business of financial fire-fighting and crisis management. Invitations to conferences on such topics were initially interesting, but invariably ignored when it came to finding the time in the diary.

However, sustainability suddenly looks like going mainstream. There are several reasons for this. As a corporate reporting concept, it has come of age and is no longer something over which there is a sharp divide. A few years ago, the divide was a geographical one. In places such as Scandinavia and Germany a wider stakeholder view has always been taken and issues such as environmental reporting and sustainability has been taken seriously. In the US, things were rather different. The attitude there tended to be that if shareholders really wanted to give money to charity, they should use their own money to do it and not ask companies to stump up.

But times change. One reason for this is technology. The traditional reasons for having a finance function have changed. And within the corporate model the function is under pressure. US surveys repeatedly show that the cost of the finance function as a percentage of total corporate costs is plummeting.

Peter Simons, technical specialist at The Chartered Institute of Management Accountants, claimed that IT is increasingly taking care of accounts.

“There are twin challenges,” Simons said. “First, to reduce the accounting function cost to the business. Second, to increase its value to the business.” This brings inevitable changes of emphasis.

There are obvious connections. According to Mark Lewis, until recently a finance chief at the Ford Motor Company, sustainability is critical. Ford’s primary products contribute to greenhouse gas emissions and are critically reliant on the availability of crude oil.

“In terms of my role as a finance professional, it is important that the potential financial impacts of these risks are factored into decision making,” he said.

But the fundamentals, which are driving the growth of sustainability as a business force, are all to do with the long-term survival of a business. It is about the quality of earnings and maintaining the income stream. It is all about the long term.

Corinne Proske, corporate social responsibility manager at National Australia Bank, said: “You have to go back to some of your non-financial drivers and tell the business it will not provide profit tomorrow, but it will create opportunities in the future.”

“Business managers with day-to-day profit and loss responsibility have a short-term focus,” said Sandrijn Weites, head of sustainability strategy and reporting at ABN AMRO. Accountants need to raise the questions. “A profit of $180,000 today may be a loss of $1m a year later. People must think about the consequences.”

And this is why sustainability has come to the fore. “It’s a boardroom topic,” Weites said. “It’s not something you do because it’s nice.”

The time of the fast buck is over for responsible companies. The number-one priority now must be sustainable growth. Our horizon has become not just the next quarter, but the next quarter of a century.