Environmental, social, and governance (ESG) investing emerged as a transformative force in the world of finance, with investors increasingly considering not just financial returns, but also the broader impact of their investments. In recent times, however, there has been a noticeable decline in ESG investments. While it may seem paradoxical, the decrease in ESG investments highlights the need for increased emphasis on sustainable business management practices to ensure transparent, accurate, and comprehensive reporting and the long-term viability of businesses and markets.
Sustainable business management is crucial from a long-term planning perspective because it ensures a company’s resilience and continuity in an ever-changing world. By prioritizing sustainability, businesses mitigate risks associated with environmental regulations, resource scarcity, and shifting consumer preferences. They also future-proof their operations by fostering innovation, reducing waste, and enhancing supply chain resilience. In the end, sustainable business practices lead to cost savings, improved brand reputation, and increased customer loyalty, translating to sustainable profits over time. Long-term planning that incorporates sustainability not only aligns with ethical and environmental considerations but also safeguards a company’s competitive advantage and growth potential in a rapidly evolving global landscape.
Accounting and finance professionals play a crucial role in measuring and reporting on a company’s sustainability efforts. Moreover, they play a leading role in advocating for sustainable business practices to ensure a company remains a going concern. Accounting ensures that sustainability efforts are transparently documented and reported, helps to identify and manage potential risks, quantifies the impact of sustainability initiatives, and can uncover cost-saving opportunities and operational efficiencies. In short, accounting for sustainable business management practices not only aligns with ethical and environmental imperatives but also creates business value.
IMA® (Institute of Management Accountants) is committed to advocating for sustainable business practices and to providing resources to help practitioners serve as leaders in this area. To educate and support members, the organization also offers the IMA Sustainability Business Practices Certificate™, which aims to help accounting and finance professionals navigate the complexities of their role in sustainable business practices. IMA also has conducted groundbreaking research on the topic of sustainable business management, including the recent Achieving Effective Internal Control over Sustainability Reporting, written in conjunction with the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Declining ESG investments may be seen as a short-term phenomenon, driven by market sentiment. Yet the true value of ESG and sustainability lies in their ability to foster a long-term view on business management. Accounting and finance professionals who embrace sustainable business management principles enable their companies to be more resilient and profitable, thereby promoting growth in their communities and society. The decline in ESG investments serves as a wake-up call for the importance of sustainable business management and reveals the need for more transparent, precise, and thorough reporting to restore trust and confidence in business. As the world faces mounting geopolitical, social, and economic challenges, sustainable business management is not just a trend but an enabling positive force in contributing to a healthier, fairer, and more prosperous world for all.
November 2023
