Companies that have an integrated approach to sustainability take a holistic approach to the strategy and management of the organisation; one that not only considers financial performance, but also the risks and opportunities inherent in the impacts of the organisation on the environment and society in which it operates, as well as the impacts of environmental and societal trends on the organisation.

All of this requires an understanding of what drives value for the organisation; the links between short term gain and long term value; and touches on all aspects of its operations, core functions, assets and finances.

The Johannesburg Stock Exchange (JSE) requires companies to produce integrated reports, giving a picture of the business which combines financial performance, environmental impact and the impact on the society in which it operates. This is part of the JSE’s listings requirement, in compliance with King III, which means it is on an “apply or explain” basis.

Sustainability issues have a potential impact on all businesses, regardless of size and sustainability management is about addressing risks and opportunities and adopting an all-encompassing approach to a company’s strategy.  

Many factors must be taken into account when balancing long term sustainability against short term financial gain. They include an assessment of the company’s business activities and how they impact overall sustainability management, value drivers and profitability.

Allocation of resources is critical, coupled with the company’s objectives, which is why strategic planning is important. Short term gain cannot be pursued at the cost of long term value.

So, what can management accountants and financial managers do to incorporate sustainability policies into best business practice? They must paint a picture of a company’s holistic model, which permeates both financial aspects and internal sustainability issues, while speaking directly to the organisation. They should be able to show the value of engaging with broader stakeholders and how increased brand equity can be derived from an integrated approach and thus be incorporated into a sustainability policy which can, in turn, be inculcated into a company’s culture and way of doing business.

Sustainability is more than a term used by companies that know the importance of staying in business. It is linked to economic growth, nationally and globally. Sustainability adherence in itself leads to economic opportunities, with opening doors to new markets and industry while reducing dependency on saturated sectors.

In any society, healthy, profitable businesses impact the country’s growth prospects. This is especially true of emerging markets, where enterprise development contributes to the expansion of a country’s economy and to increasing the various options for choice for its communities.

It’s not too difficult a process and any company, regardless of size, can make a start in contributing to sustainable economic growth by working with new sources of business production like renewable energy; reducing carbon emissions; and dealing with waste by embarking on recycling drives, backed by management. The initiatives should also include contributing to social development through skills training, and facilitating the creation of new job opportunities by involving community members in areas of operation wherever possible.

It’s a global trend. The worldwide financial crisis underscored the importance of taking a longer term and more strategic view towards managing a broader range of risks and impacts. I believe this is finding expression through enhanced collaboration on a global level, for example through the work of the International Integrated Reporting Committee (IIRC) which includes major players from the financial and sustainability realms in a combined effort to develop a guideline for business around presenting an integrated view of its finances and sustainability prospects.

Many have asked where local organisations and companies stand on the issue. South Africa is certainly ahead of the curve as compared to other emerging markets in terms of what companies are already doing when it comes to sustainability reporting – particularly social and governance practices – largely because of King III and tools such as the JSE’s SRI index.

Global business practise is indeed changing. The business paradigm is gradually shifting to a broader, more balanced approach of setting strategy and reviewing performance, and more and more being defined in forward thinking around products and services and internal framework. As the understanding of the critical importance of an integrated approach to sustainability takes root, we're also seeing a far broader range of stakeholders wishing to engage in issues beyond short-term financial ones.

The challenge that remains is because integrated sustainability - and in particular integrated reporting – are still fairly new concepts.  The views around how it should take shape are multi-dimensional and part of an on-going conversation. It is clear though, that stakeholders believe that their time has come: integrated sustainability and reporting could shape the new face of business for the future.

--

Geoff Rothschild’s address at the CIMA 2011 World Conference in Cape Town, South Africa on 24th October will cover stock exchanges on the African continent and the challenges for companies of varying sizes to comply with what has been embodied in the King III Report. His talk will cover the different stages of development and challenges that pervade the African continent, drawing out the advantages of sustainability and integrated reporting.

To get futher updates on the the themes and topics of the conference, follow @CIMA_News on Twitter and contribute your views using the Twitter hashtag #worldconf2011 or add your comments here.