Welcome back to Count Me In,

IMA's podcast about all things affecting
the accounting and finance world.

I'm your host, Adam Larson. And
this is episode 166 of our series.

Today we are fortunate to be
joined again by Liv Watson and

David Wray.

Liv and David recently shared their
perspective on a proposal for the digital

transformation of
sustainability information,

in United Nations Climate Change
conference sponsored site event.

Attendees from around the
world included policymakers,

standard settlers regulators,
to preparers, NGOs and funders.

The goal was to leverage the worldwide
momentum for climate change and

sustainable economies. In this episode,

they summarize their perspective and
share with us their view on what the

profession can do to accelerate this
transformation. More specifically,

they discuss how management accountants
can support their organizations in

managing the data life cycle
of sustainability information
from cradle to grave.

Keep listening as we head
over to the conversation now.

So I understand you both talked in
Glasgow about the greening of data and to

start off our conversation, I'd like to
first to ask, what do you mean by this?

It's a great question to start really
setting their context for the conversation

and the discussion we're going to
have Mitchell, because you're right.

We were in Glasgow talking
last week about the data life

cycle and Liv and I have coined the
term greening of the data as a way to

describe some of the problem, but
let me be put it in context for you.

So if we think back to the IFAC work,

and we've talked about this in previous
podcasts and some of us may be very

familiar with their work,

they basically look to assess the cost
of prudential disclosure reporting.

And it was just one example of
the issue that we see around data

management and the cost of that data,

to the compliance and regulatory
reporting that ends up happening.

So we know that in the
context of the IFAC report,

that about 780 billion US dollars is

spent every year by the financial
services industry alone on this type of

reporting. So what we are saying is, look,

what if we could save half of
that data, like half of that cost,

of processing that data through
digitization and structuring data at

creation. So if we really started to think
about it at the point of inception or

origination, and we really carry that
idea through to how it's processed,

how it's disclosed or
how the user consumes it,

imagine the kinds of things that we
could do in terms of environmental

initiatives that we can invest in to
better the planet with the money that we

save.

So really what we're talking about is
it's about reducing the ecosystem costs

for the sustainability reporting
and basically reinvesting this

spend into initiatives that
will ultimately result in
sustainable economies and

business models and have
better stakeholder citizenship,

because that's really what it's all about.

And all of this could be done without
raising a single incremental tax dollar,

because frankly,

I think we all need to look at more
creative ways to start achieving

sustainability objectives without
defaulting to what we've always done,

which is raising taxes.

And we can see the effect of these tax
discussions in bipartisan decisions all

around the world. It's not, you know,

unique to one geography because as
effectively a tug of war between fiscal

responsibility and the social
climate responsibility,

and that's really what's
tugging this discussion.

So unless we can start
to unlock this barrier,

we might still actually be talking about
this subject in 10 years time and time

being a luxury that we
don't have much of anymore.

So greening of the data is all about
reducing the cost of compliance and then

reinvesting that for the
better of the planet.

Well,

you have certainly piqued my interest
and I think a natural follow up question

to what you just discussed is how, right?

So I'd like to direct this
second question to Liv.

How do you make this digital vision a
reality that really benefits everyone?

And, you know, David just mentioned some
of the stakeholders and the tug of war.

How do we get everybody in alignment
around the world, on this topic?

Okay not an easy task, but Mitchell,

thank you again for
having us back on the IMA

podcast and amazing
platform to get new topics,

new ideas from.

I would also think IMA's and many
of the listeners might not know

this, but IMA was actually
part of the founders of the

digitization of financial and business
reporting as a founding member.

So, XPRL international.

So our industry organization had been
a thought leader in this topic for a

long time.

I have had lately the
opportunity to lead an initiative

appointed to the European commission
or by the European commission to

EFRAG. And for those of
who don't know EFRAG,

answering your question here very quickly,

but the players are key to
understand is that EFRAG has

been kind of the similar to fast P in the

United States and standard
center for financial reporting.

EFRAG is the European equivalent
working with the International Accounting

Standard to recommend
international standards,

to the European commission that they
then adopt and embed into legislations.

Right now, we have talking
about greening of data,

two drivers, right?

Regulators wants to reduce the
cost of compliance and standard

setters has to start thinking
digital from the outset.

And so EFRAG, who used
to be a standard take.

And with now becoming after a

consultation that I was appointed
to a special task force,

and we proposed 54 detailed
proposals on how the European

commission could accelerate
sustainability disclosure

and improve on their current
reporting requirement,

which was a legislation
called the Non-Financial

Directive Reporting
Directive to now becoming

a delegated act to improve.

Because now they want to be
thinking not just standard that are

more descriptive, not only
just more descriptive,

but also we are in the statement.

So for an annual report in
the management discussion,

we are now writing the standards,

proposed standards for the
European commission to mandate the

data, to be disclosed in
the management report.

And why is this important is
thinking digital from the first

trying to get standards
that are written by silos,

and then trying to bring consistency
so that you can digitize them,

not just the reporting.

So the taxonomy for the reported data,

but also think about digitize
the standards that today sit

locked up in PDF files, et cetera,

that they've actually become
executable codes. So yes,

number one,

we need to start thinking
digital from the outs and

not digital after the standards and

legislation, are put in place.

So that is why we feel
that now is a momentum

but it took strong
leadership from regulators to

standard setters to a project
that David and I have been very

involved with under the
Institute of Management project,

an initiative supported by
the G 7 to bring consensus

to sustainability reporting
and thinking digital

first was a project that
we got on the agenda,

the standard setters. So
yes, it takes a village.

I will tell you,

but I do feel right now and
some of the work before I

talk about some of the key
findings or the challenges of

digitization for the last few years,

David and I have done research
around the complexity of

digitization for companies and
David coming from the preparer side,

me coming from building
compliance platforms,

that's used by some major
companies around the world.

We discovered how fragmented
regulation, right?

And you can't just digitize
and create structured

data that can be discoverable if
standards are not written more

structure.

So that fragmentation because
standards and regulators are

so fragmented in our paper,
the digital transformation,

brief business reporting in the
fourth industrial revolution that was

published by IMA and thank
you to IMA for letting us

publish that paper. Because
at the European commission, in

our analysis,

that supported why we needed
digitization was actually drawn

from some of our research within
that documentation in that paper.

But we also need data management
to collect data that is like

cost enabled.

David and I talk about greening the data,

but we also need to create
discoverable data, digital's data.

There is lots of it out there, but
how do you find it? Where is it?

So the data ecosystem is
fragmented and we need

key stakeholders and IMA
to continue supporting

this journey because it's
really, truly not just,

and one time kind of an event there,

we are on a journey on digitizing
information that is consistently

changing. And in a very dynamic world,

it needs what we call controlled
vocabularies, And agreed interoperable,

taxonomy. So not sure Mitchell,

I could talk passionately
about this for quite some time,

but I better get back on
track and turn it back to you.

Well, thank you, Liv. I mean,

there's certainly so much to consider
with this topic and you outlined so many

key components of it. As you said, I'm
sure you could go on for much longer,

but, you know, to stay where
we are in this conversation.

And to flip it back to David for a moment,

I do want to pick up on some
of the things Liv just shared.

I think for many of our listeners,

particularly one of the things
that they probably question is,

how do you really present this issue
to those who are making the business

decisions within their
organizations? So David,

how do you bring this issue to life
for finance and accounting executives?

It's a great question because it is the
million dollar question at the end of

the day. Theory is wonderful,

but what does it mean to me on
the ground in my day to day role?

So let me use a really simple human
example to illustrate what we mean.

And this is something
I think that listeners,

all around the world can relate
to. So you're a preparer, right?

You've been tasked with preparing,
a sustainability disclosure,

either a sustainability
report or a disclosure.

And imagine that you've got to try to
figure out which sustainability standard

or standards you have to choose to
report on something like greenhouse

gases. So today greenhouse
gases are covered by CDP.

There are also covered in IOS 14
0 6 4, and we don't stop there.

They continue to be talked about in
the greenhouse gas protocol and TCFD.

And of course there are a
number of country specific
regulatory requirements as

well.

One example from around the world is in
the UK and they've got the measuring and

reporting environmental
impacts guidance for business.

So a preparer in the UK for example,

would have to look at a
number of different standards,

and then they've got to start answering
questions around. Okay, great.

So let's assume I've read all of
this and I can make sense of it.

Then I've got to start thinking about
questions to solve around. Well,

what data exactly do I need to collect
and how do I correlate that data in a

way that is going to make sense and is
going to relay something meaningful to

someone who looks at it? Well, then how
do I run that through scenario models?

So if I have to run a number of
models, how would I actually do that?

And then how I going to assure
the sustainability data?

So even on the assurance side,

a lot of standards that are at the
moment are talking about assuring

sustainability standards and
data themselves in particular,

which is absolutely the right idea,

but it poses some very interesting
challenges for the profession.

So it makes us then sit back as finance
or sustainability professionals and sit

and think,

how am I going to actually wave through
just the sheer volume of data and the

noise that gets created through that
volume of data to actually tell them a

coherent story to external stakeholders?

So what we really mean is that in effect,

this challenge is really four
pronged. It's about data availability,

data integrity, data fragmentation,

and data that ultimately
needs to be multifaceted,

meaning it needs to serve
more than one purpose.

So when we talk about availability,

we're talking about data that
needs to be identified and known.

So we've got to know where it's
located, what format it's in,

and is it conducive to a
multi reporting environment?

If you are sitting in an
organization that has to report in,

let's say 60 jurisdictions,

that's potentially 60 different
ways just on a country level,

never mind an individual regulatory body
within the context of that country to

do the reporting. If we
think about data integrity.

So this is about data being trusted
or capable of being trusted,

which really speaks to the whole issue
of audit and the ability to then audit

that data. Or if we talk
about data fragmentation,

this is the recognition that data is
effectively trapped in the number of silos

systems at the moment, or
potentially in some repositories.

And it could hold a wide
variety of formats, right?

None of which necessarily are easy
to automate or to integrate in

any meaningful way.

So we need to fundamentally change
the data management process so

that we really start to think about
it from the context of inception.

So data creation, not just disclosure.

So as Liv mentioned a little bit earlier,

it's thinking about the entire
cycle and not just the output,

which I think has been our traditional
fallback strategy in years gone by.

And then the fourth aspect,

when we talk about this challenge of data
in of the multifaceted nature of it is

it's basically that the same piece of
data should be able to fulfill a number of

different purposes without having
to be manipulated or re-keyed

from one format to
another. So in other words,

how do we drive down the kinds of
errors that are quite typical from those

kinds of problems? And I
think as Liv you've mentioned,

we talked about this quite a lot in
the paper that we published through IMA

last year. So effectively,

there are two key messages that really
come out quite strongly from the work

that we've done, that I'd like listeners
to reflect on as they listen to this.

So the first one being that when we
talk about structured and govern into

operability,

it's really a foundational requirement
for this digital future that we keep

talking about.

And it's got to be able to transcend
geographical boundaries because the

reality is,

standard setters may not harmonize or
integrate into a common set of global

standards,

certainly in the near term and maybe
not even in the mid or the long term,

you know, we can just see what happens
on the financial standard side.

And there really still are
some differences after decades.

So we need to start thinking about
solutions that transcend that and allow

geographies to have some flexibility.

And digital is certainly
one mechanism to do that.

So what does that mean
to us as preparers? Well,

it means that we need to start insisting
and putting more pressure potentially

on policy makers and standard setters
to consider it more concretely and

directly in everything they do. So Liv,

referred to it as this idea of digital
from the start. And that's exactly right.

So it's,

it's about how the standard is designed
because the standard setters or the

policy makers will need to start thinking
about what will that look like in

digital form. So it's a very different
way of thinking and therefore designing.

So that's the first message.

And then the second key message that I'd
like to leave listeners to reflect on

is we've got to mobilize
together and that's the only

way we're going to drive
a digital solution.

That's going to significantly drive down
the cost of compliance for the entire

ecosystem, because this
isn't just about preparers.

This is about everyone in the
ecosystem, getting benefit out of this.

Because as I said before,

the money that we save could absolutely
be reinvested in many areas for

public good.

And I think Liv said it really well a
little bit earlier when she said it really

takes a village to make this happen.

Now, David, you mentioned a couple
times through that response.

I know you said prepares earlier on,

you said accounting and
sustainability professionals.

One thing I do want to keep
top of mind is, you know,

the target for our podcast
here really being, you know,

IMA members, but management
accountants at large,

I would like to kind of
discuss their role and some,

advice that they could
take a bit further beyond,

some of the key messages that David
just left. So Liv, if I could ask you,

you know, being a former IMA board member,

what advice do you have for Ima
members or the accounting and finance

profession,

in order to become advocates for this
digital sustainability information

transformation?

Well, first of all, IMA as
a professional organization,

as I stated earlier,
has been leading this,

but it's also been my professional
organization for over 20 years

where both contributing
to the body of knowledge,

but also my career was built
on the body of knowledge that I

learned from IMA bringing
in back into my work

ethics and career opportunities.

So IMA I think has and
I'm going to quote our

fearless CEO at IMA Jeff
Thompson that says as the world

continue to change, so too who must
business change to focus more on

holistically on sustainability
business management for long term value

creation.

I think reflecting back on David
and I being in the dialogues

up in Glasgow's is also very
interesting to see that this is not

just a regulatory environment.

This is a private public sector that we

all have to change. And I
think from an IMA perspective,

management and accounting profession
cannot better be suited to

take on that challenge of greening data.

It's our role tobring

data forward that can drive
business decisions and we need to,

in our fiduciary duty and
my opinion help reducing the

cost of compliance and
data management so that

we can deliver data that is needed.

So we need new skill sets.

We need to think about how
data is produced, discovered,

and repurposed.

Then we got to rethink how
we contribute to the life

cycle of data. So with that,

I'm very excited also
going back to the IMA

and our now board as I stepped down.

My time term limit was up this July, is

that the board has now
taken a decision to create a

sustainability business
management global task force.

I will be a member of that task force,

but it is about setting the stage for

what is the kind of role of
the management accountant.

It also will start looking at things like,

how we can become the custodian of data

management and bringing this data.

But it's also going to give us
an opportunity to be right in

the dialogue of the key topics
that the world is talking about.

Now you can hardly pick up a
newspaper without reading about

the real danger of climate change
and the impact on business.

So I want to emphasize that
doesn't just impact big business.

It impacts small
businesses impact globally,

and IMA is stepping out globally
with this first task force.

So going back to IMA, and our members,

number one from a personal perspective,

IMA has been the place where
I get the knowledge to drive

my career and opportunity.

And I had quite a journey
with being able to do so,

working and traveling to over 108
countries and meeting IMA members

in all parts of the world,
but seeing their profession,

coming together and really
putting digitization first,

we still have some, as I
say, progress to be made.

And with this new task force,

I think we can get sustainability
and digital thinking first

onto the agenda.

And greening of data is one of
the greatest opportunity for

our profession. I don't know David, if
you wanted to add anything about that,

but you and I are both very
keen to say that the management,

the accounting professions got to be
at the table because that's where the

cost of data is.

The added costs that
XPRL does for regulatory

reporting is an added cost
that bring value to the output.

But the life cycle is where
we got to get standards to

be digitally auditable and discoverable.

And we as a profession
stand very well to take

the opportunity to, advance this, topic.

I think you summarized that
brilliantly Liv and I agree a hundred

percent. I think that it just needs
a different level of thinking.

I think it needs a higher level of
thinking and frankly it needs real

leadership and it's
taking leadership in the,

let's say the not so sexy things that we
talk about in the context of accounting

and finance, which is the data, the
infrastructure and the plumbing.

So I think it's recognizing that
actually we've got a lot of potential

value tapped up in that,
that we need to unlock.

And we can do that by creating a
digital end to end environment and

in doing so,

driving down the cost and therefore
enabling the investment of

that saving, to the betterment of every,
part of the world. So absolutely agree.

A hundred percent.

This conversation obviously is,
you know, beyond multifaceted,

there are so many different,

perspectives and different points that
we can really dig into a lot of what we

talked about. So valuable, as you said
earlier on David, I believe, you know,

it's,

it's kind of been a little bit more in
theory and we always really like to dig

into the action, right.

And some really actionable
next steps. So, you know,

in the essence of time as well,

I'd like to just kind of ask one more
question and give you both an opportunity

to share what you believe the next steps
may be, you know, for our listeners,

how can they actively get involved?
What can they really do to help realize,

you know, this vision that you're
discussing? And I would have to imagine,

you know, obviously it starts with
their individual organizations first,

but as we wrap up 2021, we get into 2022,

what can our listeners,

the profession actively do to make
progress on these initiatives?

It's a great question. And it's amazing
how quickly time flies chatting to you.

Mitchell,

it's always so much fun and ending on a
forward looking question is always the

best place to do that. So what can we
do? There are a few things, actually,

we can, some concrete steps that
we can take as professionals.

The first is something that is,
an area, a very simple area to do,

which is common on exposure drops
that relate to business reporting and

disclosure. And really,
I think as Liv said,

make sure that these
requests include information,

and disclosure around a digitization
strategy because that's ultimately

where we need to go. We need to be
able to get data that's structured,

standardized, has common vocabularies,
common dictionaries, et cetera,

because if they don't do that from the
standpoint of setting the standard,

then we need to push harder to make sure
that they consider our preparer needs

in this regard in a much more
direct and concrete manner.

So that's the first really
easy, low hanging fruit to do.

And there are gonna be a number
of our opportunities to do that.

Certainly I think as
Liv mentioned earlier,

Europe is going to have that opportunity
next year and they won't be the only

ones we'll also see similar, requests
we already do from the SEC and others.

The second concrete step that they
can take is consider adopting a more

cloud-based integrated business
solution environment. So really,

instead of thinking as of the
traditional inflexible ERPs,

start thinking a little bit more about
the solutions that are more cloud based

and more SaaS based that can end
up into connecting with each other.

And that's important because it provides
the flexibility that companies and

organizations need to be able to adapt
to the rapidly changing environment that

we're in. If there's one thing,

the pandemic has taught us if nothing
else has been taught to us around that

from a business perspective,
is that everything changes.

And we need to be able to respond to
that in a much more rapid manner than we

have historically.

And we need to be able to do that
without having to go through significant

transformation projects or programs,
which frankly just add time,

cost and complexity to many
organizations. So even, you know,

whether we're talking about SMEs
or we're talking all the way up to

multinationals,

I think adopting this kind of a
mindset for flexibility and integrated,

cloud based solutions is
a very healthy way to go.

And then the third thing that I
would suggest is a very concrete step

is to start thinking about processes
internally that think about data from

inception, through collection
processing and reporting,

and start thinking about
the process design,

the process flow that they need to go
through and start really thinking about

what's the plumbing or infrastructure
that needs to underpin this digital data

management,

right from the start within the
company and thinking about it from the

standpoint of, if I can extract
value from this information,

I can help management in a much more
concrete manner around the company

strategy. So really thinking about
this information as being a gold mine,

to helping us internally from a
strategic perspective, not just,

a disclosure requirement later on,
because I think at the end of the day,

we can't afford as a profession to sit
in the backseat or in the passenger

seat. We've really got to start taking
a much more assertive leadership

role in digital data management.

If we're gonna get the kind
of breakthrough change,

that's absolutely gonna
be necessary in 2022.

And well beyond that. So on that note,

thanks very much for inviting
me to chat with you today.

Mitchell I've really enjoyed it. And
let me turn it back over to you and Liv.

Yeah. Thank you, David. And as you said,

I would like to give Liv an opportunity
as well to share her closing thoughts on

this topic.

I'm going to be quick here as,

I think everybody and the key message
here. This will take a journey.

It's not a destination and answering
your question very clearly.

How do I stay involved? I
always said show up, right?

And I think showing up means
within regards to our profession

here is IMA has a lot of opportunity.
We have the IT committee.

We now have the sustainability
management accounting,

special taskforce. There are
many articles. There are,

discussions at our annual events and
even at the local chapters events.

So there are many opportunities
to take an active role

in, within IMA and other
organizations. But IMA,

like I said,

is very well equipped for both
educational and leadership role here.

The second thing I wanted to let
the members know is that David and I

will be taking a very leadership
role and will obviously invite

a professional to the
table. But we recently,

under the umbrella of the impact
management, where I am seconded to,

it's a project for seven years
to build on impact standards,

right? So what is the impact? The company,

not just their value creation is that,

we have a grant from the tipping
point and we will continue,

foster dialogue and meetings over the next

few, few months where we are going to

map out what the plumbing with
the right key stakeholders in the

room. And IMA will obviously
be at the table at this,

but many of the world leaders and
that's building on the success

from cup 26 and our event there.

We started out to be a
dialogue around six to

15 people.

We're going to have a couple of coffee
and talk about digitization to the point

we had to turn people away and now
have a very good foundation of the

right people in the room to drive
these changes so that we can get

the plumbing to really
have discoverable machine

readable, auditable data that we so need.

If we ever gonna measure

the impact on climate and
this commitment that companies

and cities and industries are doing toward

net zero, we have to have accountability
and accountability as data.

So yes,

let's do this while we are
still young and the IMA

has have a wonderful platform for us
to drive this leadership globally.

And thank you, Mitchell.

I hope we with new updates
that comes later on this

year, that you and invite us back.

Absolutely. Thank you
so much. Liv. And David,

it really is a fascinating topic and
Liv you took the words right out of my

mouth. It's always
great speaking with you.

And I have a feeling with all
this progress and work being done,

this will not be the last update that
we discuss. So thank you again. And,

I hope you both take care.

This has been Count Me In, IMA's podcast,

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