1 00:00:05,650 --> 00:00:07,720 Hello again, welcome back to Count Me In, 2 00:00:08,070 --> 00:00:12,000 IMA's podcast exploring the world of business from the management accountants 3 00:00:12,001 --> 00:00:12,834 perspective. 4 00:00:12,980 --> 00:00:17,120 I'm Adam Larson and today we are discussing exciting new thought leadership from 5 00:00:17,380 --> 00:00:20,560 IMA, which shows how management accountants are on the front lines, 6 00:00:20,820 --> 00:00:23,000 making businesses more sustainable. 7 00:00:24,090 --> 00:00:27,830 The name of the report is Management Accountants Role and Sustainable Business 8 00:00:28,070 --> 00:00:30,630 Strategy: A Guide to Reducing Carbon Footprint. 9 00:00:30,770 --> 00:00:34,190 And I'm excited as brought some of the researchers and authors involved in the 10 00:00:34,191 --> 00:00:38,310 project here today, including Kristine Brands, management professor, 11 00:00:38,311 --> 00:00:43,110 the US Air Force Academy, Arnaud Brohe CEO of Agendi, 12 00:00:43,110 --> 00:00:45,670 a leading consultancy for climate and sustainability programs, 13 00:00:45,790 --> 00:00:49,870 and Jaxie Friedman, a sustainability consultant at Agendi. 14 00:00:50,700 --> 00:00:53,950 Make sure to follow a link in the show notes to access the full report. 15 00:00:54,680 --> 00:00:55,950 Let's start the conversation. 16 00:01:03,090 --> 00:01:07,230 So before we can talk about reducing carbon emissions for a company or for 17 00:01:07,231 --> 00:01:07,610 anybody, 18 00:01:07,610 --> 00:01:10,990 we kind have to start talking about the drivers that kind of led us up to this 19 00:01:10,991 --> 00:01:14,750 point that would make companies and other folks realize, Hey, 20 00:01:14,790 --> 00:01:17,790 I need to start paying attention to this and can, so let's start there. 21 00:01:18,271 --> 00:01:20,310 Kristine, can you, can you start that off for us? 22 00:01:21,330 --> 00:01:25,350 Yes. Before I speak, I have a disclaimer because I work for the Air Force. 23 00:01:25,351 --> 00:01:30,110 The views that I am speaking about are entirely my own and 24 00:01:30,170 --> 00:01:34,430 do not reflect any policy or position from the Air Force, 25 00:01:34,450 --> 00:01:37,110 the Department of Defense or the US government. 26 00:01:39,250 --> 00:01:43,950 Drivers are huge and what astonishes me is the awareness 27 00:01:44,770 --> 00:01:49,390 and the rising of the consciousness of people towards climate change. 28 00:01:49,940 --> 00:01:54,470 And they take several dimensions of clearly external and 29 00:01:55,100 --> 00:01:57,310 the physical drivers, 30 00:01:57,311 --> 00:02:01,990 which are the data behind climate change and the astronomical 31 00:02:02,490 --> 00:02:06,630 risk that we're facing globally as a society. 32 00:02:06,970 --> 00:02:10,310 And that carries over to internal drivers, 33 00:02:10,490 --> 00:02:15,270 into organizations that are going to be put in a position, 34 00:02:15,271 --> 00:02:20,110 which I predict is going to come faster than people can imagine to address 35 00:02:20,111 --> 00:02:24,910 that risk as well as their strategy so that 36 00:02:25,310 --> 00:02:30,270 they can adapt and adjust and be agile to the threats 37 00:02:30,370 --> 00:02:32,389 that we're all facing as a society. 38 00:02:34,900 --> 00:02:36,669 Arnaud, Jaxie, do you have anything to share? 39 00:02:37,460 --> 00:02:40,040 Yeah. I agree with what Kristine said. 40 00:02:40,041 --> 00:02:44,200 I just think that people don't realize how fast this is going to evolve. 41 00:02:44,201 --> 00:02:45,034 But that's critical. 42 00:02:46,241 --> 00:02:50,800 Basically we have 10 years to change the way we consume, the way we produce, 43 00:02:51,139 --> 00:02:53,480 the way we are organized as a society. 44 00:02:54,100 --> 00:02:58,880 We have 10 years to start thinking about how to change our mobility systems, 45 00:02:58,990 --> 00:03:03,639 you know, shifting from thermite combustion engines to electric cars, 46 00:03:03,640 --> 00:03:06,480 that's going to be very visible, but that's just the tip of the iceberg, 47 00:03:06,481 --> 00:03:08,120 frankly. We have, 48 00:03:08,121 --> 00:03:11,680 we need to revolutionize the way we consume energy in factories, 49 00:03:11,681 --> 00:03:13,800 the way we consume energy in agriculture. 50 00:03:13,801 --> 00:03:17,000 So the changes are just enormous. 51 00:03:17,280 --> 00:03:20,800 The drivers of course are the physical climate risk, 52 00:03:20,801 --> 00:03:25,080 but that's not the first drivers that companies are going to experience what we 53 00:03:25,081 --> 00:03:28,000 see today and taking the automotive industry as one example, 54 00:03:28,060 --> 00:03:32,720 to trade is that transition risk are going to affect businesses even before 55 00:03:32,780 --> 00:03:37,120 physical risk and by transition risk I mean, the pressure that customers, 56 00:03:37,121 --> 00:03:40,400 the regulators, governments are putting on existing businesses. 57 00:03:44,660 --> 00:03:46,400 So if you are an automotive manufacturer today, 58 00:03:46,450 --> 00:03:49,640 and you wanna sell your car in no way, or the Netherlands or Germany, 59 00:03:49,641 --> 00:03:54,320 you better be ready to switch to much more efficient cars and to 60 00:03:54,321 --> 00:03:55,960 gradually shift 200% electric cars. 61 00:03:56,320 --> 00:04:00,320 And we know that these trends are going to come here as well in the US and in 62 00:04:00,380 --> 00:04:01,213 order jurisdiction. 63 00:04:03,830 --> 00:04:08,680 Yeah. I think it's true. What both of you guys are saying that, 64 00:04:08,740 --> 00:04:10,960 you know, the science is showing it's, 65 00:04:11,030 --> 00:04:15,400 it's more and more significant and gonna be incredibly problematic, 66 00:04:15,420 --> 00:04:19,080 but I also think that there's in relation to that a lot of 67 00:04:20,440 --> 00:04:24,400 pressure coming from businesses and consumers as well, 68 00:04:24,401 --> 00:04:26,920 that is really driving this action. You know, 69 00:04:26,980 --> 00:04:31,000 of course it's true that the science is showing that more work needs to be done. 70 00:04:31,001 --> 00:04:34,120 But I also think that there's more awareness around that fact. 71 00:04:34,540 --> 00:04:37,920 So it's not just a matter of, you know, the, 72 00:04:38,470 --> 00:04:42,160 IPCC reports saying that, you know, there's targets we need to hit. 73 00:04:42,350 --> 00:04:47,279 It's also a matter of more public awareness that's 74 00:04:47,280 --> 00:04:51,320 trying to push us forward. And some of that is, you know, 75 00:04:51,321 --> 00:04:52,081 more just reputational. 76 00:04:52,081 --> 00:04:56,600 So investors encouraging companies to be integrating climate 77 00:04:56,910 --> 00:04:58,400 into their business strategies. 78 00:04:59,390 --> 00:05:04,279 Some of it is regulatory like Arnaud I were just speaking about kind of 79 00:05:04,280 --> 00:05:09,120 the SEC regulations and how there's kind of current movement towards there 80 00:05:09,121 --> 00:05:11,880 being potential regulatory requirements related to climate. 81 00:05:16,980 --> 00:05:20,640 And I think, you know, the fact that, you 82 00:05:23,201 --> 00:05:27,360 know, those new SEC kind of papers have come out to 83 00:05:27,950 --> 00:05:29,960 suggest that we're moving in that direction, 84 00:05:30,480 --> 00:05:34,880 I think is gonna be continuing to intensify the speed at which 85 00:05:35,710 --> 00:05:39,839 climate becomes integrated, not just into sustainability functions, 86 00:05:39,940 --> 00:05:42,279 but across entire business operations. 87 00:05:44,020 --> 00:05:48,720 So it almost seemed like you needed the customer and the 88 00:05:48,721 --> 00:05:52,120 government regulators to say something cuz otherwise businesses probably 89 00:05:52,121 --> 00:05:53,000 wouldn't have done anything. 90 00:05:54,060 --> 00:05:58,480 I think you're absolutely right. There's been a lot of resistance. 91 00:05:59,250 --> 00:06:03,880 There is pressure. There's reputational pressure as was mentioned, 92 00:06:04,420 --> 00:06:08,880 but the real push is to pass the 93 00:06:08,881 --> 00:06:11,800 regulations which the European union has done. 94 00:06:12,260 --> 00:06:16,960 And there are daunting proposed regulations from the SEC. 95 00:06:16,961 --> 00:06:21,080 And I think that that's what is necessary to close the deal. 96 00:06:22,860 --> 00:06:27,060 I think also, you know, it depends company to company. I think, you know, 97 00:06:27,300 --> 00:06:29,580 considering company culture is a really important factor. 98 00:06:29,690 --> 00:06:33,940 There's more and more businesses that really have sustainability within their 99 00:06:34,000 --> 00:06:38,779 DNA evolving as it's becoming a bigger part of our society as climate 100 00:06:39,200 --> 00:06:41,860 action is becoming more integrated at a public perspective. 101 00:06:42,400 --> 00:06:44,860 So I think in order to move the needle among 102 00:06:46,740 --> 00:06:49,910 kind of the mainstream body of companies, 103 00:06:49,990 --> 00:06:54,830 I think it's completely true that the regulatory pressure helps really push 104 00:06:54,831 --> 00:06:55,664 things along. 105 00:06:55,890 --> 00:06:59,589 But I also think it's important to acknowledge that there are many companies 106 00:06:59,590 --> 00:07:04,390 that have taken really huge steps in this direction before regulation was 107 00:07:04,391 --> 00:07:05,270 even on the table. 108 00:07:05,930 --> 00:07:10,670 And so I think it's important to consider that fact, I think that, you know, 109 00:07:11,270 --> 00:07:14,950 a lot of companies get a lot of or you know, with a corporate world in general, 110 00:07:14,951 --> 00:07:16,870 I think gets flack that they're, you know, 111 00:07:17,110 --> 00:07:21,190 the causing so much of the emissions and that they're, you know, 112 00:07:21,191 --> 00:07:23,590 the source of the problem, but the truth is like also, 113 00:07:24,300 --> 00:07:28,670 they're also a big part of the solution and they've been a real driver of 114 00:07:28,850 --> 00:07:30,950 innovation towards our climate solutions. 115 00:07:31,770 --> 00:07:35,510 And so I think it's important to acknowledge that I think regulation is not, 116 00:07:36,050 --> 00:07:40,110 it is a kind of like a compounding force, 117 00:07:40,490 --> 00:07:42,030 but I think even in its absence, 118 00:07:42,031 --> 00:07:46,950 there've been a lot of massive growth opportunities that have 119 00:07:46,951 --> 00:07:51,030 evolved because of companies that are really, you know, 120 00:07:51,830 --> 00:07:54,630 recognizing the need even without the enforcement. 121 00:07:55,930 --> 00:07:57,670 To compliment what Jaxie just said, 122 00:07:57,710 --> 00:08:02,070 that I would say we should stop thinking about seeing businesses as when 123 00:08:02,071 --> 00:08:05,830 homogeneous group there will be winners, there will be losers. You know, 124 00:08:05,831 --> 00:08:08,630 when we analyze climate risk with our clients, 125 00:08:08,631 --> 00:08:12,550 actually what we do is analyzing climate risk and opportunities. 126 00:08:12,551 --> 00:08:14,070 If you are an oil and gas company, 127 00:08:14,071 --> 00:08:18,670 of course like your future is less exciting that if you are renewable energy 128 00:08:18,940 --> 00:08:21,270 company does not mean that you will go out of business, 129 00:08:21,271 --> 00:08:24,110 but you need to reinvent yourself. You need to start, you know, 130 00:08:24,111 --> 00:08:27,670 investing in biofuels, investing in carbon capture. You know, 131 00:08:27,730 --> 00:08:30,270 you also need to think about diversification, you know, like, 132 00:08:30,271 --> 00:08:34,429 should you have all your assets deploy around all exploration? Probably not. 133 00:08:34,460 --> 00:08:38,510 Like if we read the IPCC, we clearly see that we should stop drilling oil, 134 00:08:39,591 --> 00:08:42,190 you know, that in the long run. So, 135 00:08:42,530 --> 00:08:45,150 but of course that's not the same story if you are, you know, 136 00:08:45,160 --> 00:08:49,070 developing alternative meat, if you are developing electric cars. 137 00:08:49,650 --> 00:08:53,309 So really I think regulation and businesses can go end in end, 138 00:08:53,570 --> 00:08:57,320 but we need to have that common goal to significantly reduce our greenhouse gas 139 00:08:57,559 --> 00:09:00,679 emission, simply because that's the survivor of the human species, 140 00:09:00,680 --> 00:09:03,720 which is at at least like the quality of life that we enjoy today, 141 00:09:03,721 --> 00:09:04,554 which is at stake. 142 00:09:06,070 --> 00:09:07,870 I mean, that's hugely important. I mean, 143 00:09:07,871 --> 00:09:11,510 we all kind of want to still be around on this planet and enjoy this planet for 144 00:09:11,511 --> 00:09:12,344 years to come. 145 00:09:12,890 --> 00:09:16,910 So bringing it back to since this is a podcast about all things 146 00:09:17,460 --> 00:09:20,110 affecting the accounting and finance world, how, 147 00:09:20,111 --> 00:09:24,790 what value can management accountants really bring to this process of, you know, 148 00:09:24,791 --> 00:09:28,030 making this important in an organization and, you know, going through it? 149 00:09:29,070 --> 00:09:34,070 I think they are an essential part of the process and the progress 150 00:09:34,071 --> 00:09:35,429 that needs to be made. 151 00:09:36,170 --> 00:09:40,429 And you can look at it from the high level of their traditional role of 152 00:09:41,179 --> 00:09:46,110 gathering data and information and creating reports and acting on 153 00:09:46,111 --> 00:09:47,630 those poor decision makers. 154 00:09:48,490 --> 00:09:53,230 But it really transcends that they are ideally suited 155 00:09:53,860 --> 00:09:58,150 because they're a part of the inner, they have the tools, 156 00:09:59,020 --> 00:10:03,590 they've got the toolkit that they can use to create value. 157 00:10:03,890 --> 00:10:07,390 And that's what it comes down to, creating value in their organization. 158 00:10:08,650 --> 00:10:09,870 And just to name a few, 159 00:10:10,350 --> 00:10:15,110 there are cost benefit analysis and that's something that interface 160 00:10:15,220 --> 00:10:20,150 corporation in Georgia used to completely transform 161 00:10:20,320 --> 00:10:24,670 their strategy from profit bottom line to 162 00:10:24,690 --> 00:10:27,710 sustainability goals and objectives. 163 00:10:28,290 --> 00:10:30,710 We have the gap balance scorecard, 164 00:10:30,920 --> 00:10:35,309 which can be overlaid with a sustainability perspective 165 00:10:36,410 --> 00:10:40,710 developing a strategy map because if you're really gonna change the direction 166 00:10:41,100 --> 00:10:43,270 and the trajectory of organizations, 167 00:10:43,380 --> 00:10:47,390 you've gotta integrate this into the organization. 168 00:10:48,210 --> 00:10:52,870 That's what management accountants do. And very, very importantly, 169 00:10:53,330 --> 00:10:57,270 the reporting is not standard financial reporting. 170 00:10:57,559 --> 00:11:00,790 We're focusing on non-financial metrics, 171 00:11:01,450 --> 00:11:02,830 sustainability metrics, 172 00:11:03,690 --> 00:11:07,270 so they can customize those within their organizations, 173 00:11:08,010 --> 00:11:12,470 do peer analysis with their industries and come up with a reporting framework 174 00:11:12,760 --> 00:11:17,630 where the results can be presented and then to do the capital 175 00:11:17,700 --> 00:11:22,590 budgeting analysis which is also tied to implementing innovation 176 00:11:24,310 --> 00:11:29,190 within their organizations to be able to look at 177 00:11:29,330 --> 00:11:32,390 new ways to do things. If you're an airline, 178 00:11:33,360 --> 00:11:37,510 maybe you're going to weigh everything that's on that plane. 179 00:11:38,170 --> 00:11:42,710 You need metrics and capital budgeting analysis to invest in that. 180 00:11:43,429 --> 00:11:48,110 I honestly think that the management accountants are the center 181 00:11:48,850 --> 00:11:52,870 of the reporting in their organizations to 182 00:11:53,080 --> 00:11:56,120 partner with other members of the organization. 183 00:11:58,150 --> 00:12:01,080 Yeah. I'd love to chime in and just share some additional thoughts. I mean, 184 00:12:01,081 --> 00:12:03,360 I couldn't agree more. I think, you know, 185 00:12:03,361 --> 00:12:07,840 even in businesses that maybe don't have greenhouse gas accounting 186 00:12:08,200 --> 00:12:10,200 directly centered within an accounting department, 187 00:12:10,201 --> 00:12:14,960 maybe kind of separated off to the side within a sustainability department, 188 00:12:15,510 --> 00:12:19,840 accountants are a critical piece of the puzzle. Like we are already, you know, 189 00:12:19,841 --> 00:12:21,600 with the diverse clients that we work with. 190 00:12:22,179 --> 00:12:26,120 Accountants are always an important part of the conversation when we start to 191 00:12:26,121 --> 00:12:29,920 think about measuring emissions from the entire value chain, right? 192 00:12:30,270 --> 00:12:32,400 When a company's emissions, 193 00:12:32,700 --> 00:12:37,400 tend to have the majority of impact actually coming from outside of the 194 00:12:37,401 --> 00:12:38,800 direct operations. 195 00:12:38,860 --> 00:12:43,200 And so we need to provide this gets a little bit technical, but you know, 196 00:12:43,201 --> 00:12:46,760 when we start to actually measure the emissions, 197 00:12:46,761 --> 00:12:51,480 it requires an implementation of kind of like diverse data points that are 198 00:12:51,481 --> 00:12:54,600 often reliant upon vendor spend figures. 199 00:12:54,780 --> 00:12:58,160 So the accountants are inherently directly connected to that. 200 00:12:58,679 --> 00:13:02,679 I also think when we think about kind of the shift in 201 00:13:03,090 --> 00:13:07,840 regulation becoming more apparent and influencing 202 00:13:08,059 --> 00:13:11,440 how companies are measuring their greenhouse gas emissions, 203 00:13:11,830 --> 00:13:16,280 accountants are the experts who knows better how to respond to the SEC 204 00:13:17,190 --> 00:13:18,800 than those business divisions. 205 00:13:19,100 --> 00:13:23,520 And so when we see regulations starting to become embedded within those kind of 206 00:13:23,521 --> 00:13:25,320 financial disclosure frameworks, 207 00:13:25,830 --> 00:13:30,679 it's absolutely critical that there be that expertise that's able to 208 00:13:30,860 --> 00:13:34,679 be brought into the conversation in terms of how we actually meet those 209 00:13:34,680 --> 00:13:38,920 regulations. And in relation to that, I think, you know, if we look at, 210 00:13:39,500 --> 00:13:42,559 for instance, the task force for climate related financial disclosure, 211 00:13:42,560 --> 00:13:47,360 it's a set of recommendations that helps to advise on how a company 212 00:13:47,480 --> 00:13:52,400 should strategically measure their climate risk and 213 00:13:52,510 --> 00:13:54,000 kind of communicate their risks 214 00:13:56,450 --> 00:14:00,240 and opportunities to stakeholders. And I think, you know, 215 00:14:00,241 --> 00:14:05,120 that TCFD framework often talks about how do we quantify in 216 00:14:05,121 --> 00:14:08,360 financial terms, the actual climate risks. 217 00:14:08,620 --> 00:14:11,360 And I think it's really important that we recognize that, 218 00:14:11,380 --> 00:14:16,240 you know businesses are evolving and how they define their bottom 219 00:14:16,309 --> 00:14:16,890 line, right? 220 00:14:16,890 --> 00:14:21,160 We're moving towards this triple bottom line of considering environmental and 221 00:14:21,161 --> 00:14:24,320 social factors, but the traditional society it's, you know, 222 00:14:24,520 --> 00:14:28,760 finances are what determines value. And so when we consider that fact, 223 00:14:28,880 --> 00:14:33,480 I think it's really important that climate impacts be able to be translated into 224 00:14:33,481 --> 00:14:36,880 those financial metrics. And I think it also, you know, 225 00:14:36,940 --> 00:14:41,080 not just in kind of early stages of a climate reporting journey, 226 00:14:41,380 --> 00:14:43,760 but even later stages coming up with, you know, 227 00:14:44,360 --> 00:14:49,240 internal carbon prices and thinking about how you can implement smart strategies 228 00:14:49,241 --> 00:14:52,480 that help your business, not just measure your impact, 229 00:14:52,580 --> 00:14:57,120 but also start moving towards the type of kind of low impact 230 00:14:57,220 --> 00:15:01,480 and positive oriented future that you're hoping to accomplish. 231 00:15:02,180 --> 00:15:07,040 And so I think accountants are absolutely critical from early stage 232 00:15:07,150 --> 00:15:07,980 companies, 233 00:15:07,980 --> 00:15:12,040 all the way to the companies that are really acting as pioneers in this 234 00:15:12,041 --> 00:15:12,960 sustainability space. 235 00:15:13,640 --> 00:15:17,200 I think we need management and concern to reveal the truth about sustainable 236 00:15:17,201 --> 00:15:19,000 products and sustainable services. 237 00:15:19,170 --> 00:15:23,280 Cause there is this bias that most people think that when something is good for 238 00:15:23,281 --> 00:15:27,480 the climate, it has to be more expensive. And very often it's because yes, 239 00:15:27,481 --> 00:15:30,000 it costs more money when you buy it. You know, it's an investment, 240 00:15:30,380 --> 00:15:32,000 but there is a payback for that investment. 241 00:15:32,180 --> 00:15:35,560 And I think we need management accountants because they play a key role in the 242 00:15:35,561 --> 00:15:36,480 capital allocation. 243 00:15:36,780 --> 00:15:40,240 And if they can help business leaders understand that what they should look at 244 00:15:40,241 --> 00:15:44,160 is the total cost of ownership. So if you think about retrofitting, 245 00:15:44,161 --> 00:15:46,160 your factory, of course it's going to cost consume money. 246 00:15:46,540 --> 00:15:49,520 But if you model like future price of carbon, 247 00:15:49,620 --> 00:15:53,880 if you model the price increase that we see for oil and gas and that we will 248 00:15:54,620 --> 00:15:57,440 see in the future as well, especially like if your business is international, 249 00:15:57,441 --> 00:16:00,440 the price of gas in Europe today is crazy, it's super expensive. 250 00:16:01,660 --> 00:16:05,200 And it's not just driven by the war in Ukraine, of course, 251 00:16:05,220 --> 00:16:07,800 that had a major impact. But already before that, 252 00:16:07,801 --> 00:16:11,600 we could see prices going because there were simply more regulation and more 253 00:16:11,860 --> 00:16:13,080 pressure to reduce greenhouse gas emission in Europe. 254 00:16:13,180 --> 00:16:17,440 And they have a very high price on carbon as well in Europe, which is going to, 255 00:16:17,450 --> 00:16:21,240 which is already in effect in some states in the US, such as California. 256 00:16:21,740 --> 00:16:24,200 So if you take all those factors into consideration, 257 00:16:24,460 --> 00:16:27,960 you come to realize that actually investing today, it's not a cost. 258 00:16:27,990 --> 00:16:30,120 It's really an opportunity that you should take. 259 00:16:30,380 --> 00:16:34,440 And we need management accountants just to reveal that truth to the top, 260 00:16:34,441 --> 00:16:38,600 to show that investing today in a more efficient fleet makes sense, 261 00:16:38,601 --> 00:16:40,800 investing today in redesigning your supply makes sense, 262 00:16:40,801 --> 00:16:44,400 investing in retrofitting your factory or buying, 263 00:16:45,780 --> 00:16:49,880 you know, more efficient boilers for your offices. 264 00:16:49,881 --> 00:16:51,160 That makes sense as well. 265 00:16:51,860 --> 00:16:55,560 I'd like to add to that great response. And that is, 266 00:16:55,561 --> 00:17:00,480 there is a myth that it's more expensive if you try 267 00:17:00,481 --> 00:17:02,280 to become carbon neutral. 268 00:17:02,860 --> 00:17:07,640 And I think that the management accountants can create the business case 269 00:17:07,740 --> 00:17:12,080 to demonstrate otherwise and partner with others in the 270 00:17:12,081 --> 00:17:17,000 organizations to demonstrate that that myth is 271 00:17:17,060 --> 00:17:17,893 not correct. 272 00:17:18,420 --> 00:17:23,240 And that if you have the awareness in the organization and you're innovative, 273 00:17:23,580 --> 00:17:28,080 you can actually make more money and be more 274 00:17:28,170 --> 00:17:31,440 profitable. And that's a win-win for everyone. 275 00:17:33,070 --> 00:17:34,369 So that is a win-win. 276 00:17:34,390 --> 00:17:37,730 And I really feel like anything that really is worth it and means it, 277 00:17:37,950 --> 00:17:42,130 it does costs a little more upfront, but over time it's worth it. You know, 278 00:17:42,131 --> 00:17:42,891 things like DE&I, 279 00:17:42,891 --> 00:17:46,210 or accessibility and things in that route and things with decarbonization, 280 00:17:46,211 --> 00:17:50,119 I found the same things that you guys that you all are saying are the same 281 00:17:50,120 --> 00:17:52,640 things that folks who are passionate about those things are saying that, Hey, 282 00:17:52,641 --> 00:17:53,760 it may be something upfront, 283 00:17:53,761 --> 00:17:56,800 but it's gonna make us so much better in the long run. 284 00:17:57,521 --> 00:17:59,040 And I think that's what we're hearing. 285 00:17:59,140 --> 00:18:02,320 And as we've been talking about the importance of the management accountant, 286 00:18:02,321 --> 00:18:06,160 so let's say you're a management accountant, you've played out your case. 287 00:18:06,161 --> 00:18:08,880 You say, Hey guys, this is gonna go well, you need, you know, 288 00:18:08,881 --> 00:18:12,320 buy-in from your senior leadership to have some sort of company wide 289 00:18:12,321 --> 00:18:16,160 sustainability project to reduce the carbon footprint. 290 00:18:16,161 --> 00:18:19,880 What does it look like when you're trying to initiate that project? 291 00:18:19,910 --> 00:18:22,200 Can we maybe discuss that a little bit? 292 00:18:23,250 --> 00:18:24,630 You know, it really depends on the company. 293 00:18:25,150 --> 00:18:29,109 I also think it really depends on the governance structure and how 294 00:18:30,100 --> 00:18:32,950 open a company can be to new initiatives. 295 00:18:33,410 --> 00:18:36,190 But I think ultimately what you said is exactly spot on, 296 00:18:36,290 --> 00:18:40,910 you need senior leadership to be a driver of this work in order for there to be 297 00:18:40,911 --> 00:18:44,830 company buy-in throughout all of the different employee groups that are required 298 00:18:44,831 --> 00:18:46,070 to be involved in the initiative. 299 00:18:46,330 --> 00:18:50,790 So I do think it's really critical that senior people within the company are 300 00:18:50,791 --> 00:18:55,790 integrated into those conversations and in terms of kind of hitting things 301 00:18:55,850 --> 00:18:58,270 off. And how do you start an initiative like this? 302 00:18:58,830 --> 00:19:02,750 I think it's important first and foremost, whether it's internally or, you know, 303 00:19:02,751 --> 00:19:05,190 working with external parties like Agendi, 304 00:19:05,200 --> 00:19:09,630 which is where Arnaud and I come from, you know, to understand what this, 305 00:19:09,700 --> 00:19:13,350 the sustainability reporting landscape looks like and specifically focused on 306 00:19:13,351 --> 00:19:18,190 climate emissions. The greenhouse gas protocol is sort of, you know, 307 00:19:18,191 --> 00:19:19,070 the gold standard. 308 00:19:19,220 --> 00:19:23,990 It's sort of our Bible for lack of a better word in terms of how do we 309 00:19:24,430 --> 00:19:26,230 actually measure and report on emissions. 310 00:19:26,730 --> 00:19:31,630 And there's a variety of really wonderful frameworks that exist out there 311 00:19:31,859 --> 00:19:36,790 that really help to guide the process on what data do you need and how 312 00:19:36,791 --> 00:19:40,590 do you get from the data inputs to the data outputs? 313 00:19:40,591 --> 00:19:41,910 Because I think I mean, 314 00:19:41,911 --> 00:19:45,109 accountants who knows their way around a spreadsheet better than them? 315 00:19:45,850 --> 00:19:48,030 But at the same time, you know, 316 00:19:48,130 --> 00:19:52,070 you need to understand the full processes of what needs to be incorporated in 317 00:19:52,071 --> 00:19:54,869 because it's, you know, not your typical financial calculations, 318 00:19:54,940 --> 00:19:56,910 there's a lot of intricacies. 319 00:19:58,330 --> 00:20:02,940 So I think the first step is really kind of whether internally 320 00:20:03,320 --> 00:20:08,300 or working with external consultants to understand what information 321 00:20:08,320 --> 00:20:11,780 you need, what you already have and you know, 322 00:20:11,800 --> 00:20:13,980 how you can move forward from there. It's really, 323 00:20:14,000 --> 00:20:18,780 the first step is to measure your current impact prior to 324 00:20:19,480 --> 00:20:21,140 the deciding where you need to go. 325 00:20:21,720 --> 00:20:24,859 If a company gets too far ahead of themselves and sets a target without 326 00:20:24,920 --> 00:20:26,420 understanding their baseline, you know, 327 00:20:26,421 --> 00:20:29,380 how do you know if that target is achievable? 328 00:20:29,381 --> 00:20:31,340 How do you know if that target is ambitious enough? 329 00:20:33,040 --> 00:20:37,540 And so I think it's really critical that calculating things and calculating them 330 00:20:37,541 --> 00:20:41,220 correctly is the first part of the puzzle. You know, and with that, 331 00:20:41,221 --> 00:20:45,740 I think one area in which it's really different I think accounting has 332 00:20:45,741 --> 00:20:50,359 a very kind of more specific sets of rules that 333 00:20:50,410 --> 00:20:53,560 maybe I'm sure there's still constant evolutions, 334 00:20:53,570 --> 00:20:57,359 but I think there's much more of a culture in greenhouse gas, 335 00:20:57,660 --> 00:21:00,119 accounting of the spirit of constant improvement. 336 00:21:01,540 --> 00:21:05,000 We speak with our clients all the time about how it is an iterative process. 337 00:21:05,460 --> 00:21:09,840 And it's always better to measure your emissions to the best extent possible 338 00:21:09,950 --> 00:21:12,640 this year, and then improve upon that for the next year. 339 00:21:13,060 --> 00:21:15,960 So in some instances where you can't get the right data, 340 00:21:16,220 --> 00:21:20,200 it might be a matter of using some estimations based on 341 00:21:21,190 --> 00:21:25,280 what is available. And so I think familiarizing yourself, I guess, 342 00:21:25,281 --> 00:21:26,200 first and foremost, 343 00:21:26,230 --> 00:21:30,720 with how more broadly speaking one calculates greenhouse gas emissions. 344 00:21:31,140 --> 00:21:31,973 And then, secondly, 345 00:21:33,510 --> 00:21:37,720 just not being too afraid of being imperfect the first time. 346 00:21:38,020 --> 00:21:41,560 You obviously want accurate numbers, but at the same time, you know, 347 00:21:41,710 --> 00:21:43,240 it's a complicated process. 348 00:21:43,740 --> 00:21:48,640 And so it's really important that you not avoid the initiative entirely out 349 00:21:48,800 --> 00:21:49,680 of fear that, you know, 350 00:21:49,681 --> 00:21:54,520 your numbers like will not be the ultimate goal of where you would be in three 351 00:21:54,521 --> 00:21:58,160 years. Yeah. Arnaud, I'm curious if you have any additional thoughts on that. 352 00:21:58,880 --> 00:22:03,130 Yeah. I think to me first, you need to be inclusive. 353 00:22:03,190 --> 00:22:07,130 So you need as an concern, you need to go outside your own department. 354 00:22:07,210 --> 00:22:09,050 You need to involve the different functions, 355 00:22:09,590 --> 00:22:12,450 you need to discuss with your suppliers. 356 00:22:12,470 --> 00:22:16,970 You also need to discuss with your customers as some of the impact will also 357 00:22:16,971 --> 00:22:21,050 come from the customer side. You probably need to involve HR because, you know, 358 00:22:21,051 --> 00:22:24,369 your carbon footprint is also the result of the activities of your employees. 359 00:22:25,230 --> 00:22:27,170 So that's very broad process. 360 00:22:28,050 --> 00:22:32,590 I would say your goal should be that what you call a project does not be 361 00:22:33,140 --> 00:22:35,869 basically becomes integrated in the entire business. 362 00:22:36,410 --> 00:22:40,710 So I don't see like sustainability as a separate project it's really part of 363 00:22:40,711 --> 00:22:42,150 running a business efficiently. 364 00:22:44,330 --> 00:22:48,270 So you need to make sure that the risk function, for instance, 365 00:22:48,430 --> 00:22:52,670 one thing we try to do is working with the risk function and making sure that 366 00:22:52,671 --> 00:22:56,590 climate risk are being analyzed by the risk function. You need to, 367 00:22:56,820 --> 00:22:59,190 when you discuss, let's say employee travel, 368 00:22:59,530 --> 00:23:02,830 you should be discussing with people who are booking for employee travel to make 369 00:23:02,831 --> 00:23:04,710 sure that every time they book for employee travel, 370 00:23:04,940 --> 00:23:07,150 they think about the consequences in terms of carbon. 371 00:23:07,450 --> 00:23:11,510 So I feel it's a lot of sharing knowledge, you know, 372 00:23:11,530 --> 00:23:13,430 all the things that you learn on this project, 373 00:23:13,490 --> 00:23:15,150 you should share it with all the departments. 374 00:23:15,250 --> 00:23:19,750 So that basically the entire organization, brief carbon accounting, 375 00:23:19,751 --> 00:23:20,990 brief carbon reduction, 376 00:23:21,140 --> 00:23:24,790 because that's the only way you would be able to integrate all those best 377 00:23:25,030 --> 00:23:27,790 practices within your business and deliver results in the end. 378 00:23:28,910 --> 00:23:31,590 I agree with what Jaxie and Arnaud said, 379 00:23:31,591 --> 00:23:36,030 but I think that it's extremely important to do something. 380 00:23:36,210 --> 00:23:39,710 Start the process, start the thinking. 381 00:23:40,880 --> 00:23:44,590 Definitely you need the support of the top management, 382 00:23:45,180 --> 00:23:48,040 but one of the lessons that I teach my students, 383 00:23:48,041 --> 00:23:52,680 because I've integrated sustainability accounting in my management 384 00:23:52,681 --> 00:23:56,080 accounting class is the power of one. 385 00:23:56,820 --> 00:23:57,840 And with that awareness, 386 00:23:58,180 --> 00:24:02,680 you can help turn the organization around to understand how critical and 387 00:24:02,960 --> 00:24:03,880 important this is. 388 00:24:03,990 --> 00:24:08,760 It needs to be a culture where everyone participates 389 00:24:08,880 --> 00:24:11,440 and understands what's at stake. 390 00:24:11,490 --> 00:24:14,840 There's a forklift driver at Interface corporation, 391 00:24:15,190 --> 00:24:20,000 and he knows that his job every day is to save 392 00:24:20,030 --> 00:24:25,000 the planet and to work efficiently so that he doesn't use 393 00:24:25,619 --> 00:24:30,590 more CO2 gas than he needs to use. 394 00:24:30,591 --> 00:24:33,590 It don't have to start with sophisticated systems. 395 00:24:34,910 --> 00:24:39,790 Spreadsheets can do the basic accounting and then 396 00:24:40,119 --> 00:24:45,070 think through it can be complex as Jaxie said. There's no question about it. 397 00:24:45,690 --> 00:24:49,910 And it needs to be defined in an 398 00:24:49,911 --> 00:24:54,150 architecture and a plan, and you don't have to do everything tomorrow. 399 00:24:54,650 --> 00:24:59,230 You can scaffold it and build it into more complexity until 400 00:24:59,260 --> 00:25:04,230 finally you're creating an ESG or a sustainability report that you 401 00:25:04,231 --> 00:25:09,030 can publish and share with your shareholders to demonstrate your commitment 402 00:25:09,040 --> 00:25:13,790 to this urgent problem that we are facing globally and 403 00:25:14,330 --> 00:25:18,790 show the continuous improvement and you're creating value for the organization. 404 00:25:20,770 --> 00:25:23,690 I think just one more quick thing to say off of that, Kristine, you know, 405 00:25:23,691 --> 00:25:26,210 I think there were some great points you addressed and, you know, 406 00:25:26,270 --> 00:25:30,890 in speaking to that power of one I think one of the first things 407 00:25:31,070 --> 00:25:35,490 is creating an opportunity for someone to take ownership of this work. It 408 00:25:37,190 --> 00:25:41,490 is complex, as Arnaud said, it, it requires numerous business divisions. 409 00:25:41,730 --> 00:25:46,730 It requires consideration of external stakeholders and identifying a 410 00:25:47,170 --> 00:25:49,850 specific person who has this either as their entire you know, 411 00:25:51,131 --> 00:25:55,330 role or as a major component of their role is a critical step forward. 412 00:25:56,350 --> 00:26:00,570 So identifying who's gonna be doing the work or at least kickstarting it 413 00:26:00,720 --> 00:26:03,730 because, you know, in order for there to be that power of one, 414 00:26:04,020 --> 00:26:06,770 there needs to be someone to be powerful. 415 00:26:07,350 --> 00:26:09,210 So I think that is important too. 416 00:26:11,640 --> 00:26:12,930 This has been Count Me In, 417 00:26:13,560 --> 00:26:17,530 IMA's podcast providing you with the latest perspectives of thought leaders from 418 00:26:17,531 --> 00:26:20,010 the accounting and finance profession. If you like what you heard, 419 00:26:20,011 --> 00:26:23,250 and you'd like to be counted in for more relevant accounting and finance 420 00:26:23,320 --> 00:26:27,050 education, visit IMA's website at www.imanet.org.