4 ways to build businesses’ long-term sustainability

Organisational sustainability goes far beyond short-term financial returns. To create long-term value — and ultimately return on investment to shareholders — organisations need to embrace a holistic perspective that takes into account the needs of investors, lenders, rating agencies, the workforce, customers, regulators, the environment, and society.

The shift from a shareholder-focused approach to this systems value perspective requires finance to have a more comprehensive understanding of risk and opportunity. Financial reporting should meet the transparency that all stakeholders demand and measuring and managing of intangibles should be a priority.

The Future of Finance 2.0 Emerging Themes: Organisational Sustainability and ESG report serves as a catalyst for conversations within your organisation about transitioning to a systems value perspective.

We created an ESG organisational maturity journey to help finance professionals identify where their organisations are in building ESG business resilience and to highlight possible knowledge and skills gaps. This journey is based on the Future-Fit Foundation business benchmarking methodology, which includes principles, goals, and indicators, and PwC's ESG Pulse three stages of evolution.

Steps toward a systems value perspective

The gradual shift to a systems value perspective comes with challenges. Businesses must develop a deeper understanding of the interconnections between their operations and the broader systems they are embedded in.

This requires a significant mindset shift. Moreover, building capacity within the finance function and the entire organisation to incorporate systems value thinking demands strategic investment.

These four steps can guide businesses aiming to embrace this new perspective:

Assess ESG maturity

Understanding where your organisation stands on the ESG maturity journey is a critical first step. This assessment can help identify gaps and areas for improvement, enabling you to align with the systems value perspective effectively (see the chart "ESG Organisational Maturity Journey").

ESG organisational maturity journey

Understand how regulations and standards are evolving

In Europe, research the European Sustainability Reporting Standards (ESRS). Companies that are subject to the Corporate Sustainability Reporting Directive (CSRD) are required to report according to the ESRS.

In the US, follow the adopted rule changes on climate-related disclosures of the US Securities and Exchange Commission (SEC).

Where countries have declared a desire to align their sustainability disclosures requirement with the IFRS Foundation's International Sustainability Standards Board (ISSB) standards, understand IFRS S1, General Requirements for Disclosure of Sustainability-Related Financial Information, and IFRS S2, Climate-Related Disclosures.

Build your systems thinking literacy

This can be done through learning more about the International Integrated Reporting <IR> framework and integrated thinking principles. These are valuable tools on the path to systems value thinking and encourage organisations to consider their impact on a broader scale, fostering transparency and accountability (see the sidebar "Integrated Reporting and Sustainable Businesses").

Engage and collaborate

Achieving sustainability goals requires collective effort. Within your business, engage with colleagues across departments to connect objectives and contribute to the organisation's sustainability strategy. Collaboration can lead to innovative solutions that transcend traditional boundaries.

Reach out to other organisations in your industry or supply chain too. Collaborative efforts can catalyse sustainability best practice, drive innovation, and collectively address shared challenges.

Many companies have started the journey

The evolution of organisational sustainability to systems value thinking represents a monumental shift in the business landscape.

The emerging systems value perspective goes beyond stakeholder engagement and ESG considerations to view an organisation as a part of an interconnected system, both ecological and societal. It recognises that an organisation's success is deeply intertwined with the wellbeing of the environment and society at large. Companies are no longer isolated entities; they are integral components of a complex web of interactions and dependencies.  

Our research through roundtable events (see the graphic "Roundtable Participants' Estimation of Their Organisational ESG Maturity") suggests that organisations are still at an early stage in their journey towards embracing systems value thinking, with 57% of respondents stating that their organisations were either at the shareholder perspective or on the road to a stakeholder perspective. 

Roundtable participants' estimation of their organisational ESG maturity

Only 1% of respondents ranked their organisations as having a systems value perspective, where governance is aligned with the social aspects and dependent upon the wider environmental pillar of ESG. However, it is reassuring to note that 13% of respondents see their organisation currently moving from a stakeholder perspective and developing a systems value perspective with long-term value creation for all stakeholders. 

Ultimately, the shift towards systems value is not only about staying relevant but also about being a proactive force for positive change. It is about recognising that businesses don't exist in isolation; they are vital components of an intricate tapestry that weaves together the economy, the environment, and society.

As you navigate these uncharted waters, keep in mind that embracing systems value is not just a strategic choice; it is a commitment to a more sustainable and harmonious future for all.

Raluca Stroe is manager and Martin Farrar, Ph.D., is associate technical director, Research and Development–Management Accounting at AICPA & CIMA, together as the Association of International Certified Professional Accountants. Wider changes to the finance and accounting profession are explored in further reports from AICPA & CIMA's Future of Finance 2.0 research project. To comment on this article or to suggest an idea for another article, contact Oliver Rowe at Oliver.Rowe@aicpa-cima.com.

Integrated reporting and sustainable businesses

An integrated report tells a more complete story of how an enterprise creates value over the short, medium, and long term. It creates a holistic narrative of an enterprise beyond the financials and helps the organisation to join the dots across silos, driving integrated thinking, planning, and performance.

Integrated reporting incorporates material sustainability-related information and provides meaningful insights into an organisation's use of and impacts on tangible capital, such as financial and manufactured, as well as the intangible elements of an enterprise, such as its human, intellectual, social and relationship, and natural capital.

The sustainability disclosure standards IFRS S1 and S2 issued by the International Sustainability Standards Board build on the concepts of the Integrated Reporting Framework. When used with these standards, integrated reports provide decision-useful information to providers of capital and help improve the efficiency of capital markets through higher quality information relating to the business model, risks and opportunities, strategy and resource allocation, and performance and prospects of an enterprise.