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Study Zone

Making it all add up to an ethical future

Dorothy Wood outlines how organisations are being judged on more than just the numbers – and where you fit in to the new world order

September 2017

The FT’s Lucy Kellaway wrote an excellent article earlier this year called ‘There is nothing cute about innumeracy’ (FT, 7 May 2017). The angle was that innumeracy is not “a loveable quirk”, but something “stupid, shameful and, if you have a position of responsibility at all, it is dangerous.”
I am sure many PQ readers who read that article felt proud of their numeracy skills and their love of numbers. For accountants, it’s not just numeracy and the ability to make sure it all adds up – literally – that are needed to succeed. It’s important to possess other skills, too – strategic insight, excellent communication skills to explain the narrative about the financials, great risk management with a keen eye on future developments and, importantly, an ethical and professional approach are all needed.
The business ethics dimension has come under the spotlight on numerous occasions. There are many examples of organisations that have focused on financials far beyond a positive influence and lead themselves towards path to global disaster.
The focus on meeting numerical targets has lead to well-known business scandals. Recent examples are Toshiba’s accounting issues and Volkswagen’s diesel engine emissions troubles. While they seem to be very different affairs, the underlying issues are similar – set an apparently impossible target, which means rules are bent or broken simply to disclose figures at one point in time that superficially make the grade.
And the pattern repeats on a global level. Countries are ranked by GDP and yet eternal exponential growth, which is what focusing on GDP entails, will break the planet. So what are we going to measure instead as our ‘target’ if financials are not enough?
The change is already coming – businesses are now being measured on much more than the profit they make; how much tax they pay back into society is growing in importance. Also, how they make those profits, and divide up what they haven’t paid in tax, is a focus. The EU is bringing in a raft of non-financial reporting disclosures on everything from board diversity to human rights. The rise of the integrated report – ACCA will publish its sixth report this year – and the focus on the triple bottom line reflects the need of stakeholders to better understand the motivation behind the numbers, and where they might be leading.
So of course numeracy matters, but so does the narrative and strategic insights behind them. In this changing landscape, the question is “how are accountants supposed to respond?”
What we can’t ignore is that society wouldn’t exist without business. From the very first time someone realised that if you measure and record the grain going into the granary then you can identify, allocate and trade the surplus. This was when we became reliant on numbers.
Fast forward a couple of thousand years to the development of corporate business that now underpins our modern world, and methods for monitoring the behaviour of owners and managers has opened up opportunities for achievements and returns that would otherwise be unattainable. Society is built on business, and business is built on trust.
The speed and size of modern markets and transactions can’t change the underlying reality that society is made up of humans, some trustworthy, some trusting, some neither. Society still needs assurance that the individuals managing and controlling the flow of productive capability are doing it not just in their own interest, but with the broader good in mind. Accountants are indispensable for giving investors that trust in business.
However ethically pure an organisation’s motives are, it won’t survive without a realistic view of the numbers and how they fit into the supply chain – and that’s a view that has to come from a trained and experienced mind.
The world needs ethical and professional accountants, taking the wider view of business that society demands. Nothing can take the place of that ability to work with the numbers and to be able to explain them. What accountants need to do now is show how their talents and training fit into the modern economy in a way that no other skillset or automotive process can emulate.
• Dorothy Wood, Head of Education, ACCA Europe

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