The word “sustainability” can have a lot of definitions. We can think about sustainability from an environmental perspective, but we can also think about sustainability as the notion of dealing with change, providing information for decision-making, and the sustainability of the business world and the employment base that it supports.
We have the luxury today to see the most significant changes that have ever occurred in mankind. And how we provide information and decision-making sources during that time will define our commitment to sustainability in a broader definition.
Clearly, when we look at sustainability from an accounting perspective and we think about the things that are upon us—the use of artificial intelligence and augmented intelligence in business communication; blockchain technology, which will revolutionize the flow and transparency of information and decision making; all sorts of data analytics that will allow for different types of decision making; and the stress on almost every aspect of business, on employment and continued business operations—I firmly believe that the people in this room—accountants, lawyers, investor groups, business operators—will play a critical role in a dialogue that is not likely to come from government, but has to come from the free market system.
That dialogue is about the role of a multi-stakeholder approach—an integrated approach. We have an obligation as business leaders not to think purely about profitability in the short term, or even in the mid term, but to think in terms of a multi-stakeholder approach. If every business thinks in the context of what would probably be defined as “the American way”—the maximization of short-term profits—then the sustainability of our free enterprise system will be at risk, because where will the employment come from? Where will the buyers of our goods and services come from? How do we balance that intersection between society and the corporate world?
I think those are going to be the fundamental issues that we will face over the next 10 years, or I would say probably a lot shorter than that.
What I just described to you is the essence of integrated thinking. It’s the essence of not thinking about things in a myopic way—which, frankly, American business has some history of doing—but rather in an integrated way. And most well-run businesses, in fact, do that. I think the accounting profession does that very well.
Back in 1995, accountants started talking about what we called enhanced business reporting—the notion that we had to broaden the information flow from just the traditional financial statements to something that better communicates the totality of the business enterprise. There were starts and stops, and there are pressures in our system that haven’t allowed that to progress as much as it should have in the United States.
Then along came a more global movement called integrated reporting—the notion of thinking about the business world in an integrated way and developing a framework for communicating in a way that the multiple stakeholders of a business can understand. It looks at six capitals: not just the financial and manufacturing capitals, but sustainability from an environmental standpoint, relationship capital, human capital, and intellectual property capital. I would challenge us today, as we talk about the different opportunities and the ways that we could help create a different place for business in society, to think in that integrated way.
If we’re going to have business and employment survive, we have to be truly committed to looking at these things in an integrated way, and building that relationship with people who invest their capital in businesses, who buy products and services from those businesses, and who regulate those businesses.
I know that many people in this room also work for small businesses, and small businesses can have a big role in this. They can demonstrate business model thinking and integrated thinking; maybe their reporting requirements aren’t the same as a public company’s, but the notion of how they embed that into the sustainability of their business is critically important.
Education and Improvement
When I think about the profession from this standpoint, we can also look at ourselves and ask, “Where can we improve more?” For instance, the ethnic diversity of the accounting profession is a very critical challenge. Our brethren in the bar have achieved maybe greater diversity than the CPA profession has, and so we have a major initiative, because it’s critically important that our profession, if it’s going to help lead this change, also reflects society at large.
We’ve invested heavily in financial literacy programs, because ultimately, the American public will have to demand changes. The more financially literate they are about what makes business tick and what they need to know to create their own financial sustainability, the better they will be as citizens, and that will create a better demand pool for the profession.
We also do financial literacy for our elected officials, to teach their staff and the members of Congress about what the financial statements of the federal government actually contain. Our government is probably the most complex enterprise on the face of the earth, and the people and our elected officials need to understand it from something more than just purely a short-term cash basis. In fact, we have a piece of legislation pending in Congress to require Congress to have a joint session to hear the financial report in a comprehensive way, so they can focus on their responsibility for the sustainability of government.
I cannot speak more passionately and importantly about my belief that the people in this room and people like us around the country have to initiate the discussion between business leaders, the government, and stakeholder groups about how we’re going to sort out the incredible challenges that technology will place upon employment and basic economic stability. As we think about our role in protecting Planet Earth, we also have to think more broadly about how we lead business to change this dialogue and to act in a more collective way. The ability to say we have a single-stakeholder group—for instance, that we must protect a single shareholder—while that is very important, that is much too myopic a view of how the world will evolve in the future.
I encourage all of you to think about sustainability in a very broad sense. We have the ability to see facts, to see information, to see change from a much clearer standpoint. How do we bring that to this multi-stakeholder group so that the best possible decisions can be made?
I thank all of you for your commitment today. I’m sure we’ll have a very lively debate. I’m sure some of it will be a little unnerving, as well. But I encourage us to stay the course and to be true leaders of the change that’s necessary in this incredibly fast-paced world.