A variety of interconnected factors enable businesses to succeed, and these increasingly include sustainability-related issues that have an impact on the organisation’s resources and how they are used.
A report by ACCA, Making information connections for sustainable value creation, argues that it is the role of the finance professional to identify, manage and communicate these interconnections, which includes defining the organisation’s sustainability-related risks and opportunities.
Lack of connectivity can have an impact on the quality of decision-making
The report sets out five key steps for finance professionals:
- Define connectivity
- Understand why connectivity is important
- Determine what to connect
- Manage challenges in making the connections
- Appreciate policy and regulation connections.
Establish commonality
The report stresses that ‘developing connectivity’ between sustainability-related information and business activity will ’empower quality decision-making and sustainable value creation’. But ‘connectivity’ here can have many different meanings, so it is essential that those who both use and prepare the information agree on definitions.
‘Making connections between insights is a vital component of integrated thinking’
Business experts contributing to ACCA’s research defined connectivity as ‘making the necessary information connections to empower quality decision-making and sustainable value creation’ and, over time, revealing sustainability-related insights about the following business activities:
- the approach to organisation governance
- setting strategy
- setting and measuring targets and metrics for progress updates on a strategy
- managing risks and opportunities
- understanding and communicating financial impacts.
Ideally, connections should be made between information relating to different business activities – for example, explaining how risks associated with an organisation’s transition to net zero are reflected in revised targets.
Connectivity might also mean connecting insights from the processes involved in producing sustainability-related or financial information, so as to create opportunities for continual improvement in business activities.
Risks and next steps
So why is connectivity important? ‘Making connections between insights is a vital component of the integrated thinking that’s necessary for organisations to be more alert to their material risks and opportunities,’ says the report.
Even so, connectivity across business information is not common among organisations (particularly in the case of sustainability-related issues) and is not consistently applied to different business activities.
How do you communicate the connections between sustainability and business activity?
Source: Sustainability reporting – SME guide
This lack of connectivity can have an impact on the quality of decision-making. Stakeholders might be concerned that an organisation is making the connections but choosing not to communicate them, or worry that progress on sustainability-related strategies is not being relevantly and reliably measured.
Practice ethical thinking to understand how a sustainability matter impacts resources
Once an organisation agrees the importance of connectivity and how to define it, professional accountants must determine the connections that need to be made. The guide includes a video of real-life examples of connecting sustainability-related information to business activities.
Silo challenge
One of the most common challenges to making connections is that many organisations have siloed their sustainability-related activities and their capabilities relating to data, technology and people. This, argues the report, raises risks of missed or duplicated insights, lower-quality decision-making, or unintentional greenwashing.
The report stresses the vital role professional accountants play in connectivity, arguing that they must be the connectors that organisations need to create sustainable value. The business experts make the following recommendations for finance professionals as they strive to make connections across their organisation:
- Create a common understanding of what connectivity means so that everyone can apply the same definition.
- Collaborate with other professional accountants and professions. No single profession has complete knowledge across all sustainability-related matters and their relationship to business.
- Practise ethical integrated thinking to understand how a sustainability matter impacts each resource that the organisation relies on, including the relationships between these resources.
- Build traceable corporate reporting information flows so that all appreciate how material sustainability-related matters are managed throughout the business.
- Consider where to combine the production of sustainability-related information and financial information to reduce cost and effort, maximise insight, and lessen the risk of unintentional greenwashing.
- Apply an adaptable process to produce information because new connections for sustainable value will continually arise.
Watch and learn
The report’s findings are explored in detail in ACCA’s annual virtual conference, Accounting for the Future, including additional insights from the ISSB chair Emmanuel Faber. Register today to watch the session ‘Connecting sustainability to business strategy’ at 12pm GMT on 27 November, or later on demand.
