< 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
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visit IMA's website at www.imanet.org.