A role for finance professionals in improving sustainability performance

Presentation to the National Local Govt Conference 140813 Carol Adams

Best practice in local govt conference logo

The inaugural National Local Government Financial Management Conference held in Melbourne in August 2013 aimed to “provide council professionals with practical knowledge and expert advice on how to optimise financial performance and generate cost efficiency within local government organisations”. The presentations were explicitly concerned with financial sustainability – financial management, financial planning, financial solutions, internal audit.  Mind, in contrast was listed in the programme as “A role for finance professionals in improving environmental sustainability performance through integrated corporate reporting”.

I wondered how many participants would see a link between environmental and financial sustainability and whether I would need to convince them that public sector financial professionals have a role to play in environmental sustainability.

There are many reasons why the public sector should do more on environmental sustainability:

  • There are pressing local and global issues with far reaching consequences
  • Local government and the public sector is influential and should be leading the private sector
  • Sustainability provides a reason for working across functions since solutions to sustainability issues require input from different perspectives and a range of skills
  • Improves reputation, minimises reputation risk
  • Reduce costs and risks

The finance team can help with a range of cultural and institutional challenges:

  • Inertia, resistance may stem from lack of know-how and resources. The finance team can make sure the budget is there.
  • Lack of opportunity/expectation to make those cross boundary connections. Finance professionals can take the initiative and find out where their process, data collection and reporting skills can be of use.
  • Those wanting change have difficulty influencing the decision makers. Finance professionals can help develop a cost/benefit analysis.
  • Funding mechanisms, budgets, performance measurement systems, planning processes.  These are all essential to embedding sustainability and the finance team is in a position to influence.
  • Developing Key Performance Indicators and targets that make sense and demonstrate accountability.

It is not the purpose of integrated reporting to improve environmental sustainability performance, but we discussed how it can contribute through materiality and stakeholder engagement processes. (For more information see the articles in the integrated reporting and materiality categories on this site.)

I did not need to convince local government  finance professionals that they have a role in environmental sustainability.  The contributions and questions indicated that participants didn’t question that they had a contribution to make, but felt that the processes and culture didn’t support them in doing so. Someone noted that the approval processes did not require consideration of social and environmental impacts of decisions and another contributor found a lower emphasis on environmental sustainability performance in Australia than their previous experience in New Zealand.  It was also noted that the emphasis on environmental sustainability had declined in the current period of tighter budgets – an illogical step given the cost savings, reputation benefits and reduced risk to be gained from environmental initiatives. There was a discussion about materiality, the need to involve stakeholders and the need to look at materiality overall, rather than just on financial or sustainability issues, in making decisions.

The presentation I gave is on the link at the top of the page. It gives some examples of what is involved in measuring and managing environmental sustainability and how finance professionals can be involved.

Further reading 

Understanding (how sustainability fits into) your business model

Integrated Reporting and the Six Capitals: What does it all mean?

Integrated thinking and integrated reporting

Materiality: financial reporting, sustainability reporting and integrated reporting

Five essentials to embedding sustainability

Integrated reporting and directors’ responsibilities

Useful resource: Learning and Teaching Sustainability

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