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“There is no future if we fail to maintain our planet; therefore, all society’s stakeholders whether an individual, a firm, or a government, collectively, have equal responsibility to sustain the Earth for future generations.”
Dating back to the 1900s when Elkington introduced the triple bottom line (TBL) that focuses on three main dimensions: Profit, Planet, and People, the concept of sustainable accounting and reporting has been gaining prominence as companies strive to reduce their negative environmental footprint and improve the efficiency of their operations. It is an approach to gauge an organization’s dedication to environmental betterment, social responsibility, and economic success. Understanding and addressing a variety of hazards that are frequently referred to under the umbrella of sustainability are necessary for building a resilient firm.
Many intertwined risks face firms nowadays due to the increasingly intricate, dynamic, and potentially disastrous ties with the environment that create uncertainty and accelerate the importance of the transformation from focusing solely on profit-making regardless of the mean to focusing on all three aspects; profits, social and environmental values. Dalia Abdel Kader, chief sustainability officer at Commercial International Bank (CIB) participating at a roundtable on sustainable finance during the American University in Cairo (AUC) Business Forum earlier this month, highlighted the importance of sustainable finance and that it is no more about ethics, but rather “it is about the capacity to continue to generate value,” said Abdelkader.
Sustainable finance is no more a marketing tool to burnish a company’s image, but rather “it’s comply or die,” as Khaled Dahawy, professor of accounting at the AUC School of Business, said at the sustainable finance roundtable. There is no future if we failed to maintain our planet; therefore, all society’s stakeholders whether an individual, a firm, or a government, collectively, have equal responsibility to sustain the Earth for future generations.
There are various ways a business could integrate sustainability in accounting and reporting -according to the International Federation of Accountants. There are methods for businesses to identify trends and integrate them into the business model with a viable product mix, consider significant natural and social capital issues, evaluate efficiency, cost control, risk management, value creation, and risk management, and finally communicate with transparency.
The literature has proven that corporate social responsibility (CSR) and corporate governance (CG) has a positive impact on corporate financial performance (CFP) driven by the expansion in new markets attracting more investors. The World Economic Forum along with 130 of the world’s biggest companies set a universal metric called the Stakeholder Capitalism Metrics which showed its viability. The SCM includes 21 core metrics with 34 expanded metrics including governing purposes, Task Force on Climate-related Financial Disclosures (TCFD), social equality metrics, innovation, etc. Leaders around the globe are also now concerned with early education on the matter in order to have well-rounded future generations, which led many universities to introduce sustainable accounting and finance in their curriculums, an initiative we wish to see unfolding more strongly in Egypt as well.
In Egypt, the market is still at nuance, and regulatory frameworks are being constructed. The Financial Regulatory Authority has only recently issued a decree (108/2021) requiring non-banking financial institutions and EGX-Listed firms to publish an ESG report effective 2023. Also, the fact that Egypt hosted COP27 indicates the government’s direction and assures firms that still have concerns and uncertainties to start adopting financial sustainability in their business models. We have seen several institutions from different industries in Egypt voluntarily publish sustainability reports already including CIB, Vodafone, and the AUC.
It is promising to see more of such initiatives and efforts that integrate sustainability in the core business, globally and in Egypt in specific, which is a matter that is soon becoming a prerequisite for investment inflows and a booming economy.
