CPA Bulletin

28 CPA Bulletin > February 2023 www.cpa.uk.net GUEST ARTICLE: 1 If you’re anything like me, whenever you hear the three letters ‘ESG’ your subconscious probably jumps to the Jackson 5 and finishes the line ‘...as easy as ABC’. But what is this latest TLA (Three-Letter Acronym) to appear on the Business Spiel Bingo Cards? ESG - or Environment, Social, and Governance to give it its longhand name - is the by far and away fastest growing strategic issue on board agendas, and no doubt the reason behind the CPA’s theme being squarely focussed on ESG at its 2022 conference. So we all need to get to grips with it quickly. We all sense the importance of finding a trusted set of consistent, comparable management information - particularly on the climate issues which are often not within the skill set of many board members and senior executives. And from a risk and compliance perspective, environmental, social and governance issues have been around since the very first business (probably manufacturing and selling stone wheels). But. And this is a big but! Perhaps the biggest issue that appears across companies of any and all size, and any sector, for non-executive directors who are keen to fulfil their assurance roles with confidence, is a lack of high-quality, benchmarked, management information. One of my colleagues at Sustainability First, who has decades of experience working across SMEs in NED positions, recently said: “I’ve lost count of the number of ‘KPI task and finish groups’ I’ve sat on and the number of discussions about the relationship between process metrics and ultimate strategic outcomes.” But what really stood out was his next point: “We spent a lot of time measuring what turned out to be the wrong things or measured the right thing but haven’t known what ‘good’ looks like.” And it gets worse (stay with me - I promise to end on a brighter note!), the things that external agents like lenders, auditors, grant givers, and regulators, look for aren’t always the same things that might help you to run your business efficiently and successfully! ‘Great’ I hear you say ‘what’s not to like?’ go the understandably sarcastic calls of busy business leaders who are working hard to take on a recession, and fight their way through to the next boom years of our rollercoaster economy. Take comfort that we’re all in this together With thanks to that same colleague, who has already taken great strides in ESG within the housing association industry, I can share some useful insights that I hope will be of use and value in this sector too. It may be of some comfort to know that, the construction plant industry is not alone. The energy and water utilities sectors (who we work closely with at Sustainability First), for example, have similar issues. Equity owners often control where things will head next, and they regularly want metrics that can be compared across sectors. The number of different and unrelated returns they are asked to complete creates a big distraction from getting on with ‘the real day job’. Take control and set the standard This is one of the main reasons why I proposed during the CPA conference panel discussion on the need for the sector to take control of your own ESG destiny! Create your very own Sustainability Easy Peasy ESG-sy How to win at ESG, boost your company’s profitability, and secure talent in the marketplace by David Murray, Executive Director, Sustainability First