My Lord Mayor, Ladies and Gentlemen, I am delighted to see so many leaders here today from the business and financial community, not to mention so many representatives from government and civil society.
I am also immensely grateful to you all for taking the time to be here this afternoon even if it's only out of curiosity! Well we are here today to talk about an issue in which I have been happily “meddling” (as some people seem to persist in describing it!) for the last very nearly ten years in other words, how finance professionals can help to create a sustainable and resilient economy, and so it is enormously encouraging that we have such a high-powered audience. What we need most in this area, I think, is strong and decisive leadership, so I am hoping I can persuade you to help a little bit in this regard!
As it is probably only too obvious that I am certainly no financial expert, it will no doubt be a considerable relief to you that I will be followed by John Rogers, Pierre-André Terisse and Rolf-Dieter Schwalb this afternoon, all of whom will share examples of the vital role finance teams can play in practice. So if I can’t convince you, I am sure they can! As many of you already know, I happen to believe that business is on the front line of the battle to create a world where we can provide enough for all within the limits of our planet. However, it must become a battle that we all fight on the side of Nature anyone who believes that we can win a battle against Nature is sorely mistaken. As Shakespeare put it so aptly, “He is mad who trusts the tameness of a wolf.”
Instead, we have to take drastic action now to work in harmony with the Earth’s natural systems. Otherwise we risk many devastating conflicts around the world. Just think, for instance, of the current desperate situation in Syria. It was little reported, but a severe drought for seven years decimated Syria’s rural economy in the run up to the conflict. It drove many farmers off their fields and into the cities where people were already struggling with food shortages, increasing the social tensions that eventually exploded. There is a direct connection between what we do to the Earth and what we do to each other, and we have to realise how serious it will become if we do not act now.
Frankly, the older I get the more anxious I become about the dangerous experiment we seem to be conducting with the one and only planet we have, which we are presently testing to destruction. We are facing a terrifying combination of risks the pollution and over-consumption of finite natural resources; the very real and accumulating risk of catastrophic climate change; unprecedented levels of financial indebtedness, and a population of seven billion that is rising fast. The world is not even feeding its current population, let alone the nine or ten billion now expected by 2050! No matter how you try to counter the arguments, the sums just do not add up, and to an audience largely of accountants, surely that must ring plenty of large alarm bells.
Am I alone then in wondering how it is that, in a society based entirely on an evidence-based approach to everything we do, and despite the overwhelming scientific evidence of climate change and the enormous risk multiplier it represents, such evidence is discarded and ignored? Such, presumably, is the power of a predominant ideology that it can arrogantly dismiss the stark and alarming evidence as "an inconvenient truth," turning it into a falsehood or, at worst, a conspiracy to undermine the prevailing ideology. The analogy here of Sir Winston Churchill's unheeded warnings in the run-up to the catastrophe of World War II comes vividly to mind.
In stark financial terms, all the evidence demonstrates a simple fact: we are failing to run the global bank that we call our planet in a competent manner. We no longer just take a dividend each year; instead, for some time, we have been digging deep into our capital reserves. And, after the near collapse of our entire financial system, we all know that such excessive risk-taking can cause immense havoc. The ultimate bank on which we all depend the bank of natural capital is in the red; the debt is getting ever bigger and that is reducing Nature’s resilience and considerably impeding her ability to re-stock. It leaves us dangerously exposed.
The “bottom line” of all this is, surely, plainly obvious. We are, to a large extent, consuming our children and grandchildren’s inheritance in order to fuel today’s short-term, untenable, economic growth.
Now I know there may be some in the room who doubt this, but it is perhaps worth reflecting on an observation made by Martin Wolf recently in the Financial Times. He said that “Sceptics argue as if uncertainty means that the right thing to do is nothing.” He goes on to quote William Nordhaus of Yale doyen of climate economists who argues in a new book that the cost of limiting the increase in global temperature to two degrees centigrade would be just 1.5 per cent of global output, provided the right action was taken, which is only half a year's economic growth...
All too often the mainstream financial and accounting system focusses on short-term financial results. It does not adequately reflect the dependency of our economic success on the health and stability of our communities and of the natural environment. They are all too often a forgotten part of the equation.
I know for many finance professionals, “sustainability” is a term that immediately suggests the kinds of measures that frustrate the maximisation of profit. It is a “nice-to-have,” but it has no seat at the Boardroom table. And yet, the opposite is true. There are clear links which demonstrate that those businesses addressing environmental and social issues deliver improved commercial returns. So, the bottom line is that sustainable business equals good business.
I am not suggesting that this transition will be easy. The most important ones never are. And that is why there is such an urgent need for leadership and collaboration if we are to create the durable, resilient kind of economy we so desperately need.
From this perspective, I am delighted to announce the creation of the new “Accounting for Sustainability Chief Financial Officer Leadership Network.” This is a group of C.F.O.’s who are coming together to develop the tools and guidance required for all C.F.O.’s to embed sustainability within their businesses and to raise awareness and engagement within the wider C.F.O. community. I have been lucky enough to meet many of the members of the Network and I am enormously encouraged by their personal commitment and enthusiasm. I know they will be a powerful force that will help reshape the business models of the future. This is the first time a C.F.O. Network focussed on sustainability has been brought together and I can only say I have very high hopes for it! We will be expanding the Network globally during 2014, so be warned there is no such thing as a free mince pie following this Forum!
Importantly, the C.F.O. Network will add to what is already a powerful global Accounting Bodies Network established by A4S in 2008 and which now includes around two million professional accountants in other words, two thirds of accountants worldwide. These accounting bodies are now training the next generation of finance professionals to incorporate sustainability considerations as part of their day-to-day activities, and I am delighted that many of these organizations from around the world are represented here today.
Meanwhile I am very pleased to say that A4S and the University of Cambridge Programme for Sustainability Leadership, in association with the World Business Council for Sustainable Development, have created a new financial leadership seminar attended by a number of you, I believe, over the past two days, which, my spies tell me, was met with much enthusiasm (but they may have given me duff information!).
So Ladies and Gentlemen, as you can see, 2013 has been a busy year for my A4S project and I am greatly heartened that we seem to be making real progress, aided over the past year by our hard-working secondees from Deloitte and PwC.
The wider influence of the project also continues. The first framework for integrated reporting was launched on Monday, which was the result of four years of work by the International Integrated Reporting Council, set up by my A4S Project and others back in 2010. I am also encouraged by the success of the T.E.E.B. for Business Coalition, of which my A4S Project was a founding member. The Coalition is now bringing companies together with global accounting bodies and other experts to develop harmonized methodologies that value and account for natural capital mechanisms that can be used by the finance community. This will allow better decisions to be made; ones that reflect the fact our economy depends absolutely upon Nature, not the other way around. Believe me, if we can solve this problem, we are half way there...
A4S is now linking all of this great work on improved measurement and reporting to the efforts of national governments and the international community, where the aim is to align corporate measures of progress with those at the national and global level to make sure that we do all really “Measure What Matters”.
So to conclude, as you will hear from the C.F.O.’s shortly, this is not about a choice between making money or “doing the right thing.” It is actually about recognizing that “business as usual” is becoming unsustainable and that those organizations who start to develop resilient business models now will benefit in the long-term. Many of you here, I know, are at the helm of large multinational businesses. It is surely time to steer those organizations on a different course.
Individually, I know that many of you are doing remarkable things, but, dare I say it, collectively this is not enough. And yet you have the capacity to be a tremendous global force for change and I know that you are more than able to rise to the challenge. The creation of the Accounting for Sustainability C.F.O. Leadership Network is surely proof that you are determined to maximize your influence.
Not least because, surely, when you look back in ten years’ time at your work as business leaders, you will want to feel you have made a real difference to our collective future security and given some hope of prosperity to your grand-children. So, when you return to your offices and boardrooms next week I would just ask you all to think about what you can contribute to our move towards a sustainable economy.
And perhaps also remember, at the same time, what Charles Darwin said: “it is not the strongest of the species, nor the most intelligent that survives. It is the one that is the most adaptable to change”.
Thank you Ladies and Gentlemen.