ESG CoStar

Reconciling Sustainability: Your Role in ESG Reporting


Sponsored by CoStar

Accountants have been on top of ESG long before the headlines. They just didn’t know it! See how accountants already have everything they need to lead sustainability initiatives.

Sustainability and ESG are hot topics that present new opportunities. But many accountants are surprised to find that they have more experience in this emerging field than they thought! 

I am one of those accountants. 

To break down how sustainability initiatives are providing new opportunities, let me first tell a few stories about other opportunities that have presented themselves in my career.

Green Ledgers

I’m not trying to be clever by tying nostalgic green ledger paper into the “green” sustainability discussion.  I’m actually going to tell you about the first time I noticed an opportunity for improvement in my accounting career.

One of my first jobs was working for a family-owned property and casualty insurance company.  It was great experience, but one thing struck me as inefficient.  You see, every quarter-end close, I would need to go into the office on the weekend and record that quarter’s JE’s in the ledger.  Not an electronic ledger, a stack of green ledger paper bound together into an actual ledger book. 

I was pretty green myself, but I knew something could be more efficient.  In that case, the company needed to embrace technology.  When they eventually did, I bet the accountants didn’t have to work on weekends anymore!

That’s the first time I remember recognizing an opportunity for improvement in my day-to-day work as an accountant, and there have been many times since then.  It turns out I’m not alone!  I recently polled over 100 accountants to ask how often they identify opportunities for improvement.  43.5% said every day!  54% said at least once per month or occasionally.  The math is clear, accountants are good at identifying areas for improvement!

Thankfully, many accountants today have never had to write journal entries in green ledger paper, but my next example will hit closer to home for many. 

Electronic Reconciliations

Fast forward a few years.  I had moved from the insurance company to working at the world’s largest home improvement retailer.  At one point while I was working as a Manager of Accounting, I was responsible for reviewing over 300 balance sheet reconciliations per month.  Do you know how I reviewed them?  My team would print them out, stack them on my desk, and I would tick and tie each one and put my initials on them when I was satisfied.  I had a folding hand truck that I used to take these home with me to review over the weekends.  And all that paper had to be filed away somewhere when I was done, just to repeat it all the next month.  Think how many trees were involved in that process.  This was a $90 billion company, and we had the best accounting ERP system available, but I was still doing manual work on the weekends.

Turns out there was a solution for manual reconciliations.  Through CPE conferences, I learned about a company called BlackLine that was automating the reconciliation process.  I proposed BlackLine as a solution and obtained project approval.  Now, the accountants at that billion-dollar company are not using hand trucks to cart paper copies of reconciliations home on the weekends.

It is satisfying to not only identify an area for process improvement, but also work to implement the improvement.  I’m in good company in this category as well.  Turns out 90% of surveyed accountants said they have worked to implement a process improvement and over two thirds of those said it has happened “many times”.  So, accountants are good at identifying areas for improvement and implementing change!

Double Materiality

One of those reconciliations that I was responsible for was for the Pallet Credit Receivable account.  This account was used to record the deposit that the company paid to the wooden pallet vendor when we used a pallet, and we got the deposit back when the pallet was returned to the vendor.  Simple enough, but I noticed a problem.  Every month we wrote off about $500,000 worth of pallet deposits. 

Believe it or not, that $6,000,000 per year was basically just considered a cost of doing business.  Not so hard to image because remember, we were selling $90 billion worth of home improvement products, and almost every product showed up at the 2,000+ stores on wooden pallets. 

Still, I thought we should try to do something to stop the loss of pallets.  We put together a cross functional team, raised awareness, changed behaviors, and the losses stopped!

I bring up the wooden pallet example to highlight, not just another case of accountants improving business results, but also to highlight a term related to sustainability:  Double Materiality.

Double Materiality basically means that some things are material to the financial statements and material to the environment.  Guess what wooden pallets are made from?  Yep, wood.

I did a little math with the help of Google AI:



 

I’m not sure exactly what 20,000 acres of rainforest looks like, but I can imagine. As a matter of fact, AI can also help me share that image with you: