Are Accountants obliged to be green?

The Great Debate: Accountants and the Environment

Jairo Rojas, BASDA director general, provides an opposing view on the debate topic on Accountingweb:  "This house believes that accountants are not professionally obliged to promote environmentalism.”

"Much of what Rob Lewis says can’t be disagreed with – it’s just that some of his conclusions don’t necessarily follow. He states that “the only social responsibility of business is to improve its profits” and that “as trusted business advisors, accountants are only obliged to help their clients run better businesses” – absolutely, but neither of those statements goes against the case for accountants helping set and drive the green agenda.

Let’s leave aside the scientific arguments and the debate as to whether organisations are doing this from conviction or more cynically. Let’s focus on how embracing the green issue can be good for business.

How are profits improved? Simply by increasing revenues and reducing costs. At BASDA (The Business Application Software Developers’ Association – the UK IT trade association) we have seen our customers falling into four broad revenue or cost-driven groups:

• Green leaders – those organisations embedding environmental concerns and CSR into their brand and using this as a business differentiator. Examples from near-history would be The Body Shop and The Co-op Bank. More recently Marks & Spencer and BP. The focus here is to create competitive edge to win more business. The green issue is being used to drive revenues.
  
• Supply chain followers – these are often suppliers to the leaders and their policies and actions are driven by the green promises of their major customers or the green demands of doing business with the public sector. The focus here is to keep clients and, over time, win more business – again a revenue focus.
  
• Cost savers – these organisations may dress themselves up as leaders, they may even win green awards but the focus is really cost reduction and this is often the business case used to sell the green initiative to the board. For example, The Post Office – they made significant fuel and hence cost savings by improving transport efficiency – they didn’t focus on reducing the amount of junk mail that they had to deliver in the first place.
  
• Legislation-driven – these companies will only act when changes in the law force their hand. The speed of reaction required depends on the industry. For example, power generators face more pressing green demands than the financial services sector. Unless a company decides to become a leader then the focus here is the cost of staying in business.
  

The accounting profession has a key role to play in guiding each of these types of businesses.

What is the definition of a “better business”? That takes in much more than just financial performance and evolves over time, taking in aspects such as health and safety, ethics, employee welfare and customer satisfaction. But given a choice aren’t people more likely to buy from and work for better businesses? Following Rob’s argument wouldn’t we still have boy chimney sweeps, slavery and slum housing for workers? For example, didn’t the altruism and pioneering standards of Cadburys and Rowntrees help them become “better businesses” and hence make bigger profits too?

At BASDA we are helping the software industry take the initiative in the green debate and it would be great if we could join with the accountancy profession to do this. Software is the engine which power today’s business processes from order taking, purchasing, manufacturing and distribution through to accounting and audit. It is in both the software industry and accounting profession’s interest to make sure that the move to a greener global economy can actually be achieved in a timely, cost-effective, practical way – that doesn’t impact profits and growth.

In effect that means helping set standards, lobbying for the right legislation, demanding consultation and practical implementation times and minimising unnecessary differences in country-specific requirements. Whether an individual or organisation views these as ways to drive revenues, reduce costs or to become a better business does not really matter.
Shouldn’t the IT and Accounting professions set the pace here so that we do not get ill thought out legislation, differing reporting standards and overnight implementation requirements? For those who do not remember European Monetary Union’s start up, the UK’s “will-we, wont-we join” and the ludicrous currency triangulation conversion rules – maybe the expensive tick-in-the-box Sarbanes Oxley exercises and overnight VAT changes will be fresher in the memory?
As Rob says, “environmentalism is a personal moral choice (unless it becomes law)”. Everything that BASDA is hearing from the EC down is that legislation will not be far away. Being at the heart of the debate is the only sensible place to be and some would say that the business software providers and accountants should be driving the debate on this issue."

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