RISCPA at forefront of sustainability discussion

Surely, you have heard the term, “sustainability.” Over the years, it became a buzz word of sorts. Its meaning initially connected to our environmental consciousness, but is now a broad term.  It’s an important concept that has found its way first into the mainstream of public discourse and the business arena.

Michael Kraten, an Associate Professor of Accountancy at the Providence College School of Business, explains that as a discipline, “sustainability” has existed for decades, but has now captured the attention of business leaders who understand the proverbial big picture.
“Over the past decade, it has emerged into the forefront of business,” he said.  “COSO’s (Committee of Sponsoring Organizations of the Treadway Commission) model of Enterprise Risk Management (2004) and the global financial crisis (2008/09) demonstrated that our greatest financial challenges often feature social and environmental implications.”

Sustainability is connected directly to the success of a company as it involves the need to think about long-term financial, environmental, and social effects that a business decision can make.

“A new business unit will only be sustainably profitable if we can maintain a productive work environment that attracts and continues to employ skilled professionals,” said Kraten.  

It is a topic that has become very important to RISCPA as they’ve created a task force to study it more closely.  Kraten has played a big role in those discussions.

“Our work thus far has been focused on CPA firms that are building sustainable service practices,” he said. “We are now expanding our focus to other organizations that are building sustainable business models.”

Michael T. Tousignant, CPA, Director of Accounting and Auditing at KRL (Kahn, Litwin, Renza & Co.,Ltd.) in Providence, is a member of RISCPA’s task force. He believes an effective CPA takes his or her client beyond the numbers and that incorporating the importance of sustainability is one way to do that.

“CPAs, trusted advisors can help businesses understand and measure how sustainability practices can save money, develop more engaged and productive employees, and increase investment opportunities,” he said. “Understanding the importance of how these intangible assets affect the bottom line of businesses can enhance its value. Although these assets are not found on today’s balance sheet, they are measurable. Understanding the value and presenting these assets to investors, banks, employees and the community at large will enhance brand image, reduce expenses and position the business for greater success.”

The idea of sustainability is saturated with research about how to do things in the most environmentally prudent way and how to incorporate that thought process in a company’s mission to ensure long-term success.

“There is a misconception that sustainability is some kind of EPA dictate which could be costly and have no economic benefits to the business,” he said. “What the research shows is that a company that deploys sustainability concepts actually increases its enterprise value and consequently increases its profitability of future success.

Tousignant suggests that research being done on sustainability could result in a set of standards that could evolve into the norm for best practices in the business community.

“I can very much envision a time when CPAs not only opine on the financial statement numbers but also a set of ‘sustainability standards’ that are generally accepted by the market place,” he said.  

It is an exciting issue and one that RISCPA intends to pursue. Long-time RISCPA member Jim Morrison, CPA, and Chief Financial Officer at Teknor Apex Company, serves as a representative of the AICPA with the CIM A Council in London.  During a trip to London In April, Morrison planned to discuss the sustainability issue and RISCPA’s interest in it, with CIMA representatives.

“I know that CIMA is deeply involved in what is called ‘Integrated Reporting,’ which tries to integrate the human element into the financial reporting of companies,” said Morrison.

Morrison believes there may be an opportunity for collaboration between the two groups in the future.