There is just one truly important event in the economic history of the world, the onset of economic growth.
This is the one transformation that changed everything. GDP in the UK economy grew by an even larger extent, because not only average incomes increased since the onset of the Industrial Revolution, but the number of people in the country increased as well.
The statistics prove something needs to be done
Global economic development has improved the world in which we live but now we find ourselves in a situation where inequality is rising, we have serious risks with our climate, tensions and conflict are becoming deeper within the world.
- Less than half of the global population has access to essential health services.
- Manufacturing growth is declining to tariffs and trade tensions.
- 789m people lack electricity.
- 2019 was the second warmest year on record, with temperatures set to rise by up to 3.2℃ in 2100
Why do we need an impact-driven change towards sustainability from businesses?
To change this we can’t simply rely on the Government, Non-Governmental Organisations or the public. We urgently need businesses and their finance leaders to step forward and be a driver of this change.
In the UK 27.5m people are employed in business, of which 16.6m are in businesses with fewer than 250 employees.
The potential for action here is big.
We’re of the opinion that finance can be the real driver for change that the world needs to see. If we can shift the way of working with the incentive that we have in these businesses we can use this to positively impact the world.
How do you incentivise executives to consider sustainability?
If you change the way you measure success to a holistic model it would be illogical if you continue to incentivise your executives based on profit or sales outcomes.
Being able to see the impact of your actions is important and visuals will inspire and motivate many, but we must also recognise that in our deeply embedded business cultures the way we reward positive outcomes is usually through financial reward.
For many, many years, executives have been driven and measured by numerical results. We do need to be realistic as to how we can motivate businesses that are established into transitioning through to sustainability.
Executives are key to to reaching sustainable finance practices
Some may argue that it would not be ethical to reward executives for positive social impact, or indeed environmental impact, but we do believe if you don’t adopt this approach you’re going to struggle to take a big swathe of executives with you on your change programme.
It’s our view that it’s this group that has the commercial and creative thinking to really make this happen at a grassroots level. If we want to see this change, which is so fundamental to the way we live, then we believe that financial incentives for executives would have a material influence on the rate at which we move.
How can you incentivise executives to drive change and measure your success holistically?
Carefully consider the level of executive incentives. Is it fair? Does it reflect the effort and outcomes? Are other areas of your workforce receiving relative value incentives?
Where do you begin your finance sustainability journey?
Firstly by engaging your executive team in the process.
Involve your executive team in the decisions around the impact that the organisation wants to make. Getting agreement and buy-in from the beginning will make conversations so much easier.
Work closely with your HR & commercial teams to devise fair and measurable goals.
What could your environmentally-driven goals look like?
Goals would be linked to your impact report, examples of metrics could include:
- Carbon footprint reduction in the year
- Job roles created for the local community
- Diversity metrics in managerial roles
- Community giving can be directly linked to profit growth
- Product development with sustainable innovation and a viable financial return
- Supply chain sustainability measurement
- Achieve sustainability certification such as B Corp
What should your first steps be as a finance professional?
We advocate simply starting where you are today. Understand the sustainability landscape.
What is it and how does your organisation fit in it? Benchmark your business against a recognised framework such as the B Corps’ free Business Impact Assessment (BIA).
At Profit Impact we have a number of quality learning opportunities for finance professionals as well as sustainability services to help SME businesses to start their journey. Get in touch. Start today. We’re here to help you.
Sarah Whale, Founder of Profit Impact
Sarah Whale is an Impact Consultant and Founder of Profit Impact. She leads on sustainability matters for the ACCA in their global The Practice Room community.
Profit Impact supports SME businesses on their sustainability journey with Net-Zero, B Corp, and ESG, alongside a learning program for finance professionals to grow their impact.
Want to learn more about sustainability?
We have a webinar coming up on the 24th of May 2022 on Reporting ESG the RIGHT way. if you want to become an ESG reporting pro, then make sure to register your interest below.