The aim is to bring together all of the key stakeholders working on valuing natural capital operating on the principle that a challenge shared is a challenge halved. 

Ladies and gentlemen, I am very pleased to welcome many of you back here today, but also to see so many new faces, which I hope shows the growing interest in how we can each play a part in moving towards a more sustainable economy.  Frankly, I cannot stress enough how urgently we need to do this.  I was quoted recently as saying I am desperately impatient.  Well, I am.  We should all be.  We are rapidly running out of time to adopt an approach that reduces our impact on the Earth’s capacity to sustain us all.  I am afraid the damage we are doing is now beginning to bite.  I was struck by a comment at the recent Climate Change conference in Doha.  Someone said that “Climate change was due to arrive tomorrow.  Unfortunately, it’s arrived today.”  Although, the point is, it is not just climate change we have to deal with; it is a multitude of factors resource scarcity, energy security, food security, unsustainable population growth and globalization.  These pressures all render “business-as-usual” an impossible option.  And yet the needle seems stuck in the paradigm...! 

The topic of today’s discussion is what all of you can do, as the finance and accounting community, to “future-proof” our economy?   I am sure I don’t need to remind you that I am no expert in matters of finance and accounting.  I am, apparently, as various organizations of the Media seem to insist, an interfering busy body!  But I suppose this forum shows that being a busy body works! However, as some of you may know by now, I have been keen for many years to highlight that your community sits on the front line of developing a genuinely sustainable approach to business.  So, I am very pleased to welcome speakers who are much more qualified to discuss these critical issues than I am.  I am particularly grateful, therefore, to Peter Bakker, to Christianna Wood and Jean-Marc Huët who, I am sure, will inspire you today.  I would, though, like to offer you a little food for thought, particularly if there are any sceptics in the audience who feel the need to chew more extensively on what may seem to be indigestible matters!  I would like to explain why every one of you should consider having these issues at the top of your “to do” list when you return to the office tomorrow...

We can all see that the pace of change in the world is increasing.  The way the physical environment is changing is matched by enormous changes to the structure of our society much of it for the good, of course.  Global poverty, for instance, has decreased more in the last 50 years than it did in the previous 500.  But, on the debit side, we have to acknowledge that because we have been pursuing economic growth as if it was an isolated goal, we have done alarming damage to nearly every element of the natural world you care to think of.  We continually fail to see that the health of Nature’s capital and the resilience of the fabric of society are interconnected and underpin our continued economic prosperity.  In fact, I find it increasingly worrying that so few people seem able to see the fundamental problem.  To use an accounting term, we are living off the Earth’s natural capital rather than the income derived from that capital and, unfortunately, there is no global C.F.O. to keep us in check!  So we sit by and watch as the biggest bank of all - in other words, Nature - heads towards catastrophe.  Over-dependence on fossil fuels, over-fishing, over-stretching the capacity of the soil; rapid and unsustainable population growth; you name it, we’re at it.  And it’s a very dangerous game.

As many of you will know, the daunting challenge of building a better world that provides for a better life for everyone, all within the environmental constraints of our planet, is one that I have been concerned about for many years.  And now that my first grandchild is on the way, even more so! Unfortunately, my concern has been portrayed as purely environmental when I have been at pains to point out just how significant these issues are to economics, business and long-term security.  That is why I set up my Accounting for Sustainability Project eight years ago to demonstrate that extending decision-making and reporting to include social and environmental factors in a systematic way can add real value to your organization and is, in fact, the only pathway to success.  

A4S recently commissioned some research into what would drive organizations towards more future-proofed decision-making and the results make striking reading.  Many organizations clearly feel that the case for why these issues are relevant to Board-level decision-making has not yet been made.  There is no shortage of alarming in fact, frankly terrifying statistics about our changing world that should make that case, but perhaps it is not always so clear to organizations what these facts mean for them.  Just last month, The World Bank and the Pottsdam Institute published a report reminding us all of what the dire consequences would be if we continue on our current path and, by 2050, let temperatures rise by an average of 4oC above the levels they were before industrialization dire for human wellbeing, dire for the natural world and, thus, dire for our economy and the ability of your organizations to create value.  But the challenge is how we translate these “big picture” studies into the risks and opportunities for individual businesses and public sector bodies.  

We certainly need to focus on the opportunities that this present challenge offers us.  And there are plenty of them.

You are probably thinking that 2050 is a long way away.  No doubt by then none of us will be doing the same job we are doing today!  But I fear it is closer than you think and the trick is to start thinking and doing things now rather than waiting to run into the proverbial brick wall.  Interestingly, there are plenty of businesses that were sufficiently mindful of the problems years ago and acted early.  Either they reduced their dependence on resources and their impact on the environment, or they developed products that now drive a sustainable economy, and they are already seeing the fruits of these new endeavours.  So, perhaps it is wise to consider what could happen to your organizations if you do not lift your eyes to the changing global context.  That is why I hope that all of you in this room see this as an opportunity an opportunity for imagination and innovation in how we might evolve business models, decision-making processes and mechanisms so that they continue to be fit for purpose in this new economic era. 

At the moment, it seems to me that the financial model we have could be much more appropriate to the circumstances we face.  It is currently topsy-turvy, if you think about it.  We tend to reward those who use most of the free resources from Nature and who pollute our environment, when we should be rewarding the organizations that protect our dwindling natural resources or seek to reduce atmospheric pollution.  And shouldn’t the difference be reflected in the price of what we buy and consume?  At the moment these costs often do not appear in anyone’s books.  Thus, we are led to think that the cost of draining a wetland, destroying a rainforest or pumping tons of carbon into the atmosphere is zero.  But what supply chain can survive these pressures?  Almost all of these costs, for which future generations will pay dearly (in order words, your grandchildren and mine), are given no value in accounts.  So the challenge for all of you in this room today is to design a system that reflects the true economic reality of the way organizations generate value.  And, if I may add, how to create an effective market mechanism for natural capital one in which the ‘public utility’ services provided by Nature and her major ecosystems are properly valued and paid for.  I have yet to hear of any suggestions as to how such a market could be established, but it surely needs to be, and fast. 

We have to face this new world with full and complete information that will help us reach balanced conclusions so that we take informed decisions.  The finance and accounting community is in the perfect position to innovate in order to gather better and more comprehensive information about the way organizations operate so that you can use this to help future-proof our economy.  This will, in turn, result in improved risk management for organizations and society as a whole. 

Thankfully, I do sense there is growing recognition that the potential risks of not considering the long-term impact of our actions on a global economy are far too great to ignore and the number of you that support the work of my A4S Project and continue to come here every year may be a sign that not all hope is lost!  If you are in any doubt about how important your role as the accounting and finance community is, and without wishing to steal his thunder, it is perhaps worth my repeating what Peter Bakker said earlier this year: it is “the accountants who are going to save the world!” and I’m sure you will hear more about this in his speech.

I share some of Mr. Bakker’s thinking and I am pleased to say that my A4S Project is continuing to spread this message throughout your community.  After the success of setting up the International Integrated Reporting Council, which we did in collaboration with the Global Reporting Initiative and the International Federation of Accountants and which is now leading the charge on Integrated Reporting, the project is currently focussing on internal decision-making and strategy as well as the wider economy, where I know there is still so much to be done.  

A4S is also proud to be a founder member of the T.E.E.B. for Business Coalition which aims to achieve a shift in corporate behaviour to preserve and enhance, rather than deplete, natural capital.  The aim is to bring together all of the key stakeholders working on valuing natural capital operating on the principle that a challenge shared is a challenge halved. 

In order to drive an enabling environment for change, the A4S team also attended the Rio+20 U.N. Summit on Sustainable Development in June to call rather hopefully! for alignment between business incentives, national and global goals and performance measurement systems.  Encouragingly, I now hear that there are a number of organizations and governments keen to form a working group to look at how to take this forward next year... 

In the light of all this, over the next twelve months my A4S Project will focus on three things firstly, it will articulate the business case for integrated thinking in a language that will resonate with the finance community to make this engaging; secondly, it will equip organizations with the knowledge, skills and resources they need to be able to future-proof decision-making; and, thirdly, it will help to build a more sustainable economy by driving change at each level of our economy to seek alignment so that these are all pushing in the same direction.

An important part of this is a new C.F.O. leadership network that A4S is setting up, which some of you met to discuss earlier today.  You will hear more about this from Jean-Marc Huët shortly but, believe it or not, a number of C.F.O.s have said to me how much they enjoy this annual forum as they see it as a chance to meet other C.F.O.s with an interest in this area.  However, they say it is a shame it only happens once a year therefore, this network is a chance for those looking at opportunities in this area to share ideas and lessons learnt along the way, so they can become visible leaders for the rest of the community.  

I am also delighted to announce that A4S in collaboration with Cambridge Programme for Sustainability Leadership (C.P.S.L.), of which I am Patron, will be launching a training programme for C.F.O.s next year which will hopefully repeat the success of the C.P.S.L.’s exceptional C.E.O. courses.  This work is also being supported by The World Business Council for Sustainable Development.

And I have not forgotten the investor community.  A4S, in collaboration with a number of my other charities, is planning an event in the City of London next Summer to look at the reforms that are necessary to our capital system to reflect the changing environment.  I am pleased that we are joined today by a member of the investor community, Christianna Wood, who I hope will say a little more about the work some of the major financial institutions are undertaking to integrate sustainability into investment decision-making. 

I hasten to say that all of this is made possible by our wonderful secondees from Deloitte, Ernst and Young, and PwC, together with A4S’s powerful Accounting Bodies Network which, I understand, now reaches nearly two million accountants in 176 countries and is helping to train the next generation of C.F.O.s and leaders as to why accounting for sustainability makes business sense.  And I am enormously grateful to those of you here today who very kindly took part in the research that forms the basis of the report released today, as well as to all of you who have given up your precious time to be here. 

So, ladies and gentlemen, in return for the promise of a mince pie or two at the end of this forum, can I urge the C.F.O.s amongst you to join the C.F.O. network and sign up to the C.F.O. training programme?  And can I ask you all to read the A4S report and consider if the strategic and decision-making processes within your organization are really fit for the new economic era?  For those of you who have already embraced this agenda, please enter the Finance for Awards to receive the recognition you deserve, or join the T.E.E.B. for Business Coalition which is looking at how to measure and value our impact on the natural world.  

All of this will require every one of us to work together to “future-proof” our economy, our organizations and, ultimately, our very survival.  Can our grandchildren rely on us or you?