< Intro >
– Welcome back to Count Me In.
In today's episode, we're joined by John Mahoney,
an ESG external reporting project manager, IBM.
He shares his unique journey
and insights into the company's approach to ESG integration.
We discuss the importance of having the right company culture.
Support from leadership, and cross-functional collaboration
to make ESG initiatives successful.
So sit back and relax and let's explore
how IBM is uniting for a sustainable future.
< Music >
Now, John, I want to thank you so much
for coming on the podcast today.
We're really excited to talk about ESG, and ESG at IBM.
And, so, many professionals, in this space, have been reluctant
to engage with ESG for a number of different reasons.
But maybe you can start with talking about
what your journey is, was to get here.
–Of course, and my thanks to you, Adam,
and the IMA, for having me.
I'm excited to be a part of the Count Me In series, it's really great.
In terms of my story, I'd say I've had a relatively
conventional accounting background,
in that I spent the first chunk of my career in public accounting.
Splitting my time between audit and advisory services.
Where I was fortunate to have the chance
to work with some really great clients,
and help them navigate through complex and challenging topics.
Spanning from the adoption of accounting standards,
acquisitions, carve-outs, stocks implementation,
as well as, some SEC reporting jobs.
So I was really grateful to have seen
so many different things, early on, in my career, in public,
and I knew I wanted my next role to be dynamic as well.
So I was very thankful to have landed at IBM.
First joining the Accounting Practices and External Reporting Organization,
which is really a consultative group
focusing mostly on technical accounting consultations,
as well as the preparation of IBM's periodic SEC filings.
I had always enjoyed the reporting aspect of the job,
and helping companies craft their stories
and messaging to external parties.
So I knew I wanted to stay close to that
and I was grateful that the opportunity at IBM afforded me that.
So, as you can tell, I don't have an ESG background,
but I did know I wanted to continue to explore new topics.
And with all of that being said,
I had been keeping an eye on the energy
in the ESG space, and I had expressed interest
to stay involved wherever possible within the group.
So when the opportunity arose to make it a full-time job,
I jumped right in headfirst.
And really saw this as a great chance
to apply the skills that I've been working on, thus far,
in my career to a new area
and one that was not only hyper-relevant, in the time,
but also deeply purposeful in terms of subject matter.
We spend a lot of time working on dollars and cents-related topics
and working through financial statements,
and this was just a really exciting opportunity
to apply my skill set in a different forum.
So, well, I can't speak to reluctance, personally,
I'd even venture to say that
we're probably passing the point of reluctance.
But for those that are hesitant, I'd encourage everyone to engage
and start exploring the topic and draft standards.
While it is gaining more momentum as a topic,
there's still only a small amount of accounting folks
that are focused on it currently.
And with the rules still being written,
it's a great chance to get in on the ground floor
and establish yourself as a go-to person,
not only within your organization, but really the space at large.
So really excited to be a part of the journey,
and keen to see where it takes me and all of us at large.
– And I'm really excited to hear about your journey,
as we've heard other people's journeys when it comes to ESG
I find that everybody's journey is different
and I feel that that brings a real diversity
of thought into the ESG space.
Which is needed in something that's growing
and something that's just starting out,
you need to have many different perspectives.
– I couldn't agree more, and everyone I've engaged with
have been coming from a diverse background.
And some folks have that key SEC reporting or accounting footing,
and other folks, perhaps, have spent more time
in true-blooded ESG functions, if you will.
I think between the pending rule on SEC climate
the Corporate Sustainability Reporting Directive in Europe,
the ISSB standards, we just haven't seen anything
of this magnitude all at once.
So bringing together a diverse group
to really tackle this watershed moment for the profession.
It's going to have broad impacts on not only finance
and accounting organizations, but organizations for years to come.
– Yes, definitely, so when organizations
bring on ESG into their organization.
You have to start combining the ESG objectives
with the overall objectives of the organization.
How does IBM go about harmonizing those objectives?
– Yes, so, no surprise, IBM is a large company.
We've got more than 280,000 employees, globally,
operating in more than 170 countries.
So with that scale, and for the scale of most large companies,
there are always countless initiatives
and objectives that need to coexist, simultaneously.
We are lucky in that IBM does have a great legacy
with ESG just as it relates to climate.
We incorporated our first environmental policy in 1971,
and began reporting on CO2 emissions as early as 1994.
But truly have a deep history in all three pillars of ESG.
So that legacy is great, in that it not only gives us a head start
in navigating the landscape and proposed rules.
But it also has helped establish
responsibilities within the organization,
as well as avenues for communication between groups.
So really fortunate to have that legacy.
But even with that head start,
recent activity in the ESG space comes with even more
and it adds incremental objectives that we all need to navigate.
Including pending regulations that I've mentioned.
Rating agency requests, shareholder needs,
analyst inquiries, and countless other internal and external factors.
So really important to emphasize
how important that open lines of communication
and regular touchpoints with different functions are.
And, also, the importance of educational sessions
to bring awareness of what other functions
are managing and striving towards.
Leading with that transparency
not only helps to avoid duplication of efforts,
but it also unlocks efficiencies
and helps us understand one another
and how we're going to strategize.
So each function can achieve its mandate
and targeted objectives, while still being mindful of the larger picture.
– Yes, so I hear you talking a lot about how ESG affects
different functions within the organization.
Which requires those functions
to talk to each other or work together.
How has IBM, what has been their approach when it comes
to cross-functionality and making sure that
everybody's talking together and not staying in their silos?
Which happens so many times within corporate structures.
– Sure, yes, so I'll first speak to our external reporting project
and our current ownership, within the financial and accounting organization,
and I've only been in my role for a few months.
So there is countless work
that have been done prior to me arriving in this seat.
But we've been very busy kicking off our project
and establishing a task force, as you put it.
Given the magnitude of proposals and the potential impact,
not only at a consolidated reporting level,
but perhaps also even at a group or a subsidiary level,
depending on what the international rules finalize as.
We did know that we had to get started right away.
And, so, we kicked off a few key work streams.
Starting first and foremost
with stakeholder identification and outreach.
We, effectively, held a roadshow
where we connected with various functions, within IBM,
to not only alert them of the pending regulation.
But also to learn about their current areas of ownership
and processes within the company.
Which was a great first step for us,
it really helped emphasize how cross-functional
this effort will truly need to be.
We spoke to probably more than 20 functions in the process,
and they all will need to be involved in some capacity.
And, so, as we continue down this path,
I'm certain that that number will continue to grow
and more folks will be pulled in.
I do think that that's also very telling
and that this effort is going to span the entirety of organizations,
and you're going to need the full breadth
and strength of the groups within,
and that ownership will ultimately need to be shared.
So providing those educational sessions, speaking to awareness,
and just trying to elevate everybody, internally, at once.
While keeping them all aware of where we're marching towards is vital.
– I mean, that's amazing to be able
to have that cross-functionality to work and to be successful.
That's not an easy task for any organization,
so I really commend you.
It sounds like it has been something
that is working toward a successful thing.
– Yes, for sure, and there's even more work streams
that I could probably speak to for hours.
But, I think, all of this was an upfront investment that we,
very much see as necessary in terms of driving the project.
So those conversations not only helped us understand
what's out there, but it also helped us
establish project governance.
And we've established that task force, that subcommittee,
and we hold regular touchpoints now with the group.
And we were able to identify one to two representatives,
during those discussions,
that all, now, join us for these regular touchpoints
where we keep them apprised of
the regulatory landscape developments
and we also kick off, initiate, monitor,
and advance our work stream.
So it's really been a great joint effort thus far.
– Yes, that's great.
So we've talked a lot about the people doing the work,
and then there are people
who're overseeing everything within organization.
The senior leadership reports to the Board of Directors
and the Board of Directors, ultimately,
answers to the shareholders.
But what extent are the Board of Directors
involved into this process?
– Yes, so it all does, ultimately, start with the oversight of the board,
and I'd say that ESG is very much
embedded within the organization.
In part due to that legacy but also, in part,
just due to the excitement and potential of what's to come
in the decades ahead.
And that can be seen and is relevant through
some of our go-to-market offerings.
Our use of technology, research and development efforts,
as well as other internal initiatives
and just overall remarks from our chairman and other senior leaders.
So, ultimately, the Board of Directors,
and its committees, do have oversight responsibility for these areas.
And under their guidance and supervision,
IBM's senior management is then responsible for the company's
environmental and social performance.
And they're able to do so via two groups, in particular,
which help integrate CSR across the business.
And those are our Executive Steering committee and the ESG working group.
So both of those groups meet monthly,
and they include representatives
from functional areas spanning all of IBM.
Including the atypical ESG groups as well as HR,
accounting, legal, procurement,
really great representation spanning the organization.
And it's between those two groups that leadership
is able to provide the direction
on key corporate responsibility issues,
and also stay apprised of work related to ESG matters.
So while that's the day-to-day operation
and actioning of ESG-related activities.
We then do report, the Chief Sustainability Officer
provides periodic updates to the Board of Directors
and we're now, also, providing regular updates
to the Audit Committee as it relates to work underway
and the regulatory landscape.
So it's great to have these channels in place,
and I'd say senior leaders are absolutely seeing ESG
as an area of focus within the company.
– And that's wonderful to hear, when you set the tone at the top,
it really sets the stage so that all the cross-functionality,
the things that we've been talking about,
are recognizing, "Hey, I have the support of my leaders
that I can do this and we can do it well."
– Yes, absolutely, I think, having that support from the top is crucial.
I'm sure that's true for all organizations,
but it's only through that support, and direction of leadership,
that all organizations are able to operate in harmony.
So, absolutely, a crucial step in the process
to make sure that you are on
the appropriate people's agenda and radar,
and that they're aware of what
we're marching towards and the [indistinct].
– Yes, so when it comes to any new initiative,
there can be challenges with buy-in,
and with ESG you can get into so many different elements
of why somebody wouldn't want to buy-in.
But the biggest thing that, probably,
comes to my mind with what you've been describing
is it's, probably, adding extra workload onto people.
And, so, have there been challenges to buy-in within IBM,
as people are having added elements and uncertainties
with the coming regulations and things like that?
– Sure, yes, it can be hard because people
do have full-time, day jobs,
and they've got a full plate of duties as it currently exists,
and now we're asking them to focus on an additional area.
But I would say that the response within IBM, internally,
has been very positive overall
and folks are both willing and eager to help.
And, I think, some of that is probably due to our culture
and the fact that people have tended
to work in multiple roles within the company.
So they perhaps have an understanding
or a perspective as to where we're coming from,
as finance and accounting,
and that always makes conversations easier to have.
But I do think it's important to approach those conversations
and ask for buy-in with an open mind
and a sense of understanding.
ESG is not, historically, a core competency
for accounting professionals
and we realized, very quickly, that this was a new frontier for us.
So, in that regard, we didn't want to be the team that showed up
and forced ourselves in,
and forced our way of thinking on groups.
We wanted to pause and listen, gain an appreciation
for the great work that had been happening
before accounting entered the room,
and that helped build trust, I think.
But also leading with the fact that we're here to help.
We're not taking over ESG reporting.
We don't know everything we want to learn in team,
and we're all working towards a common goal of
providing investor grade financial, and now non-financial reporting
has been helpful in having those conversations.
I would say that while there's not, necessarily,
challenges with people buying-in.
I do think there can be challenges, at times,
with planning and embracing the plan.
Just due to the overall, uncertainty,
surrounding what the final rules might look like.
It can be hard to convince folks that they need to jump in, full force,
with so much uncertainty and such frequent developments
on the standard-setter front and in the space.
So, I think, as the rules finalize
and effective dates become more clear,
it'll be easier to have those conversations,
and the path forward will just reveal itself
and we'll know exactly what we need from everyone then.
– Yes, well, and having the right company culture
is a key element, and people being willing
to just being open-minded
as they go into conversations and new responsibilities.
So it sounds like there is a great company culture there
and that's really exciting to hear.
– Yes, it's fantastic and, I think, between our points
on support from leadership and support from the groups,
I think, that's going to prove to be crucial.
There's just so much happening,
and given the breadth of the international proposals,
that it's becoming clear that we'll likely need more resources
and not all those will live within accounting and finance,
and they'll likely be homed in other functions.
So having that support, having that understanding
and cross-functional awareness
is just going to help avoid surprises
or last-minute scrambles when the rules, ultimately, are finalized.
– So, shifting gears a little bit, when it comes to reporting,
there are some key concerns
that we've heard from other organizations,
that there's a need to rely on third-party data.
What is IBM doing to address those types of concerns?
– Yes, there's been a lot of talk of that topic.
And I know there's a lot of comments on it, and there, certainly, are
inherent challenges that come with data aggregation.
There is, especially, the requirements
that involve data from the value chain.
It's always challenging to aggregate, create data,
that's coming from outside your organizational walls.
And an easy example of that is greenhouse gas emissions,
where entities will need to rely on third-party data in several capacities.
It's going to take collection of invoices from utility providers.
Use of emissions factors from various sources.
As well as data from upstream and downstream activities,
potentially, your customers and suppliers.
So while there's a lot to gather and to think about,
I do think that accounting and finance professionals
can help bring some discipline around the difficulties
dealing with estimates, and help provide guidance to other functions.
Surrounding the need for adequate, relevant, sufficient, and reliable data.
All that is the basis for estimating the estimate
and to mitigate the risk of material misstatement.
So while accountants might be less familiar
with the subject matter itself,
we do understand the need to formalize processes
and put rigorous and robust controls in place,
for areas of significant estimates and assumptions.
– John, we could talk about ESG for hours.
There is reports, constantly, being written about this studies
being done on it and there are many professionals
who are curious about it.
And if you're a professional who's thinking about getting into ESG
or you're looking at your organization,
and you're recognizing "We're not doing anything about this."
What advice would you give to that professional,
as they're looking to get into it?
– Yes, it's a great point, and it's in everyone's best interest
to get engaged as soon as possible.
There's so much momentum in the space,
and there's going to be such a widespread impact
to accounting and finance professionals.
That it's really great to get started early
and learn what is facing us as a profession and potential rules.
I do think it's also a great chance
that we can all elevate and upskill one another.
We're all embarking on this journey, simultaneously,
and I've, personally, enjoyed having outreach
with peers in the space, and trying to leverage,
and join working groups where they exist,
and learn about best practices,
and other happenings at other companies.
So joining the effort, probably, an inevitability
in terms that rules are coming.
In terms of timeline and effective dates,
maybe, that's less certain.
But there's a lot to do, and joining now
will just set yourself up for future success.
Well, for what really is a turning point,
in the profession, and something that
we'll be focusing on for years and decades to come.
– And, sometimes, getting in the ground floor,
you get to see the evolvement real-time,
as it happens, which can be really exciting.
– Yes, for sure, and that's really front of mind, today.
It seems like not a day goes by,
and I've only been in this role for a few months,
but there's no shortage of news cycles in the space,
and seeing stuff evolve, and what may or may not be required,
it's changing quite often.
And watching that evolution, well, it can be a bit daunting,
in terms, of what it means for implementation and next steps,
I think, it's very exciting to watch it play out real-time.
And really feel involved in what is coming,
and how do we react to that, and pivot,
and really important to stay nimble and on your toes.
– Well, John, I just want to thank you so much
for coming on the podcast.
It was really exciting to have you on
and everything you shared with our audience today.
– Of course, and thanks again for having me, Adam.
It's an exciting space and I'm excited
to be a part of the journey, so thanks again.
< Outro >
– This has been Count Me In, IMA's podcast,
providing you with the latest perspectives
of thought leaders from the accounting and finance profession.
If you like what you heard and you'd like to be counted in,
for more relevant accounting and finance education,
visit IMA's website at www.imanet.org.