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Accounting for climate change - CIMA's new report is essential reading for management accountants

Posted: Tuesday 08 December 2009 by Gillian Lees
Replies : 4
Category: Business ethics, Management accounting, Professional development, Risk management, Strategic management / economics, Sustainability
Keywords: climate change, Sustainability
Gillian Lees's picture

In a week that has seen the start of the Copenhagen Summit (COP15), CIMA has published Accounting for climate change.  This looks at how management accountants can help mitigate and adapt to climate change.

The basic premise of the report is that management accountants have a key role to play in driving sustainable strategic and operational decisions.  They have the skills to help businesses understand the scale of the problem, come up with viable solutions and ensure they are properly implemented.

Problem is that while all this may be true, our research shows that finance teams are only getting involved on climate change related activities on an ad hoc basis.   Here at CIMA, we think this must change.  So this report aims at providing you with a viable way forward.

On top of the report itself, we have also published a series of case studies to support the development of best practice.  These come from a range of companies such as Asda, John Keells Holdings, Jaguar Land Rover, EDF, Marshalls, Unilever, Cathay Pacific, Fife Council and Punch Taverns.  These can all be downloaded from www.cimaglobal.com/sustainability.

We are hoping to add more global case studies and we would be very interested in hearing your insights and experiences.

Another piece of the jigsaw

Posted by Adrian Rutter on Tuesday 08 December 2009 14:39

The biggest lesson here seem to me to be to stretch our thinking across a much longer timeframe than most of us are used to.

I work on interim assignments in local government transformational improvement, and although we're all probably used to "medium term strategic planning" over a 3 to 5-year period, this report and CIMA's March 2008 climate-change report seem to demonstrate that there's now a governance and risk-management responsibility stretching over 25 to 50 years. At my last assignment we introduced an "Office and Workplace Transformation" programme with payback over 25 years, and had begun to link that into carbon reduction/cost management and general sustainability, but were unusually lucky to have key decision-makers prepared to accept that sort of timeline. It was quite a culture-shock for the finance community, too, having to make judgements using figures way beyond their usual comfort-zones.

But is it only me who finds Jaguar Land Rover an interesting case-study that, unless they stop making 5.0 litre supercharged cars and restrict their Land Rover sales to people who actually need vehicles like that, just might be missing the main point? Aren't they acting rather like an arms dealer developing quieter land-mines? Sustainability doesn't seem to have made it out to their marketing department.

Resource material

Posted by Cliff Moggs on Thursday 10 December 2009 18:48

The International Organisation for Standardisation (ISO) have since 1996 now relased 22 standards and guidelines for Environmental Management. These are issued by Technical Committee 207 (TC 207). They aslo have 10 further proposed standards in the pipeline including one on 'Material Flow Cost Accounting' from Working Group 8

Members may find this resource useful if not familar with this organsiation. (See www.iso.ch)

I have no connection with ISO or BSI, just interested in their output on management issues.

Yours sincerely

Cliff Moggs

Sustainability and the marketing department

Posted by Gillian Lees on Monday 14 December 2009 10:18

Hi Adrian

You raise an interesting point about Jaguar Land Rover's vehicles.  The problem, I think, extends beyond cars/SUVs to the whole issue of needs/wants.  For instance, should businesses be encouraging us to buy this year's latest look/gizmo/travel destination?  Somewhere along the line - and hopefully soon - we are going to have to reassess what businesses are there to do!!  And we as individuals will have to understand what we truly need.

One concept that I have heard of is 'cradle to cradle' manufacturing - in essence, that means totally eliminating waste.  Also the idea of all appliances being leased - so manufacturers have to recycle what they produce indefinitely. This may be a productive way forward.

Best wishes

Gillian

 

Sustainability and the marketing department

Posted by Adrian Rutter on Friday 18 December 2009 12:02

Hi Gillian - that's a really good thought about "cradle to cradle" evaluations and manufacturing. And that's an area that CIMA people could be making very real and lasting contributions to our entities and the whole debate; lifting peoples' perspectives from the short-term to the sustainable.

Perhaps part of the problem is the 'visible cost vs. invisible cost' conundrum; the visible cost of this year's latest look/gizmo/travel destination is the ticket price, but the 'cradle-to-cradle' cost includes purchase, development, environment & emissions, energy cost of disposal or recycling, and so on. As accountants, the best way we can contribute to the debate is probably by making all those costs visible. People can then make their choices at least in the full knowledge of all that's involved.

I suspect the UK housing market would be a lot less inflationary if the "sticker price" included 25 years of mortgage interest ....  

And maybe this is a good season to consider the balance between "wants" and "needs"?