27 July 2016

Accountants and CSR

What is the role of accountants in corporate social responsibility?

Former TNT CEO Peter Bakker stated already in 2012 that he thinks accountants will “save the world”. Yesterday, the VCV Alumni Circle for Sustainability, together with the Circle for Accountancy and Control, organized an inspiration session about this very same topic.

About 30 alumni attended the event in the beautiful – and extremely sustainable – office building The Edge in Amsterdam. Our host was Deloitte, who were kind enough to provide a guided tour through the building, a nice dinner and two of the four speakers for the main event.

The following is a short interpretation of the four speeches, followed by my own point of view on the topic.

Leen Paape: the role of accountants is to advocate transparency, integrated reporting and positive assurance
The first speaker was Leen Paape, dean and board member of Nyenrode Business Universiteit. Leen is also a member of the jury for the ‘Transparantiebenchmark’, who organize a yearly competition for the best CSR Report in the Netherlands. Leen’s biggest fear as a jury member for the competition, is that the company they select as winners, will ‘do a Volkswagen’ shortly after. Therefore, he advocated for transparency in reporting. A company should be brave enough to report on all material aspects of business, also on the things that didn’t go very well.

Next to that Leen argued that he sees integrated reporting (IR) as a step forward. IR means a company produces one annual report consisting of both financial and non-financial information, instead of having a separate financial- and sustainability report.

One other thing that accountants can do to contribute more to sustainability is to use positive assurance for non-financial results. At the moment, for non-financial metrics often negative assurance is used (‘we checked it and we can’t see that it isn’t true’).

Udeke Huiskamp: the (future) role of accountants is to improve internal controls of non-financial measures.
The second speaker was Udeke Huiskamp, senior manager sustainability at Deloitte. She showed graphically that companies that score high in the Dow Jones Sustainability index, outperform companies that score low in this index. Investors see more and more that these non-financial ESG factors (Environmental, Social, Governance) are valuable. To be able to compare these metrics between organizations, they require standard reporting criteria. Examples are Global Reporting Initiative (GRI) and Integrated Reporting (IR) Standard.
However, for non-financial metrics, the internal control systems are often not as advanced as for financial metrics. Deloitte believes accountants can help with this by forming multidisciplinary teams with financial, technical, IT and sustainability expertise.

Carola Wijdogen: accountants can help to valuate the total impact of the company
Then came Carola Wijdogen, director of CSR at NS (Dutch Railways) and former CSR manager of the year (2014).
Carola gave a very interesting insight in how the role of the accountant can enhance CSR in practice. At NS, together with their accountant, they first mapped out all value streams (inputs and outputs) according to the IR Framework. They only focus on value streams that are material (=important, impactful) for stakeholders. After that, they monetized the impact of each material theme: positive AND negative. The results are completely transparent for everyone and can be retrieved from the NS website.

Of course the calculations of the value of the societal impact are based on guestimates. Of course there can be discussion about how these impacts are measured. But the end result definitely gives new insights! It becomes visible which aspects have the most positive and negative impact, and this does not always correspond with the general beliefs in the organization. Next to that, it becomes easier to evaluate project alternatives, because the impact of each alternative on society can be calculated.

Erica Kostense-Smit: IR is promising and scores are gradually improving
The last speaker was Erica Kostense-Smit, manager sustainability at Deloitte, who explained in depth the research Deloitte is conducting on Integrated Reporting for four years now. Slowly but surely the scores of 30 large Dutch companies on IR principles are improving. It is also interesting to notice, that to score high on IR principles it is not required to have an integrated report (for example, Heineken has one of the highest scores and does not have an integrated report).

The night concluded with a plenary panel session with the speakers and after that some drinks.

At Heartbeat Strategy, we agree that accountants can have an important role in implementing CSR in companies, be it mostly in the first stage. In our vision of CSR development, companies usually start with CSR when an external stakeholder (e.g. government, a large client) puts pressure on them to move. This is when they want to create reports and follow standard guidelines to satisfy said stakeholder. Accountants can set the reporting standards and guide the company (controllers) to improve internal systems to manage non-financial metrics.

This will in turn help the company to go to the next stage of the model: take responsibility. So we believe accountants can play a vital role in getting organizations started with CSR and improving their internal system of controls.

What do you think? Can accountants help companies with CSR development? Or should people in companies just directly take responsibility and change their behavior, instead of trying to measure everything?

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