‘The speed and depth of the [pandemic-triggered] economic crisis have shown that a core principle of the global economy – prioritising short-term economic growth and efficiency over long-term resilience – can have huge societal costs.’ That was how the OECD framed its policy response to Covid-19, calling on world economies to ‘build back better’ to create more sustainable and resilient economies with a focus on wellbeing and inclusiveness.
The pandemic has accelerated many existing business trends but it has also emphasised the fragility of human life and the power of nature, providing extra momentum to the re-emergence of stakeholder capitalism. While growth and financial recovery is an imperative in the coming months and years, it is increasingly clear that this should not come at any cost.
The pressure is on businesses to pay attention to environmental, social and governance (ESG) issues or face the consequences. Asset manager Blackrock warned in January 2021 that it would consider dropping from its actively managed funds those companies that fail to commit to a 2050 net-zero emissions target.
But what does this mean for professional accountants, who will be in the front line of the recovery? What is their role in a world that puts purpose before profit?
‘It is still all about profit, but shareholders don’t just want to see growth, they want to see sustainable growth’
Many studies have pointed out that professional accountants have an important role to play. ACCA’s Accountants, purpose and sustainable organisations report states: ‘The accountancy profession is core to building confidence in organisations and their performance, with a wider public-interest role, helping to create an environment that encourages trust and facilitates transparency in the workings of the capital economy and the activities of business.’
Matt Dolphin FCCA, finance director at the rail company Greater Anglia, argues that the change in emphasis is more subtle than it first appears. ‘It is still all about profit, in a sense, but shareholders don’t just want to see growth, they want to see sustainable growth,’ he says. ‘People are starting to believe Sir David Attenborough when he says that our planet might die. If it does, all the profit in the world won’t help.’
That means, in essence, that businesses need to be more aware than ever of everything that could have an impact on a company’s ability to deliver profits in the future, he adds.
‘The pandemic has been a solid lesson on that,’ he continues. ‘The business model of so many businesses changed overnight. Some events seem so incredible that no one would believe you when you say they could happen. And yet here we are. As accountants we’ve had to relearn everything we thought we knew over the past year. Chaos theory, it turns out, is a real thing.’
The role of the accountant has shifted. ‘Financials – the epitome of everything that accountants have done until now – have become the baseline,’ says Paula Kensington FCCA, CEO of global financial community CFO Conversations. ‘The traditional financial measures of success are still important, but but finance professionals should recognise that all new and emerging measures are not a tickbox exercise; they have to be authentic and embedded into the culture of the business.’
‘We have to look much more at unstructured data such as social media to assess what people are doing, to work out what our business demand might be in the future’
Melanie Proffitt FCCA, CFO of luxury hotel business Farncombe Estate, has also seen her sector change beyond recognition. ‘In terms of my own job, one of the things that has been thrown into disarray is that we have always looked at past data to spot trends. All of that – all of our usual tasks, reporting what has happened and using that data to forecast and carry out trend analysis – has gone in the bin.
‘Instead, risk has ridden up the agenda. And we have to look much more at unstructured data such as social media to assess what people are saying and doing, to work out what our business demand might be in the future.’
Dolphin agrees: ‘When you’re driving, you spend nearly all of the time looking forward through the windscreen, making sure you don’t hit something, checking what might be coming over that hill, rather than looking in the rear-view mirror at what has already occurred. That forward vision is part of our remit now.’
Whether the accountant’s required skillset will need to change as a result remains to be seen. ‘Accountants tend to be in one of two camps: the details people who like numbers, and those who prefer the big picture and strategy,’ Kensington says. ‘Pure number-crunching roles in accountancy will be far fewer in 10 years’ time than they are today because those tasks are being automated.’
The seven skills areas that form the foundations of the ACCA Qualification will come into their own in this new world. ‘They are certainly very important because that’s where the role of the CFO is heading,’ says Proffitt.
Dolphin, though, wonders if even more skills will be necessary as stakeholder capitalism becomes more established. He says: ‘Technical knowledge and ethics will always be the core of the profession, but perhaps we need more around the long-term sustainability of the business – the ability to adapt and change, and spot risks and opportunities ahead.’
Measurement of ESG is an essential element of stakeholder capitalism. Shareholders need to see evidence of the value of the business beyond revenue. ‘What gets measured gets managed. That’s the key role of accountants,’ says Proffitt.
So integrated reporting, reporting on the company’s purpose, stewardship, and pension scheme reporting will all be critical, and accountants will be part of a wider team that communicates the impact of ESG issues on financial performance and on society as a whole.
Kensington believes that a vital point for professional accountants to remember is that individually we all have a role to play. ‘The personal brand has become more and more important – who you are and what you care about,’ she says. ‘You have to stand for something, and that’s new for a lot of people.’