“Our starting point is to appreciate that everything becomes public,” Roger Spitz, futurist, author and President of consultancy Techistential, told the ICAEW Climate Summit in November 2023. “Absolutely nothing remains private and confidential, whether it’s bank statements or wealth management teams. And the digressions will stand out…This is our context of radical transparency, traceability and accountability.”

The transition in the past five years or so from shareholder primacy to stakeholder capitalism has brought greater expectations of transparency and accountability. “You’re interacting with much broader ecosystems, where the lines between responsibility in the legal sense and expectations may be becoming more blurred,” Spitz said.

Accounting standards, regulations, organisations and economies have, to date, been focused on complicated, rather than complex, change, he explained. Complicated is linear and predictable, in a reasonably controllable environment. “Complex means there are a lot of interacting drivers that are basically dynamic and in flux themselves. You can only evaluate and appreciate retrospectively what the impact is of a change you’ve made. And there might be no right answers at a particular point in time.”

Measuring impacts

One challenge is that sustainability is quite a conceptual term; knowing what actions to take or prioritise is tricky. Hannah Keartland, Outsourced Chief Impact Officer at consultancy Keartland & Co, told the summit that the term ‘impact’ can be much more tangible. 

“Every single thing we do has an impact on people, communities, the environment and the natural world, and that impact can be positive or it can be negative, it can be intended or can be unintended,” she said. “The thing is that these impacts can be observed and they can be measured. The numbers here might not be financial numbers, but a lot of the skills required in measuring impacts are those that accountants have in spades.”

This provides a massive opportunity for professional accountants to use their analytical skills to identify and unpick these different impacts. Their measurement and estimation skills can put a number on different types of impact. “Identifying underlying assumptions, ensuring that any comparisons are comparing apples with apples rather than apples with oranges – which we see a lot in the sustainability space – and also supporting the decision-making,” Keartland added.

Looking beyond financial value

At forestry company Forico – the largest private land custodian in Tasmania and Australia – CFO Rayne van den Berg put those skills to the test. “The exciting bit for me as an accountant is to take what we measure normally in a financial sense, all those tonnes and litres and hectares, and give them value for those natural assets as well,” she said.

The company has been addressing its direct and indirect impacts on nature and re-evaluating its strategy to think of itself as “more than just a timber business, but essentially a custodian for all of the natural capital assets that we looked after, whether it was carbon or water, biodiversity, conservation and the broader community”.

She added: “Our job is about preserving and creating value that’s fundamental to our profession. To do that we have to look beyond financial value. It’s changing conversations in the boardroom. It’s been fundamental to some of the strategic responses we’ve had about looking at new markets, by not just looking at short-term profit. But long-term value is about protecting those assets to make sure they are truly sustainable.”

Accounting for carbon

The climate agenda provides opportunities for professional accountants working in practices as well as those working in business, particularly when it comes to accounting for carbon. Taylor Fox-Smith, Partnerships Lead at net-zero software company trace, told the summit that carbon accounting can help businesses grow.

“We can assume that half of the small businesses you are currently working with are calculating emissions,” she said. “That might be with an open-source set of emissions factors from the UK government. They might be working with a software provider.”

That’s 50% of your clients whose business has gone outside your firm, she explained. “There’s a huge opportunity here in a retention piece in getting additional value from the back book you already have.”

Carbon is also a growing risk for businesses to manage. Carbon footprint is something that every business will need to have measured in the next five years. It’s the first step to net zero, she added. 

Ira Poensgen, Technical Lead at HM Treasury’s Transition Plan Taskforce Secretariat, told the summit that there is a growing level of understanding across the private sector that climate-related risks and opportunities are, in many cases, material to firms. “As part of a response to that, many companies have started to come out with net-zero pledges and climate targets. 

“This has been an important mental step change in the private sector, but a pledge without a plan is little more than a wish, and this is where climate transition plans come in.”

The transition to net zero

Poensgen explained that professional accountants should take a strategic and rounded approach to transition planning, where they think through actions they can take across three different channels: decarbonising across scope 1, 2 and 3 emissions, managing climate-related risks and opportunities, and enabling economy-wide transition, not only to lower greenhouse gas emissions, but also to increase climate resilience.

“What’s really important for thinking about change and more long-term perspectives is what happens beyond surface events, what happens in terms of disclosure, which becomes more transparent and authentic in terms of seeking to incentivise the system in a way that’s helpful and relevant for energy transition,” Spitz added.

Organisations need to incentivise climate action and relevant disclosure is essential, he said. “We like to think of businesses as a system. What’s above the surface is the standard: what does something cost, what’s its brand or services, and from that there are the various accounting elements that get derived from that.” 

Below the surface is where stakeholder perspectives come into play, he explained. As COP28 meets to discuss a nature-positive, socially just transition to net zero, it’s clear professional accountants have a huge role to play in meeting this target.