The translation of environmental and social impacts into the language of business and accountancy is a rapidly evolving area. A wide range of organizations are conducting work to develop methodologies and approaches that measure and value environmental and social impacts. This will provide a more complete view of the true costs and benefits of an organization’s activities and enable them to understand better the risks and opportunities faced. However, little of this work to date has investigated what kind of information will drive the greatest change in behaviours and be of most value in organizational decision making, including whether describing environmental and social factors in financial terms is an important part of the answer.
A4S commissioned research that set out to understand whether organizational decision making would be improved by a different set of information, and to assess the attitude of key decision makers — Board members and senior management — to different types of environmental and social information.
The research reflects a series of interviews and discussions with Board members and other senior managers of large companies and public sector organizations conducted by a highly experienced social research team led by Sir Robert Worcester, Founder of MORI, with assistance from Futerra Sustainability Communications. The detailed results are set out in ‘Integrating Environmental and Social Factors into Organizations’ Key Decision Making: A Qualitative Survey for A4S of Board Level and Other Senior Managers’ Views’, available here.
The A4S report not only sets out the findings of the research, but also the business case for the integration of environmental and social information into decision making, an analysis of key research in this area, and identification of key next steps, including what A4S is doing to scale up how organizations tackle these challenges.
The A4S research indicated that:
1. There is a growing recognition of the changing business landscape and a potential need for changes to decision making processes and strategic objectives to reflect new risks and opportunities.
2. The business case for the inclusion of environmental and social factors at Board level is not yet clear, particularly for many CFOs, due to uncertainty around the relevance of these issues to their organization.
3. Environmental and social information is often assumed to have been formally considered by the CSR / Sustainability team (with sometimes limited impact on the wider business) before decisions reach Board level. Information is typically presented as traditional sustainability data e.g. tonnes of carbon — with little alignment to strategic objectives or financial information.
4. Scepticism over the quality and robustness of many types of environmental and social data is preventing more widespread use.
5. A belief among respondents that expressing many environmental and social factors in financial terms can be counter-productive as data can be viewed as unreliable, spurious or unethical.
6. A perception that action can be left to successors who will understand these issues more fully.
What will drive change?
Following the research conducted by A4S and others, A4S identified the following levers for change, which will form part of A4S’s work in 2013 and beyond.
1. Demonstrate the business case – Better articulate the commercial rationale for incorporating social and environmental factors into decision making to help ensure that organizations are aware of the risks to mitigate and the opportunities to grasp over the short, medium and long term.
2. Speak the right language – Develop narratives that are aligned with the needs and ‘language’ of business. These need to be focussed at a sector and organizational level and grounded in commercial understanding.
3. Develop more robust information – Work with existing collaborations to develop commonly agreed methodologies to value environmental and social inputs and impacts in financial terms that link to strategic objectives and wider financials, either directly or via reputational impact. Work with others to develop a wider set of tools that enable future risk, opportunity and uncertainty to be incorporated into decision making processes.
4. Bridge the knowledge gap – Recognize and address the need for skills expansion at Board level and within the finance and accounting community.
5. Create an enabling environment – Align business incentives with national and global goals and frameworks.
To access the A4S report “Future proofed decision making: Integrating environmental and social factors into strategy, finance and operations“ click here. To find out more about how to get involved with the work of A4S click here.