wind turbines

By David York, head of auditing practice, ACCA

‘You can’t manage what you don’t measure'; so is that why ACCA has issued Technical Factsheet 190 Carbon accounting for small businesses? To give accountants the tools to help smaller businesses measure their outputs of greenhouse gasses. So they can manage them – reduce them – and help ‘save the planet’.

Partly. Plenty of organisations have been trying to make measurable and reportable the environmental (and other) impacts of business. But almost without exception, these initiatives have been aimed at, and only been taken up by, large corporations.

There is nothing wrong with that. ACCA has been prominent in promoting sustainability reporting and now integrated reporting for giant businesses for which measurable reductions can make significant contributions to reducing global warming. But more can be done.

These existing initiatives are not readily scalable down to very small businesses. The GRI G4 Sustainability Reporting Guidelines for example have over 90 pages and are issued with a 260-page implementation guide. The authoritative Greenhouse Gas Protocol corporate standard is over 100 pages.

In complete contrast, the essence of the ACCA guidance is contained in ten pages. It does this by introducing a simple form of carbon accounting. The simplification comes primarily from narrowing down the scope of reporting to concentrate on common businesses’ activities that have significant measurable emissions, typically energy use and transport.

This makes it potentially accessible to all, so that businesses are not deterred by either the amount of time it will take to complete the carbon accounts or the complexity of the process. The guidance has been developed in conjunction with Green Accountancy, an ACCA registered practice that successfully provides this service in the UK.

The factsheet explains the form of reporting, provides a methodology, and sets out ‘conversion factors’ – the means to convert physical measures, such as electricity used, into a carbon equivalent. Guidance is also provided on the relevant professional responsibilities, such as a suitable engagement letter, and on marketing this new service.

Marketing has a sting in the tail. The client must have trust in a firm’s ability to provide the service. There are many ways to build that trust, but there is one sure way to destroy it: unless a firm ‘practices what it preaches’ and does its own carbon accounting, it will have no credibility.

Brian Cox has got it easy…

accapr —  19 September 2014 — Leave a comment

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By Jason Piper, manager for tax and business law, ACCA

The recent launch of the OECD’s proposals for the BEPS project resulted in a deluge of response, commentary and reaction.

Too much is ill, mis or uninformed, and often from people who ought to know better. There’s a rush to present simplified answers, to try to clear everything up with a couple of soundbites and a nod to popular opinion.

But it’s not simple.

People say “oh, it’s not rocket science”. As these things go, rocket science is actually a comparatively simple bunch of equations. Rocket engineering on the other hand, now that’s difficult. Any 6th form physics student can (or at least, should be able to) do the theoretical calculations on how much fuel you need to get a given payload to escape velocity. But actually designing the pumps, tanks & nozzles to get the stuff to burn, let alone actually building them (hands up anyone with the knowledge of metallurgy to understand precisely which alloys you should be using where?) is a different matter, and only the most gifted and dedicated of amateurs have even a hope of getting a rocket to actually work (and even then they’d be the first to admit their debt to the professionals who build the parts).

Tax is much the same. Should everyone pay a fair amount of tax? Well that’s so trite it barely even deserves to be a question.

What is a fair amount of tax? You might as well ask what’s the right shade of blue, or how tall should a politician be.

Laws are the next best proxy we have to fairness when it comes to tax. But then the laws are (to put it mildly) complicated. And Brian Cox can point to planetary movements, reel off the equations, and explain what’s happened. When someone asks why a baseball pitch doesn’t work the same way, that’s easy – baseballs are operating in an atmosphere, and under another heavy gravitational field. And there’s no real mileage in trying to establish the physics of what would happen to a baseball in space, or a planet in the earth’s atmosphere and gravity, because the two scenarios are implausible. And there’s no need to worry about how a watermelon would operate at high altitude, or a whale sized object on the edge of the atmosphere, because such things don’t exist. There is no gentle graded curve between the tiny everyday objects that we all handle and work with and the vast numbers and forces which operate in astronomical models. There’s a clear break between them; no need for complex transitional calculations.

But tax isn’t like that. There’s no legal difference between the structure your window cleaner can set up to run his business and the one that a multinational might use to handle its international treasury function. There’s no difference in principle between the calculations that a business handling nuclear waste reprocessing does to work out its tax liability and those that a corner shop might do. And the tax system isn’t just trying to run one set of equations at once; it’s got two or three sets to cope with (companies, partnerships, limited vs unlimited liability variants, sole traders – they’re all valid forms of business, and it’s open to business to mix and match the legal forms to get itself the best result.) So it’s a bit like having planets that can behave like baseballs if they want to.

And the best bit is that the tax system isn’t like physics, which gets done to us and we just have to try to work it out from the evidence. The international tax system is something we’ve done to ourselves (albeit perhaps indirectly, in that it’s actually the work of elected politicians).

Now, I have to say that if we were in a position to be able to revise the equations that govern the temperature that the sun burns at, or the force exerted by gravity, I’d probably advise caution in the choice of those writing the new rules. I’d certainly want them to have a pretty firm grasp of astrophysics; a background in marketing or even an advanced degree in economics just wouldn’t quite be what I was hoping for.

But when it comes to the tax rules, there is a nasty tendency for the value of knowledge and experience to be ignored. I’m sure it would be terribly helpful to have the sun coming out at night instead, when the light would be more useful. Clearly weakening the force of gravity would make us all lighter and put diet clubs out of business overnight. Spinning the planet’s axis of rotation through 90 degrees would put London in the tropics and make for much warmer winters; bound to be a good thing.

It’s fairly obvious that actually none of those would be terribly good ideas, and no half-sane scientist would ever fall for them. But of course that’s another advantage the physicists have; they can be reasonably certain that their system works and they’re not at serious risk of breaking it. Tax systems aren’t like that. The British one was described this week as “complex, confused, irrational, punitive and in urgent need of root and branch reform”. And that got it a rating of 21st out of 34; quite what they’d have to say about the US system (33) or the French (34) is anybody’s guess. And yet unsound proposals get put forward for tax all the time in the comments columns of the internet, and explaining why they won’t work can require a degree of engagement and willingness to learn that all too few seem prepared to put in. I’d love to help more people understand the basics of tax system design, it’s really important stuff. I’ve tried to do some of it here: http://bit.ly/TaxSimplicity

But please, don’t ask me to condense 746 pages of BEPS documentation into 140 characters. It’d be about as much use as posting  and if you know what that means, you don’t need me to explain it.

(It’s the Tsiolkivsky Rocket equation, for which I must thank Randall Munroe, of XKCD – see http://what-if.xkcd.com/7/ )

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By Terence Jeyaretnam, director, Net Balance

The International Standard on Assurance Engagements (ISAE 3000) is a standard used globally for assurance engagements for audits or reviews of historical non-financial information. Here at Net Balance, a specialist sustainability firm, we use the ASAE3000 (along with the more qualitative AA1000AS), its Australian cousin, generally alike in scope and application. While the ASAE3000 has always allowed non-accountants to use the standard, the IAASB has only recently adopted this provision.

From experience we believe there are numerous benefits when utilising the suite of ISAE/ ASAE 3000 in conjunction with the AA1000 Assurance Standards (AA1000 AS), which has traditionally been the domain of specialist sustainability firms. The AA1000 AS is a holistic sustainability-focussed standard designed specifically for assessing and strengthening the credibility and quality of an organisation’s social, economic and environmental reporting.

Here at Net Balance we encourage the revised ISAE 3000 to be used in conjunction with a detailed approach of the AA1000 AS, and be applied together during the phases of planning, obtaining evidence and establishing quality controls.

Having the experience of successfully completing over 250 Assurance engagements, we believe a more complete assurance can be undertaken by using both the AA1000 AS and the ISAE 3000 in combination.

Accordingly, this revision creates new opportunities for Assurance providers housing subject matter experts in sustainability to provide Assurance to all organisations. Numerous advantages include:

  • Increased representation of materiality – Defined by the assurance provider and the client organisation, subject matter experts using their professional and experienced judgements can now delve deeper into complex topics such as supply chain issues, water, waste management, or even inform clients about the global landscape on human rights.
  • Risk identification – Subject matter experts understand the clients’ business and operations and therefore they can leverage past experience to address existing risks and to identify new sustainability-based risks.
  • Value add – Subject matter experts can provide feasible value adding recommendations. This is an increasingly important factor as most reports received by management from assurance providers should provide strategies to help clients understand both the risks and opportunities in a fast changing regulatory environment.

Read Deloitte’s viewpoint on the matter here

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By Sarah Hathaway, head of ACCA UK

Last week I had the honour of being part of the judging panel for the British Accountancy Awards 2014. Since the Awards were re-launched four years ago, ACCA has been proud to be involved as the lead partner and we are pleased to have seen a year on year increase in terms of both the number and quality of entries received.

The most interesting and important categories for me have been those which recognise the ‘Independent Firm of the Year’ across the UK’s various regions. These provide a valuable opportunity for smaller practices to demonstrate how they have both adjusted to and thrived during what have proved to be challenging times for our economy. I was also a judge in 2013 and I continue to be delighted to see great examples of the focus, drive and innovation that has led to increases in turnover, profit and – most importantly of all – client satisfaction.

If you are part of a practice which has a good story to tell, please seriously consider entering in 2015. For a flavour of what it’s all about, why not consider attending this year’s awards’ ceremony in London on Tuesday 25 November? You will be able to meet some of the short-listed firms, individuals and previous winners. I promise you will be inspired!

For more information visit www.britishaccountancyawards.co.uk

Nikki Walker

By Nikki Walker, diversity and inclusion expert, More2Gain

What springs to mind when someone says Finance Director? Or Diversity Director for that matter? Very different skills and personalities, I am sure, based on some fairly ingrained stereotypes. But, actually, does anyone really care?

I certainly did. When I moved from being a Finance Director to Head of Diversity & Inclusion, EMEA, at Cisco Systems, I found myself battling a tidal wave of stereotypes and bias.

“What on earth are you thinking of?” was a typical reaction from many of my finance colleagues. Followed closely by, “I’ll give you three months before you are begging to come back to the real world of finance.”

And from my new diversity colleagues, both internal and external, I also encountered a fair amount of scepticism. “Why would a finance person want to do this job? She hasn’t even worked in HR! Will she really be able to get to grips with this?” And this, no less, from diversity professionals!

And so I found myself in the rather novel position of having to defend my choices, prove I hadn’t taken leave of my senses and overcome some pretty ingrained views about the value and abilities of two very different professions – from both sides of the camp.

This is a real pity and a missed opportunity. Because it is when we work together and blend different skills that we achieve the best solutions. Whether it was offering a fresh pair of eyes, critiquing strategies or applying “forensic commercial” analysis to combine many strands of employee data and surveys, the new insights I shared helped leaders understand the opportunity they were missing shape thinking and bring about lasting change.

The very fact that I was an “outsider” gave me a huge advantage, enabling me to challenge orthodoxies and come up with new perspectives and solutions. My finance and commercial skills enabled me to anchor the case for change in measurable business benefit.

I also learned a huge amount from spending time with people whose viewpoint is not “centred on the numbers.” In short, I realised how much I had to offer… and how much I had to learn. A journey that is still ongoing now that I have changed careers again to run my own inclusion and diversity consultancy, More2Gain, focused on helping organisations realise the power of Inclusion and Diversity,

And so I would like to leave you with a final thought. In finance, we focus heavily on measuring “returns.” Well, I can say with absolute certainty, that there are rich returns to be gained (for you and your organisation) whenever you connect with people outside of your group.

So reach out to your diversity colleagues and offer to help. Partner with them to jointly seek out new ideas. Be bold, make new connections, use your finance skills and help to advance diversity and inclusion in your organisation. Whatever you do next, do not allow convention and stereotypes to hold you back. I didn’t and I really am the richer for it.

ACCA, in collaboration with ESRC (Economic Social Research Council) and Brunel University, has launching a paper about diversity in business – read it here.