On April 22, to celebrate Global Earth Day, IFAC and ACCA organized a joint session as part of ACCA’s Sustainability Half-Day Conference, during which global experts discussed the role of the finance function in climate transition planning, focusing in particular on the key aspects of governance as a driver for change especially at the board level, and the role of the accountancy profession.

Watch the recording of the session here (prior registration is necessary – click on Sustainability half-day conference – The role of the finance function and governance in the climate transition.)

ACCA & IFAC Virtual Earth Day conference

 

While many organizations have made public emission reduction commitments, not all have a plan to deliver on their promises or a roadmap to show how they will chart their progress. This was highlighted by a recent ACCA, IFAC and PwC report, The role of the CFO and finance function in the climate transition: driving value and sustainability.The role of the CFO and finance function in the climate transition: driving value and sustainability. Based on a survey of 1,000 senior finance professionals around the world, the report reveals that almost half of respondents have yet to produce a plan for reducing their carbon emissions, and nearly 70% of those respondents without an emissions plan alarmingly say they currently have no intention of developing one.

Emmeline Skelton, Head of Sustainability at ACCA, presented the key findings of the report and   set the scene: “Strategies and transition plans are vital for companies to combat climate change, remain successful and meet stakeholder expectations, and the finance function has a key role to play in transition planning.”

But to elevate their role, finance teams need to develop the right skills and expertise in this area. “For CFOs this means that balancing the short-term operational priorities whilst simultaneously upskilling and equipping the team to support the wider organization’s net zero initiatives longer term is a critical imperative,” she noted. 

Regulatory and reporting drivers for emissions and transition planning

Ira Poensgen at Earth Day Virtual conference

 

Ira Poensgen, Technical Lead of the Transition Plan Taskforce Secretariat said, “Transition plans will be an important part of climate related disclosures going forward. There is a lot of work going on internationally, but while the landscape can seem a little bit complex, it's not impenetrable.”

“With the incoming sustainability reporting standards — at global level with the ISSB standards, or regional level with the EU Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) — regulators and standard-setters are increasingly saying that the forward-looking piece in terms of how companies are planning to grapple with the transition is relevant information And that's really where transition plans are coming in,” she added.

Ira Poensgen highlighted how the Transition Plan Taskforce (TPT) gold standard for private sector climate transition plans—in particular the TPT Disclosure Framework—can help companies get started.

She offered four recommendations:

  1. Engage your senior management and talk to your board. A clear tone from the top is needed to guide you through that process.
  2. Think from the very beginning about how you're bringing all parts of the company into the conversation—your sustainability team won't be able to develop and implement a credible Transition Plan in isolation.
  3. Don't expect to have all of the answers in your first plan. The first disclosure is the start of a journey.
  4. Start earlier than you think you have to—there will be challenges, uncomfortable and hard discussions internally; make sure you have the time to work through those before requirements start coming down the pipeline.
Emmeline Skelton Stathis Gould and Alan McGill at Earth Day Virtual Conference

 

Key aspects of governance as a driver for change

During the discussion moderated by Emmeline Skelton,Stathis Gould, Director of Member Engagement and Professional Accountants In Business at IFAC and Alan McGill, Global Head of Sustainability Reporting & Assurance at PwC, underlined that robust transition planning and execution require effective governance and board accountability & oversight. They also discussed the key elements that would make governance fit for delivering the change needed to transition to the low carbon economy.

For Stathis Gould, “There is a huge opportunity and responsibility for the accountancy profession to influence sustainable transition through enabling governance practices. Most boards around the world have at least one board member who's a professional accountant.”

He said that sustainability needs to be top of mind. If we want to drive forward sustainability and sustainable development as a performance rather than a compliance exercise, we need that to begin with leadership – the “tone at the top”--starting with the board embedding sustainability into purpose, strategy, risk & performance, and reporting.

“And CFOs and finance teams have a big role in driving decisions, aligning priorities and resource allocation to sustainability and other objectives, and connecting sustainability and financial information, processes and systems,” he added.

Alan McGill pointed out that “to be able to deal with transition plans, boards need to acquire new skills, new knowledge and experience to strengthen their ability to really understand the issues at stake and challenge the business. Boards also need to think about their structure: how climate is being integrated into the overall organization and how transition plans play into that. Timing and incentivizing, with bonuses, climate-related performance, and stakeholders’ engagement will be crucial to drive the right behaviors in the business,” he underlined.

The role of the accountancy profession

As a public interest profession, accountants enhance transparency. They have a critical role in de-risking capital markets and organizations, unleashing finance, seizing transition opportunities, and mitigating risk.

“With increasingly important issues such as biodiversity, carbon waterways, social issues, and more, what a fantastic time for the accountants to use their curiosity, look at different things — and not just the financial flows. They can get involved to understand how the business is going to transform,” said Alan McGill, “and they've got existing transferrable skills to be able to do this.”

One of the critical areas that accountants—as board directors, or as finance and business leaders—really bring in this process is the integrated thinking mindset.

“That starts with a clear and widely understood governance structure that drives collaboration and integrated thinking across the business, breaking down silos to drive forward operational integration and connectivity. It’s thinking about how we drive a systemic approach to sustainability integration into core board and management processes and decision-making, such as strategy, risk, investment appraisal — including leveraging green finance opportunities — and reporting, as well as understanding how impacts and other forms of capital such as dependencies all relate to each other,” Stathis Gould explained.

Both Gould and McGill highlighted that sustainability and digital transformations go hand-in-hand and noted the critical role that technology can play in analyzing more complex data, and the interactions between those data points.

They also stressed that for some accountants, sustainability reporting will require some shifting of their own mindset. “It's important for us to help change the narrative, moving from ‘What is the cost?’ to ‘What is the cost of inaction?’,” said Stathis Gould.

Regarding assurance, they both highlighted the global move towards sustainability assurance, noting both the opportunities and also the double challenges of recruiting finance professionals with adequate sustainability knowledge, and the pressure to educate and hire quickly.

“It's important and we need to get it right, otherwise there will be real issues around the integrity of the data. As a result of this, qualifications around data and information and restatement, which have historically not been a feature of financial audit, might become relatively commonplace,” underlined Alan McGill.

Stathis Gould concluded that partnership with and between professional accountancy organizations (PAOs) like the ACCA is important to help support and train finance staff on their learning journeys.

USEFUL RESOURCES

IFAC – ACCA - PwC

IFAC

ACCA

Reports:
Courses:
Capability development framework:

TPT

Disclosure Recommendations
Key supplementary resources

 

Cecile Bonino
Cecile Bonino

Principal, Global Engagement

Cecile Bonino is Principal of Global Engagement for IFAC. She bridges global organizations' relationship management, policy support, event management, and brand awareness. A lawyer by education, Cecile has 20 years of experience in public affairs and public relations. Before joining IFAC, Cecile worked for 13 years at ACCA, where she headed EU Affairs and the ACCA Brussels office, working with European decision and policymakers, Media and key influencers, as well as global organizations. Prior to this, Cécile worked as a consultant in financial services, energy, environment, and climate change at Weber Shandwick and as Environment and Legal Affairs adviser at the European Landowners Organisation. At the beginning of her career, Cécile also worked at the DG TRADE of the European Commission, the DG Development of the College of Europe, and the law firm, Gide Loyrette Nouel. In 2012, Cécile won the ‘Public Affairs Professional of the Year’ prize at the European Public Affairs Awards.

Stathis Gould

Director, Member Engagement and PAIB

Stathis Gould is responsible for IFAC member engagement and leads IFAC’s advocacy for professional accountants working in business (PAIB) and the public sector. A key element of his work is developing thought leadership and guidance in support of enhancing the recognition of and confidence in professional accountants as CFOs, business leaders, and value partners in the context of sustainability/ESG, data and digital transformation, and other emerging business trends and issues.

Before joining IFAC, Stathis worked at the Chartered Institute of Management Accountants (CIMA), where he was responsible for planning and overseeing a program of policy and research that promoted and developed management accountancy. Prior to serving the accountancy profession, he worked in various roles in the private and public sectors in the UK. There, Stathis delivered financial and performance management in the National Health Service and worked for a technology company responsible for delivering the localization of software and content across the globe.

Stathis holds a BA in European Business Studies, an MBA (with distinction), and a postgraduate certificate in Environmental Management, Economics, and Policy. He is a member of the Institute of Management Accountants.

Emmeline Skelton
Emmeline Skelton, Head of Sustainability, ACCA

Head of Sustainability, ACCA

Emmeline is Head of Sustainability at ACCA. She has a wealth of experience as a sustainability practitioner including over a decade at PwC, and within the UN Global Compact where she was involved with production of the SDG Compass.