Global economics itself is a major driver for applying accounting to climate change. Rising utility costs are a factor, but the economic downturn and global competition have created further demands for operating efficiencies.

Aside from fuel savings, businesses are now examining investment in new technologies, plant and equipment requiring rigorous financial and strategic appraisal provided by management accountants. One example of the benefits from investing in steam-valve technology is demonstrated by Compass’s management accounting team to their NHS Trust client (see case study at www.cimaglobal.com/sustainability). Thirty-six percent of the respondents who have cut back on environmental programs during the downturn may be missing out on opportunities for long-term cost savings from projects ostensibly designed to further a sustainability strategy.

Eighty percent of the respondents think that the finance function should be involved in climate-change initiatives.

Primary drivers for implementing climate-change initiatives

Our survey showed compliance and conformance to be significant drivers for climate-change initiatives, with just 29 percent saying that competitive advantage or performance alone was the primary driver although regionally the percentage ranged from 14 percent for Australian respondents to 64 percent for Chinese ones.

But in many cases, it’s not as simple as drawing such clear distinctions.

“Carbon is raw material and energy—and they both cost money,” explains Chris Harrop, Marshalls. “We all need to be saving as much money in the current economic downturn as possible. More people are actively seeking environmentally and socially beneficial products, so consumers are pushing, too. And both the government and the key stakeholders are pushing us to reduce carbon footprints, improve ethical sourcing, responsible sourcing and improve biodiversity. So, we either get on with it or it will hit us in four or five years, and the costs of implementing then will be far, far higher.”

Cima has found that companies are at vastly different stages in their sustainability journey, often driven by the historic degree of regulation of their business, stakeholder and consumer pressure, innovation—and sometimes the personal ideologies of their CEOs. The range of motivation—and benefits—often depends on the sophistication of an organization’s approach.

The degree of adoption for some sectors may have been influenced by the early recognition of the likely value-creation opportunities or value at risk—calculations made by management accountants. Clearly, the opportunities to exploit their skills in sectors only now facing up to the risks, costs and benefits of climate-change action are huge.

Barriers to change

Cima is keen to understand why finance professionals aren’t more involved in climate-change management in many organizations and why more organizations aren’t taking concrete steps to manage, mitigate and adapt to climate change. Worryingly, only 29 percent of the respondents to our survey agree that climate change poses a significant risk to their organization.

“There is not enough being done to raise the profile of this within the business,” said one respondent. “We have started to bring our thoughts on to climate change, but only for new business not for current operations,” said another. A third summed up one of the biggest barriers to action: “Other priorities push such issues to the back seat.”

For the finance team, this creates a two-layer problem. First, will the organization and its people commit to a rounded and forward-thinking view of climate change? And second, will they see the value in applying management accounting skills?

On the latter question, there is cause for optimism. A key barrier to taking climate change seriously is the need for discipline and robustness around the measurement of the problem, something that the finance function can bring to the issue.

And although on a global basis, finance teams are least likely to have a formal role in climate-change policy implementation (30 percent in our survey), in some countries, finance professionals are more deeply embedded.

So while in the UK it’s 44 percent and in Ireland just 23 percent, in China, finance functions are more likely to have a formal role in implementation, according to our survey.

We discovered several further key barriers to both acceptance of the need for action and of the role management accountants can play.

This regular weekly column from the UK-based, 90-year-old Chartered Institute of Management Accountants, or Cima, is meant to expand and enhance the diversity of views on current issues in the financial world, which has been facing some of its toughest challenges the past few years. Cima officers and members will take turns writing the Monday column. Cima is the organization behind the Global Business Challenge, meant to test the strategic business skills of students globally, part of Cima’s vision to develop future talent, and targeting university undergraduates.