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Accounting for Sustainability: A Charge to Professionals and Students

Guidance on reporting for students and sustainability professionals.

Submitted by: Martha Woodman

Posted: Jul 03, 2011 – 11:00 PM EST

Tags: accounting, environment, gri

 
Woodman

I’ve got a simple formula for you: sustainable business practices + reporting = continued improvement and growth = better business and a better world.

How do I know? For more than 20 years I taught college students about accounting. That changed in 2001, under the guidance of an inspirational colleague. Now, I’m excited to teach students not only about accounting, but about how accounting plays a key role in analyzing business’s effect on the environment. It’s an exciting time to be in the numbers world.

Yet, accounting and the environment is not a well-defined field. It’s very new, in much the same way that sustainability reporting is still young. We’re all still learning.  Fortunately, academia and organizations, like the Global Reporting Initiative, provide thought leadership in this space, for there are significant challenges present: first and foremost, cost and inclusion of sustainability reporting within a larger financial report.

For some companies, doing is more important than incurring the cost for reporting. For others, like Green Mountain Coffee Roasters (GMCR), reporting is a codified corporate practice. GMCR points to reporting as a tool that helps the company run its business better by not only helping it identify areas for improvement, but enhancing communications with employees to provide them with a greater understanding – and proof – of the company’s mission and vision.

Reporting is imperative, allowing companies to benchmark progress to show how engaging in sustainable business practices is beneficial to the triple bottom line. Likewise, reporting reveals when a strategy needs to be changed, a program revisited, a practice further explored for optimization. Reporting helps us get at the answers.

My charge to students and sustainability professionals is this: Educate yourself and then act. Here is grounding guidance to get you started:

Know How to Report. There are two areas for reporting: 1) Internal reporting to a company’s internal teams, whereby there is discussion on how a company is spending money and the environmental impacts of those decisions; and 2) External reporting to investors, suppliers, and other users of information; Socially responsible investing, a subset of the external investor audience, is a growing field with $3 trillion invested and managed in 2010 (Source: SRI). Investment reporting goes to institutional investors.  

Get Started. You know you want to start measuring and accounting for your efforts, but where do you go next? The Global Reporting Initiative has a very useful reporting framework for people looking to begin the process – a starting place that can be built upon in the future. You may also want to look to forerunners in the reporting space: Ben & Jerry’s, Patagonia, Seventh Generation, and Timberland.

Go Beyond Voluntary. Financial reports are required; CSR and sustainability reports are voluntary, which begs the question: why would a company choose to report on information that isn’t required, especially when there is a cost?  As corporate transparency becomes a more urgent issue among consumers, we will see reporting become a cost of doing business – a practice companies must engage in to stay competitive and maintain open conversation with internal and external audiences. (A recent report by Cone found that 85 percent of people indicated they would consider switching to another company’s products or services because of a company’s negative corporate responsibility practices.

Determine What to Report. It’s important to set goals and measure them, such as reducing one’s carbon footprint, waste water, toxic emissions, employee retention and social impacts. Choose what makes sense for your company and what reflects your corporate values. For example, Alcoa measures how many trees it plants every year and reports on aluminum recycling efforts.

Account for Externalities. What about environmental and social costs that are not incurred by the company? Environmental pollution and public health matters for example. Who pays for those? Some companies internalize the costs, and pass it on to the customer. This is a strategic decision that you need to make.

Let Your Company Values Inform Your Social Investing. As I mentioned, socially responsible investing is an exciting and growing space. Ask yourself: What would you screen funds for? The term SRI has a lot of different interpretations and there are hundreds of them, which makes it the perfect test of your business’s values.

Engage in a Third Party Audit. For information to have value, it has to have authenticity. The best way to do so is to be externally validated or audited. This is still a new practice in the US. In England, accounting firms are involved in validating CSR. I’m proud that one of my Sustainable Business Program graduates, Brendan LeBlanc, is leading the way in this space in the US through his firm LeBlanc and Associates.  

Get Schooled. There is huge job potential in the sustainability reporting space. In fact, our UVM School of Business commencement speaker was an investment banker who spoke to the potential of this field. Get in on the ground floor. I welcome readers to the Sustainable Business Program at UVM, where we discuss and analyze reporting in-depth.   

I look forward to the next chapter of sustainability reporting. I know it’s a key part of the equation for a better business world. I hope you will put that equation into practice.

This commentary is written by a valued member of the CSRwire contributing writers' community and expresses this author's views alone.

The opinions, beliefs and viewpoints expressed by CSRwire contributors do not necessarily reflect the opinions, beliefs and viewpoints of CSRwire.

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