The Prince of Wales has called on the accounting and finance professions to help "future proof" the economy by designing a system that reflects the true economic reality of the way organisations generate value, in his annual address to the Prince’s Accounting for Sustainability Project (A4S) forum at St James’s Palace in London last week.
In his speech, he said "we have been pursuing economic growth as if it was an isolated goal" and in doing so "have done alarming damage to nearly every element of the natural world you care to think of" adding," we are living off the Earth’s natural capital rather than the income derived from that capital and, unfortunately, there is no global chief financial officer to keep us in check!".
"So we sit by and watch as the biggest bank of all – in other words, nature – heads towards catastrophe. Over-dependence on fossil fuels, over-fishing, over-stretching the capacity of the soil; rapid and unsustainable population growth; you name it, we’re at it. And it’s a very dangerous game," Prince Charles warned.
"At the moment, it seems to me that the financial model we have could be much more appropriate to the circumstances we face. It is currently topsy-turvy, if you think about it. We tend to reward those who use most of the free resources from Nature and who pollute our environment, when we should be rewarding the organisations that protect our dwindling natural resources or seek to reduce atmospheric pollution. And shouldn’t the difference be reflected in the price of what we buy and consume? At the moment these costs often do not appear in anyone’s books. Thus, we are led to think that the cost of draining a wetland, destroying a rainforest or pumping tons of carbon into the atmosphere is zero. But what supply chain can survive these pressures? Almost all of these costs, for which future generations will pay dearly (in other words, your grandchildren and mine), are given no value in accounts."
According to Prince Charles, the finance and accounting community is in the "perfect position to innovate in order to gather better and more comprehensive information about the way organisations operate so that you can use this to help future-proof our economy. This will, in turn, result in improved risk management for organisations and society as a whole."
A4S issues report
However, the project’s report, which was launched at the event, Future Proofed Decision Making: Integrating environmental and social factors into strategy, finance and operations indicates accounting and financial professionals may remain unconvinced when it comes to understanding the risks – and opportunities – of environmental and social issues, which will reshape the economy in the coming decades.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataAccording to the report, senior decision makers first need to understand why these issues are relevant to Board level decision making and for the credibility of the data to be proven. According to UNEP, the global economy depends on an estimated $21-72trn of services provided by the environment – natural capital that is traditionally not accounted for in decision making or profit. But a senior manager who participated in the A4S research explained "almost the only non-financial factor that the Board leads on is corporate reputation… Apart from that one, every single decision has to be financially-based."
The research indicates that although some decision makers recognised sustainability drives growth for their companies, there was still scepticism by others over the quality and robustness of many types of environmental and social data, which is preventing more widespread use by senior management.
A4S director Sarah Nolleth said there is a "clear and urgent need to communicate better to senior decision makers – especially CFOs – the business case for considering the environment and society in the day-to-day running of their organisation".
"Not only do the report findings show that the business case needs to be articulated more effectively, but they also show that it needs to be made in the right way and using the right language in order for change to take place," she urges.
A4S to launch CFO network
Prince Charles said in the next 12 months, A4S will focus on three main things: first it will articulate the business case for integrated thinking in a language that resonates with the finance community to make this engaging; secondly, equip organisations with the knowledge, skills and resources they need to be able to future-proof decision-making; and, thirdly, help to build a more sustainable economy by driving change at each level of our economy to seek alignment so that these are all pushing in the same direction.
On the back of this A4S is in the midst of setting up a chief financial officer (CFO) leadership network for CFO’s to share ideas and lessons learnt along the way. The A4S will also, in collaboration with Cambridge Programme for Sustainability Leadership and the World Business Council for Sustainable Development, launch a training programme for CFOs next year.
Related link
Prince’s Accounting for Sustainability Project
