Hello again, welcome back to Count Me In,

IMA's podcast exploring the world of
business from the management accountants

perspective.

I'm Adam Larson and today
we are discussing exciting
new thought leadership from

IMA, which shows how management
accountants are on the front lines,

making businesses more sustainable.

The name of the report is Management
Accountants Role and Sustainable Business

Strategy: A Guide to
Reducing Carbon Footprint.

And I'm excited as brought some of the
researchers and authors involved in the

project here today, including
Kristine Brands, management professor,

the US Air Force Academy,
Arnaud Brohe CEO of Agendi,

a leading consultancy for climate
and sustainability programs,

and Jaxie Friedman, a
sustainability consultant at Agendi.

Make sure to follow a link in the
show notes to access the full report.

Let's start the conversation.

So before we can talk about reducing
carbon emissions for a company or for

anybody,

we kind have to start talking about the
drivers that kind of led us up to this

point that would make companies
and other folks realize, Hey,

I need to start paying attention to
this and can, so let's start there.

Kristine, can you, can
you start that off for us?

Yes. Before I speak, I have a disclaimer
because I work for the Air Force.

The views that I am speaking
about are entirely my own and

do not reflect any policy or
position from the Air Force,

the Department of Defense
or the US government.

Drivers are huge and what
astonishes me is the awareness

and the rising of the consciousness
of people towards climate change.

And they take several dimensions
of clearly external and

the physical drivers,

which are the data behind climate
change and the astronomical

risk that we're facing
globally as a society.

And that carries over to internal drivers,

into organizations that are
going to be put in a position,

which I predict is going to come faster
than people can imagine to address

that risk as well as
their strategy so that

they can adapt and adjust
and be agile to the threats

that we're all facing as a society.

Arnaud, Jaxie, do you
have anything to share?

Yeah. I agree with what Kristine said.

I just think that people don't realize
how fast this is going to evolve.

But that's critical.

Basically we have 10 years to change
the way we consume, the way we produce,

the way we are organized as a society.

We have 10 years to start thinking about
how to change our mobility systems,

you know, shifting from thermite
combustion engines to electric cars,

that's going to be very visible, but
that's just the tip of the iceberg,

frankly. We have,

we need to revolutionize the way
we consume energy in factories,

the way we consume energy in agriculture.

So the changes are just enormous.

The drivers of course are
the physical climate risk,

but that's not the first drivers that
companies are going to experience what we

see today and taking the
automotive industry as one example,

to trade is that transition risk are
going to affect businesses even before

physical risk and by transition risk
I mean, the pressure that customers,

the regulators, governments are
putting on existing businesses.

So if you are an automotive
manufacturer today,

and you wanna sell your car in no
way, or the Netherlands or Germany,

you better be ready to switch to
much more efficient cars and to

gradually shift 200% electric cars.

And we know that these trends are going
to come here as well in the US and in

order jurisdiction.

Yeah. I think it's true. What
both of you guys are saying that,

you know, the science is showing it's,

it's more and more significant and
gonna be incredibly problematic,

but I also think that there's
in relation to that a lot of

pressure coming from businesses
and consumers as well,

that is really driving
this action. You know,

of course it's true that the science is
showing that more work needs to be done.

But I also think that there's
more awareness around that fact.

So it's not just a
matter of, you know, the,

IPCC reports saying that, you know,
there's targets we need to hit.

It's also a matter of more
public awareness that's

trying to push us forward.
And some of that is, you know,

more just reputational.

So investors encouraging companies
to be integrating climate

into their business strategies.

Some of it is regulatory like Arnaud
I were just speaking about kind of

the SEC regulations and how there's
kind of current movement towards there

being potential regulatory
requirements related to climate.

And I think, you know, the fact that, you

know, those new SEC kind
of papers have come out to

suggest that we're
moving in that direction,

I think is gonna be continuing
to intensify the speed at which

climate becomes integrated, not
just into sustainability functions,

but across entire business operations.

So it almost seemed like you
needed the customer and the

government regulators to say something
cuz otherwise businesses probably

wouldn't have done anything.

I think you're absolutely right.
There's been a lot of resistance.

There is pressure. There's
reputational pressure as was mentioned,

but the real push is to pass the

regulations which the
European union has done.

And there are daunting proposed
regulations from the SEC.

And I think that that's what
is necessary to close the deal.

I think also, you know, it depends
company to company. I think, you know,

considering company culture
is a really important factor.

There's more and more businesses that
really have sustainability within their

DNA evolving as it's becoming a
bigger part of our society as climate

action is becoming more integrated
at a public perspective.

So I think in order to
move the needle among

kind of the mainstream body of companies,

I think it's completely true that the
regulatory pressure helps really push

things along.

But I also think it's important to
acknowledge that there are many companies

that have taken really huge steps in
this direction before regulation was

even on the table.

And so I think it's important to consider
that fact, I think that, you know,

a lot of companies get a lot of or you
know, with a corporate world in general,

I think gets flack that they're, you know,

the causing so much of the emissions
and that they're, you know,

the source of the problem,
but the truth is like also,

they're also a big part of the solution
and they've been a real driver of

innovation towards our climate solutions.

And so I think it's important
to acknowledge that I
think regulation is not,

it is a kind of like a compounding force,

but I think even in its absence,

there've been a lot of massive
growth opportunities that have

evolved because of companies
that are really, you know,

recognizing the need even
without the enforcement.

To compliment what Jaxie just said,

that I would say we should stop
thinking about seeing businesses as when

homogeneous group there will be
winners, there will be losers. You know,

when we analyze climate
risk with our clients,

actually what we do is analyzing
climate risk and opportunities.

If you are an oil and gas company,

of course like your future is less
exciting that if you are renewable energy

company does not mean that
you will go out of business,

but you need to reinvent yourself.
You need to start, you know,

investing in biofuels, investing
in carbon capture. You know,

you also need to think about
diversification, you know, like,

should you have all your assets deploy
around all exploration? Probably not.

Like if we read the IPCC, we clearly
see that we should stop drilling oil,

you know, that in the long run. So,

but of course that's not the
same story if you are, you know,

developing alternative meat, if
you are developing electric cars.

So really I think regulation and
businesses can go end in end,

but we need to have that common goal to
significantly reduce our greenhouse gas

emission, simply because that's
the survivor of the human species,

which is at at least like the
quality of life that we enjoy today,

which is at stake.

I mean, that's hugely important. I mean,

we all kind of want to still be around
on this planet and enjoy this planet for

years to come.

So bringing it back to since this
is a podcast about all things

affecting the accounting
and finance world, how,

what value can management accountants
really bring to this process of, you know,

making this important in an organization
and, you know, going through it?

I think they are an essential part
of the process and the progress

that needs to be made.

And you can look at it from the high
level of their traditional role of

gathering data and information
and creating reports and acting on

those poor decision makers.

But it really transcends
that they are ideally suited

because they're a part of the
inner, they have the tools,

they've got the toolkit that
they can use to create value.

And that's what it comes down to,
creating value in their organization.

And just to name a few,

there are cost benefit analysis
and that's something that interface

corporation in Georgia used
to completely transform

their strategy from profit bottom line to

sustainability goals and objectives.

We have the gap balance scorecard,

which can be overlaid with
a sustainability perspective

developing a strategy map because if
you're really gonna change the direction

and the trajectory of organizations,

you've gotta integrate
this into the organization.

That's what management accountants
do. And very, very importantly,

the reporting is not
standard financial reporting.

We're focusing on non-financial metrics,

sustainability metrics,

so they can customize those
within their organizations,

do peer analysis with their industries
and come up with a reporting framework

where the results can be presented
and then to do the capital

budgeting analysis which is also
tied to implementing innovation

within their organizations
to be able to look at

new ways to do things.
If you're an airline,

maybe you're going to weigh
everything that's on that plane.

You need metrics and capital
budgeting analysis to invest in that.

I honestly think that the management
accountants are the center

of the reporting in their organizations to

partner with other members
of the organization.

Yeah. I'd love to chime in and just
share some additional thoughts. I mean,

I couldn't agree more. I think, you know,

even in businesses that maybe don't
have greenhouse gas accounting

directly centered within
an accounting department,

maybe kind of separated off to the side
within a sustainability department,

accountants are a critical piece of the
puzzle. Like we are already, you know,

with the diverse clients
that we work with.

Accountants are always an important part
of the conversation when we start to

think about measuring emissions
from the entire value chain, right?

When a company's emissions,

tend to have the majority of impact
actually coming from outside of the

direct operations.

And so we need to provide this gets
a little bit technical, but you know,

when we start to actually
measure the emissions,

it requires an implementation of kind
of like diverse data points that are

often reliant upon vendor spend figures.

So the accountants are inherently
directly connected to that.

I also think when we think
about kind of the shift in

regulation becoming more
apparent and influencing

how companies are measuring
their greenhouse gas emissions,

accountants are the experts who knows
better how to respond to the SEC

than those business divisions.

And so when we see regulations starting
to become embedded within those kind of

financial disclosure frameworks,

it's absolutely critical that there
be that expertise that's able to

be brought into the conversation in
terms of how we actually meet those

regulations. And in relation to that,
I think, you know, if we look at,

for instance, the task force for
climate related financial disclosure,

it's a set of recommendations that
helps to advise on how a company

should strategically measure
their climate risk and

kind of communicate their risks

and opportunities to stakeholders.
And I think, you know,

that TCFD framework often talks
about how do we quantify in

financial terms, the actual climate risks.

And I think it's really
important that we recognize that,

you know businesses are evolving
and how they define their bottom

line, right?

We're moving towards this triple bottom
line of considering environmental and

social factors, but the
traditional society it's, you know,

finances are what determines value.
And so when we consider that fact,

I think it's really important that climate
impacts be able to be translated into

those financial metrics. And
I think it also, you know,

not just in kind of early stages
of a climate reporting journey,

but even later stages
coming up with, you know,

internal carbon prices and thinking about
how you can implement smart strategies

that help your business, not
just measure your impact,

but also start moving towards
the type of kind of low impact

and positive oriented future
that you're hoping to accomplish.

And so I think accountants are
absolutely critical from early stage

companies,

all the way to the companies that
are really acting as pioneers in this

sustainability space.

I think we need management and concern
to reveal the truth about sustainable

products and sustainable services.

Cause there is this bias that most people
think that when something is good for

the climate, it has to be more expensive.
And very often it's because yes,

it costs more money when you buy
it. You know, it's an investment,

but there is a payback
for that investment.

And I think we need management accountants
because they play a key role in the

capital allocation.

And if they can help business leaders
understand that what they should look at

is the total cost of ownership. So
if you think about retrofitting,

your factory, of course it's
going to cost consume money.

But if you model like
future price of carbon,

if you model the price increase that
we see for oil and gas and that we will

see in the future as well, especially
like if your business is international,

the price of gas in Europe today
is crazy, it's super expensive.

And it's not just driven by
the war in Ukraine, of course,

that had a major impact.
But already before that,

we could see prices going because there
were simply more regulation and more

pressure to reduce greenhouse
gas emission in Europe.

And they have a very high price on carbon
as well in Europe, which is going to,

which is already in effect in some
states in the US, such as California.

So if you take all those
factors into consideration,

you come to realize that actually
investing today, it's not a cost.

It's really an opportunity
that you should take.

And we need management accountants
just to reveal that truth to the top,

to show that investing today in a
more efficient fleet makes sense,

investing today in redesigning
your supply makes sense,

investing in retrofitting
your factory or buying,

you know, more efficient
boilers for your offices.

That makes sense as well.

I'd like to add to that
great response. And that is,

there is a myth that it's
more expensive if you try

to become carbon neutral.

And I think that the management
accountants can create the business case

to demonstrate otherwise and
partner with others in the

organizations to demonstrate
that that myth is

not correct.

And that if you have the awareness in
the organization and you're innovative,

you can actually make
more money and be more

profitable. And that's
a win-win for everyone.

So that is a win-win.

And I really feel like anything that
really is worth it and means it,

it does costs a little more upfront,
but over time it's worth it. You know,

things like DE&I,

or accessibility and things in that
route and things with decarbonization,

I found the same things that you guys
that you all are saying are the same

things that folks who are passionate
about those things are saying that, Hey,

it may be something upfront,

but it's gonna make us so
much better in the long run.

And I think that's what we're hearing.

And as we've been talking about the
importance of the management accountant,

so let's say you're a management
accountant, you've played out your case.

You say, Hey guys, this is gonna
go well, you need, you know,

buy-in from your senior leadership
to have some sort of company wide

sustainability project to
reduce the carbon footprint.

What does it look like when you're
trying to initiate that project?

Can we maybe discuss that a little bit?

You know, it really
depends on the company.

I also think it really depends on
the governance structure and how

open a company can be to new initiatives.

But I think ultimately what
you said is exactly spot on,

you need senior leadership to be a driver
of this work in order for there to be

company buy-in throughout
all of the different employee
groups that are required

to be involved in the initiative.

So I do think it's really critical that
senior people within the company are

integrated into those conversations
and in terms of kind of hitting things

off. And how do you start
an initiative like this?

I think it's important first and foremost,
whether it's internally or, you know,

working with external parties like Agendi,

which is where Arnaud and I come from,
you know, to understand what this,

the sustainability reporting landscape
looks like and specifically focused on

climate emissions. The greenhouse
gas protocol is sort of, you know,

the gold standard.

It's sort of our Bible for lack of
a better word in terms of how do we

actually measure and report on emissions.

And there's a variety of really
wonderful frameworks that exist out there

that really help to guide the process
on what data do you need and how

do you get from the data
inputs to the data outputs?

Because I think I mean,

accountants who knows their way
around a spreadsheet better than them?

But at the same time, you know,

you need to understand the full processes
of what needs to be incorporated in

because it's, you know, not your
typical financial calculations,

there's a lot of intricacies.

So I think the first step is
really kind of whether internally

or working with external consultants
to understand what information

you need, what you
already have and you know,

how you can move forward
from there. It's really,

the first step is to measure
your current impact prior to

the deciding where you need to go.

If a company gets too far ahead of
themselves and sets a target without

understanding their baseline, you know,

how do you know if that
target is achievable?

How do you know if that
target is ambitious enough?

And so I think it's really critical that
calculating things and calculating them

correctly is the first part of the
puzzle. You know, and with that,

I think one area in which it's really
different I think accounting has

a very kind of more
specific sets of rules that

maybe I'm sure there's
still constant evolutions,

but I think there's much more
of a culture in greenhouse gas,

accounting of the spirit
of constant improvement.

We speak with our clients all the time
about how it is an iterative process.

And it's always better to measure your
emissions to the best extent possible

this year, and then improve
upon that for the next year.

So in some instances where
you can't get the right data,

it might be a matter of using
some estimations based on

what is available. And so I think
familiarizing yourself, I guess,

first and foremost,

with how more broadly speaking one
calculates greenhouse gas emissions.

And then, secondly,

just not being too afraid of
being imperfect the first time.

You obviously want accurate numbers,
but at the same time, you know,

it's a complicated process.

And so it's really important that you
not avoid the initiative entirely out

of fear that, you know,

your numbers like will not be the ultimate
goal of where you would be in three

years. Yeah. Arnaud, I'm curious if you
have any additional thoughts on that.

Yeah. I think to me first,
you need to be inclusive.

So you need as an concern, you need
to go outside your own department.

You need to involve the
different functions,

you need to discuss with your suppliers.

You also need to discuss with your
customers as some of the impact will also

come from the customer side. You probably
need to involve HR because, you know,

your carbon footprint is also the result
of the activities of your employees.

So that's very broad process.

I would say your goal should be that
what you call a project does not be

basically becomes integrated
in the entire business.

So I don't see like sustainability as
a separate project it's really part of

running a business efficiently.

So you need to make sure that
the risk function, for instance,

one thing we try to do is working with
the risk function and making sure that

climate risk are being analyzed
by the risk function. You need to,

when you discuss, let's
say employee travel,

you should be discussing with people who
are booking for employee travel to make

sure that every time they
book for employee travel,

they think about the
consequences in terms of carbon.

So I feel it's a lot of
sharing knowledge, you know,

all the things that you
learn on this project,

you should share it with
all the departments.

So that basically the entire
organization, brief carbon accounting,

brief carbon reduction,

because that's the only way you would
be able to integrate all those best

practices within your business
and deliver results in the end.

I agree with what Jaxie and Arnaud said,

but I think that it's extremely
important to do something.

Start the process, start the thinking.

Definitely you need the
support of the top management,

but one of the lessons
that I teach my students,

because I've integrated sustainability
accounting in my management

accounting class is the power of one.

And with that awareness,

you can help turn the organization
around to understand how critical and

important this is.

It needs to be a culture
where everyone participates

and understands what's at stake.

There's a forklift driver
at Interface corporation,

and he knows that his
job every day is to save

the planet and to work
efficiently so that he doesn't use

more CO2 gas than he needs to use.

It don't have to start
with sophisticated systems.

Spreadsheets can do the
basic accounting and then

think through it can be complex as Jaxie
said. There's no question about it.

And it needs to be defined in an

architecture and a plan, and you
don't have to do everything tomorrow.

You can scaffold it and build
it into more complexity until

finally you're creating an ESG or
a sustainability report that you

can publish and share
with your shareholders to
demonstrate your commitment

to this urgent problem that
we are facing globally and

show the continuous improvement and you're
creating value for the organization.

I think just one more quick thing to
say off of that, Kristine, you know,

I think there were some great
points you addressed and, you know,

in speaking to that power of one
I think one of the first things

is creating an opportunity for someone
to take ownership of this work. It

is complex, as Arnaud said, it, it
requires numerous business divisions.

It requires consideration of external
stakeholders and identifying a

specific person who has this
either as their entire you know,

role or as a major component of their
role is a critical step forward.

So identifying who's gonna be doing
the work or at least kickstarting it

because, you know, in order for
there to be that power of one,

there needs to be someone to be powerful.

So I think that is important too.

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
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education, visit IMA's
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