Inviting me to speak at special anniversary dinners for professional associations is a dangerous business � mostly, I have to say, for me! Perhaps it is a hereditary form of masochism to stick the royal head above a convenient parapet and then to experience on a regular basis the joyous sensation of having it shot off! Back in the early �80�s I was asked to attend both the 150th Anniversaries of the British Medical Association and the Royal Institute of British Architects. In both cases, a delightful decapitation was the reward � and all I had done was to plead for a restoration of balance between modernity and things of timeless value! Interestingly, the doctors agreed with what I had said about the architects and the architects with what I had said about the doctors, but not vice versa! Having got this off my chest, shortly to be followed by my head, I particularly wanted to wish the happiest of 125th birthdays to the Institute of Chartered Accountants.
When I was younger I used to think that it was Prime Ministers and Presidents, or even the occasional King or Sheik, who ran the world; but now I am older and wiser I know that it is in fact accountants!
It came as rather a shock at first, but I then decided that it might be best if I captured a few from the wild and tamed them in my own organization. So I now have five chartered accountants in my Household and an unquantified, but growing, number in my various charitable organizations. For some reason that has not been explained to me, a significant proportion of them come from K.P.M.G. My Principal Private Secretary comes from a long line of hereditary accountants, but the way he rides his bicycle around London may result in a rapid end to the dynasty!
I must say that, whatever their previous employment pedigree, I am sure that I have benefitted from the accountant�s rigour in problem solving � they have even solved a number of problems which I was not aware we had!
Now I understand that the Institute of Chartered Accountants in England and Wales has over 127,000 members, that around 15% of the Chief Executives and Chairmen of the F.T.S.E. [pronounced Footsie] 100 companies are accountants and that Chartered Accountants are generally recognized as contributing to the high reputation of U.K. P.L.C.
This is all very different to 125 years ago. I am told, for instance, that before the Institute was founded accountants had a less distinguished reputation. I gather that they were mainly concerned with bankruptcies and insolvencies and that calling for an accountant was generally regarded as akin to calling for an undertaker. Indeed, in 1875, a High Court Judge bemoaned the appearance of an �ignorant set of men called accountants.� Presumably, he kept his head on in those days as all the accountants were sheltering behind their parapet!
If I may, in this your 125th year, I would like to do two things -
Firstly, and most importantly, to congratulate you on the contribution that you have made to this great nation of ours and, indeed, internationally. The foundation for prosperity is confidence, and this confidence is built, to a large extent, on the integrity and reliability of financial information.
In other words, if you will allow a mere employer of accountants to say so in this company , it seems to me that the essence of an accountant�s professional contribution is not knowledge of figures and finance, important as this is, but integrity: the integrity to provide the meaningful, accurate and timely information needed for the financial decision-making that underpins the success of our economy, the integrity of the independent audit which is fundamental to business trust and confidence and the integrity and impartiality of the business advice offered by firms and individuals.
The Institute has played a vital role in fostering and maintaining the very highest professional standards by encouraging and preserving this integrity and the high reputation of the U.K. Accountancy Profession - a reputation which I understand surpasses that in all other countries. Although I have to say that I was told this by a not entirely impartial observer!
The second matter which I should like to raise also concerns the future.
As we all know, there is now more focus on how our economic activities affect the environment, and a growing acceptance that many of them may not be sustainable.The Government has addressed the issue and has, for example, recently published its Sustainable Development Strategy, and in a recent MORI poll 85% of the members of the public who were asked agreed that we cannot afford to neglect the environment.
Accountants have also been hard at work in this area, with a number of initiatives with impressive names, ranging from �triple bottom line reporting� to �social accounting�. I think that the latter is about sustainability, but I may have got the wrong end of the stick!
However, despite all these excellent aspirations and much hard work, only limited practical progress has been made.
One of the reasons for this is that many decisions are taken which have hidden or not fully considered consequences.
To take a simple but, I hope, clear example - some years ago bus companies began to phase out bus-conductors replacing them with driver-only buses. This was to save salaries and increase fare collection rates because everyone had to pay or show a pass on boarding the bus. However, the money saved by the bus companies was far outweighed by the cost of the congestion and pollution caused by traffic waiting behind buses as they stopped for longer to take on passengers.
The problem was that no reliable information about these wider and longer-term costs was available to the bus companies and there was, and is, no culture or practice that costs of this type should be taken into account.There are countless other examples.
- Farmers are encouraged to apply chemicals to the land even though water companies are then paid to extract them from the water.
- Money is saved by sourcing centrally even though the unemployment and other support then needed for local suppliers far outweighs the saving.
- Old, historic, characterful buildings are knocked down, even though in the longer term it would cost far less in financial, social and environmental terms to refurbish and convert them to other uses, such as residential and mixed use. This is a particular passion of mine, as for the past decade or so I have been battling to save, restore and reuse many of our great historical sites that have been vacant for so long, such as naval dockyards, army barracks, mental hospitals and 18th and 19th Century buildings. All such sites can be converted to be used, there are infinitely more sustainable solutions, I would suggest, than knocking them down or even worse, leaving them lying to become derelict.
It is not that these decisions are taken lightly or recklessly, it is just that because information about longer term and wider costs, and benefits, is not readily available or sufficiently robust to form a basis for decision-making, decisions are necessarily made on a short-term and/or a narrow basis.
As I have said, attempts have been made to provide this sort of information, but there is, as yet, no standardized and accepted method of identifying and quantifying many longer term and wider factors. To use economists� language, to quantify negative externalities.
To put it another way, our knowledge of the complexities of life and the consequences of our actions is now far greater but, dare I say it, the accountancy profession has yet to provide us with a mechanism to allow us to assess and quantify these newly apparent complexities and consequences.
In other words, accounting mechanisms have not, for the moment at least, kept pace with our requirements for sustainability information. And I would suggest we need that information as a matter of real urgency if we are to avert a growing series of man-made catastrophes in our over-crowded world.
It is vital that these accounting mechanisms do keep pace, because without the ability to identify and assess in a robust and consistent manner the longer-term and wider consequences of our decisions, we will not know whether our prosperity and quality of life today are being achieved at the expense of our children and grandchildren.
You are all, no doubt, familiar with the old saying that few people have heard of the inventor of double entry bookkeeping [Fra Luca Pacioli] but that he has probably had more influence on human life than Dante or Michelangelo. It seems to me that in enabling financial decisions to be made with proper regard to sustainability, accountants would again be making an enormously important contribution to the future.
As a result of what, I fear, have been persistent concerns about sustainability, and with the support of the Comptroller and Auditor-General Sir John Bourn - who I am pleased to say is here this evening - I took the initiative ( we were trained to take the initiative at my old school, Gordonstoun, and I can�t break myself of the habit!) to establish an Accounting for Sustainability Group last year and was lucky enough to co-opt as one of its members your own distinguished President, Paul Druckman.
I asked the Group to see, in particular, what could be done to encourage longer-term and broader perspectives in decision-making which are, of course, the essential prerequisites to ensuring that we live and work more sustainably.
I am pleased to say that the Group�s report has been published today.
The subject area is too vast and complex for definitive solutions to be offered, and perhaps the report�s most interesting and compelling finding may turn out to be that the sustainable option can also often be the cheapest option � certainly when all the costs, internal and external, are taken into account.
Through my experience with organic farming and my food company, Duchy Originals, which I set up to support farmers and the environment and to make money for charity, I am aware that there is a commonly held view that sustainability is an expensive luxury which is of little relevance to the day-to-day running of organizations in which people are under pressure to keep costs down and obtain value for money. This is perfectly understandable, given that sustainability often costs more in the short term.However, I am delighted to say that the report includes examples of sustainable initiatives in the U.K., Canada and New Zealand which have, in fact, saved money in the long-term, and in some cases in the short-term as well.
This is something of which I also have first-hand experience. In 1990 I made it a condition of bearing my Warrant that companies must have an environmental policy which means, of course, that they must do an environmental audit. You can perhaps imagine that this caused some flutterings in the Warrant-holder dove-cote, but some companies were surprised by the financial benefits which could accrue to them by reassessing their operations in the light of environmental awareness. One company switched to 100 per cent recycled packaging, reduced container sizes and switched to recycled carrier bags resulting in a 6.5 per cent reduction in their annual costs. So their bottom line benefitted as well as the environment.
I believe that this point is also borne out by another of my initiatives. As some of you may know, and in an attempt to practise what I preach, I have been developing what I hope will prove to be a more sustainable extension to Dorchester in Dorset. I tried to take a longer term perspective from the start in the belief that attention to detail, good design based on timeless principles of urbanism that created less dependency on the car, the use of local materials and the creation of a community rather than just another housing estate would pay dividends in the longer term. However it was not easy, and the Treasury and even some in the Duchy of Cornwall were difficult to convince.
In the event, Poundbury has been a success and I am told that houses in Poundbury are worth significantly more than equivalent houses just a few hundred yards away in Dorchester. The house-builders, who initially found working with a Masterplanner and building with natural materials more time consuming and expensive, are also very happy (and keen to buy more land) as is the Treasury, with the public money invested in social rented housing in Poundbury proving to be a good investment - because the housing will be fit for the purpose for generations, unlike some post war developments that had to be demolished not many years after they were built.
In other words we got there in the end, but it would have been easier if there had been an accounting model which identified and quantified these longer term benefits.It seems, therefore, that there is scope for those who want more rapid progress with sustainability to work with the grain of human nature and stress the financial benefits that can result from choosing the sustainable option.
It is, perhaps, a happy coincidence that the publication of our report has come the day before the establishment of the new Sustainable Procurement Taskforce chaired by Sir Neville Simms, which has been given a year to report back to D.E.F.R.A. and the Treasury jointly (� how important it is to have the Treasury fully involved in this!). Our report, �Realizing Aspirations,� will hopefully be near the top of their reading list and I am looking forward to hearing how the new Taskforce responds to our recommendations.
There are, of course, no easy solutions; but I do hope the report and what I have tried to say this evening may help the accountancy profession to look carefully at the new techniques required to embed sustainability in our accounting and decision-making processes. Without them we will merely go on deluding ourselves we are being �sustainable� when, in fact, most of the time it is �business as usual� with little brass knobs on�
As I have said, your profession is one of the key pillars of our economic stability and prosperity, but to ensure that our descendants can experience something of that stability and prosperity there is a very real urgency to adapt our accounting procedures to the critical challenge of minimizing the wasteful damage done to the fragile world around us through man�s increasingly short-term perspective. We must tackle the unsustainable issue of the �throw-away� society. I am no accountant, but in my simple estimation we are living off capital, not income � yet we cannot perceive this easily because the capital consists of the mysterious, but ordered processes of Nature, in the form of air, water, soil and climate. If we don�t reckon these vital �capital� elements in the accounting procedures, nor follow the basic rules of putting back what we take out in order to maintain the capital base, then I�m not sure that the 200th Anniversary of your Institute will be a frightfully jolly affair! Having said that, nothing could give me greater pleasure than to propose the good health, good sense and, above all, the wisdom of The Institute of Chartered Accountants in England and Wales.
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