Environmental, social and governance metrics are crucial when formulating your business strategy and looking to the future. But what can organisations do to meaningfully embed ESG into their business? Fiona Gaskin explains. International events and movements such as COP26, the COVID-19 pandemic and Black Lives Matter (BLM) have concentrated the minds of investors and executives on the importance of integrating environmental, social and governance (ESG) into overall business strategy and non-financial reporting. PwC's latest CEO Survey revealed that ESG metrics are still not being integrated into long-term corporate strategies, however. Released in March, the report found that fundamental ESG targets, such as net zero, have only been set by a minority of Irish companies. So, why does ESG matter? At its simplest, ESG gets to the very heart of why you are in business, ‘who’ you are as a company, and what your impact on the world is. It’s also about how you align your business model with the needs of society, what you report, and how you engage with your people and stakeholders. Deferring integrating ESG into your overall business strategy gives rise to risk. It might mean, for example, that you will hardwire old value creation models that don't meet the concerns of your stakeholders and long-term needs of your business.  It also becomes increasingly likely that you will fail to manage real and material risks while also finding yourself out of step with your stakeholders. Integrating sustainability into your overall business strategy is essential, as ESG will propel the next wave of corporate transformation.  Strategic reinvention Companies are redefining their business and sustainability strategies before determining how to respond most appropriately to the evolving non-financial reporting environment.  Management teams are taking a fresh look at difficult strategic trade-offs in response to both new opportunities and external pressures. This includes concerns about heavy carbon emissions — very much on the radar of energy companies and cement manufacturers, for example — and a range of social concerns including health, race, gender, inclusion, and inequality.  So, what can you do if your organisation's current strategic priorities result in outcomes increasingly viewed as unsustainable (or even unacceptable)? In this case, you will need to introduce a strategy to address such concerns, exploit different opportunities, and redefine, not only what the business does, but also how it does it. Reimagined reporting The most immediate call-to-action is often a combination of heightened regulatory requirements, greater risk awareness, and demand for data that can support the management and disclosure of ESG data.  Everything from carbon emissions to racial and gender balance and the sustainability of sourcing strategies is under the microscope. Investors, governments, regulators, rating agencies, and informed customers assess whether businesses have identified, and are appropriately managing, ESG risks. As companies re-evaluate what they report publicly, formal non-financial disclosures are starting to augment or replace non-binding frameworks. Business transformation A business that begins to report against broader non-financial metrics will quickly find that objectives need to be defined in order to manage these metrics, and drive the change needed to achieve these objectives.  Similarly, a business that has had to redefine its strategic priorities to ensure its sustainability and relevance will need to transform to deliver on the new strategic objectives.  Either way, businesses will have to actively manage ESG outcomes by internalising ESG into strategy and transforming it to implement the related change and report progress and results.  Senior leaders have a critical role to play in driving this agenda for transformation, which is not separate from ongoing digital transformations but will inform and build on them, redefining both their context and purpose. Every company is uniquely situated, as is the scope of change needed. Whether the motivation is an ambitious emissions target that inspires strategic reinvention, deals to exit or restructure unsustainable businesses, ambitious diversity, equity, and inclusion (DEI) priorities or supply chain overhaul, the resulting ESG agenda will eventually encompass reporting, strategic and business transformation initiatives.  It all adds up to a new equation for business – behaviours based on purpose and trust that create value by forging solutions to society's challenges. Here are four steps you can take to help your company begin its ESG transformation journey. Decide on strategy and metrics The first step is strategic. Set an overarching approach to ESG. It should be supported by a clear tone from the top, with the CEO and leadership team committed to encouraging buy-in across the entire organisation cohesively and inclusively. Process and governance Standardised policies, procedures, controls, and governance are crucial to efficiently integrating ESG into your business. Automated workflow and data transformation tools can help ensure that your data is appropriate and your metrics are clearly defined. Through this kind of structured approach to reporting processes and governance, your ESG story will be grounded in objective and reliable data. Prioritise integrated reporting Treat ESG reporting like the integrated effort that it is. Create an architecture that includes data sourcing, aggregation, calculation, validation, reporting and analytics. Leverage existing financial reporting architectures to the greatest degree possible, and map each ESG reporting element to the architecture. Tell an authentic story When telling your company's ESG story, present more than a snapshot of where you are now. Instead, talk about where you want to go next and how you plan to get there. That sense of evolution will help you act now, with reporting and data you can stand behind into the future. The final word The impetus for businesses to address ESG issues and opportunities is likely to continue to grow, spurred by investors, shareholders, governments, policymakers, employees, suppliers, customers and citizens. Now is the time to start planning for a new future. Fiona Gaskin is ESG Leader for Assurance and Reporting at PwC Ireland.

What does the future hold for the audit profession and what can firms do to attract and retain the best young auditors? Mike Hartwell, Aisling Kirby and Orla Duffy examine lessons learned from the pandemic and look at what lies ahead. As we emerge from the pandemic, we have to ask: will the work of the auditor ever return to the way it was before? The answer to this question isn’t simple. To get to the bottom of what might lie ahead for the profession, we must consider a wide range of elements, from audit quality to the calibre of experience and on-the-job training available to our Chartered Accountants from the start of their career. Then there is the changing nature of the way we work, the emergence of new technologies and the impact of rising interest in sustainable finance on business practices. Collaboration is at the core of the audit How we collaborate has changed immeasurably, not just within our audit teams, but with clients and other stakeholders who have an interest in financial reporting. The experience of working effectively in a hybrid world has allowed component and group auditors to collaborate more easily across jurisdictions, off-shore delivery centres, and with a wider cohort of specialists. Our young audit professionals have led the way in driving this adaption, and finding the silver lining for the profession as we emerge from the pandemic. With hybrid working now the norm, the days of auditors convening in client boardrooms for days on end are behind us. We have the technology to be connected to the businesses we work with from virtual audit room settings in combination with those all-important in-person interactions. Virtual audit room technology has enabled young auditors to gain exposure to senior clients and audit management from the very first day of their training contracts, allowing for more impactful virtual collaboration. By combining virtual and in-person engagement, opportunities arise for a richer professional experience in which young audit professionals can accelerate their development. Tech-first generation drives adoption The success of statutory audits in the collaborative post-pandemic world is being made possible by technology. By embracing emerging technologies, auditors can develop more valuable insights about business processes and control environments in the remote or hybrid working world. Businesses reliant on our audits are no longer looking for assurance alone. They want insight that goes beyond the audit opinion. Technology — in particular, analytics — has enabled auditors to enhance the efficiency and quality of our engagements, deliver valuable observations and communicate better with management and those charged with governance. Sustainability is two-fold The changes that have come out of the pandemic have allowed audit professionals and audited entities to step back and consider practices that have the potential to reduce our carbon footprint without compromising audit quality. There is now an acceptance that you do not need to fly across the world for every planning meeting, endure long daily commutes, and print each and every draft financial statement on single-sided paper. Due to be published by the end of the year, new International Financial Reporting Standards on the disclosure of sustainability-related financial information will help to ensure that our profession remains to the fore in carrying out our responsibilities in a sustainable manner. The future of work Overall, how we work has become more agile, flexible, and collaborative, while also ensuring that ever-evolving regulatory and legal requirements are fulfilled. The rapid pace of change has given the profession fresh scope to help build a more sustainable model for business and finance — one in which the role of the auditor is valued by stakeholders and viewed by young professionals as an attractive career. In-person interaction will always be critical to the work of the auditor. Combined with emerging hybrid working practices, however, the profession is now entering into a new era of greater collaboration and innovation. Mike Hartwell is an audit partner and Head of Audit and Assurance in Deloitte Ireland. Aisling Kirby and Orla Duffy are audit seniors in the Deloitte Consumer Business and Technology & Financial Services departments, respectively, and members of Deloitte’s Young Audit Professionals Forum.

The role of the risk function is changing, and risk professionals need to make sure they are equipped with the right set of future-proofed skills. Andy Banks explains. Organisations are reappraising the skill sets of risk professionals as they reposition the risk function to adapt to new organisational structures and tech-driven strategies. This represents a fundamental shift away from the traditional approach to risk management, which often focused on established risks, to a more predictive and integrated approach. In this environment, we are seeing a growing emphasis on new skill sets for risk professionals —digital affinity, innovation, agility, and communication, for example, alongside a greater focus on strategy, client needs and holistic thinking. At the same time, analytics and data science teams are beginning to emerge within risk functions. This means that risk professionals now also need data analysis skills and a greater focus on predictive digital models. Growth of specialist teams The greatest threats facing the risk function today are coming from non-financial sources, feeding demand for more specialists with niche knowledge. Despite this, specialist teams currently account for just six percent of the risk function on average. Although climate change was seen as the top threat facing banks in a recent PwC survey, climate change specialists account for, on average, just 0.51 percent of risk teams. While operational resilience is high on the agenda for regulators, meanwhile, most risk teams have just one operational resilience specialist for every 100 risk professionals. Acquiring new skillsets Successful transformation requires the right leaders, behaviours, data, tools, and incentives. Here are five steps organisations can take to acquire the skills needed for the risk management function of the future. 1. Strengthen the risk function with a diverse range of skills In a fast-moving, uncertain environment with a changing risk profile, the risk function must have a range of multi-skilled and senior risk professionals. There is a strong emphasis on individual skills such as holistic thinking, storytelling, and digital affinity. 2. Close the digital skills gap As well as developing their soft skills, risk professionals need to improve their digital skills continually as a data-driven and visualisation approach is essential for managing and reporting risk today. This will enable risk professionals to focus their time and attention on analysing, interpreting and visualising data and ultimately provide value. Combining data analytics with human knowledge will provide in-depth insights into trends and changes in risk and generate higher levels of precision and greater risk coverage. 3. Reshape the risk function to meet the greatest threats With the rising focus on non-financial risks such as cybersecurity, climate change and operational resilience, specialist skills are essential. Building teams with diverse skills will encourage diverse thinking and lead to better decision-making. Specialist risk professionals can be ‘found and made’ through recruitment, upskilling, and on-the-job training. 4. Create a culture of continuous learning Staff will need to be supported through this period of change ahead as ways of working evolve and become more tech-enabled. Ongoing training and development will be crucial to driving the transformation agenda and upskilling the risk function, not least in data analytics. Employees who see their organisation investing in their long-term development will be more likely to trust leaders and feel engaged and valued. 5. Monitor risk function skills continually It is vital to continuously monitor your risk function's skillset and headcount to ensure that the team is equipped with the skills, seniority and expertise to manage new and emerging risks. Importantly, as the digital agenda grows, risk function leaders should utilise data analytics to predict skills gaps and upskill. Andy Banks is Partner in Risk Advisory Services at PwC.

The way we manage people has undergone seismic change in the last two years giving rise to a valuable opportunity to redefine leadership for better business results, writes Paul O’Donnell. As we move into the post-pandemic era and employees navigate new hybrid work environments, it’s time for companies to review their leadership and management structures. The ‘old rules’ of management, characterised by the pyramid structure of top-down hierarchy, are no longer fit-for-purpose. In their place, we’re seeing the emergence of a very different approach characterised by both flexibility and responsiveness. The flat organisation The pandemic has created and enabled opportunities for companies to reset, rethink and reinvent how they operate. It is no longer a case of leaders rising to the top. Instead, we need a different kind of leadership — one that extends right across organisations, with fewer management ‘layers’ and greater reliance on cross-functional teams. This new collaborative culture is how leadership tends to look in what we call a ‘flat’ organisation. A flat organisation is one in which there are few or no levels of management separating the leadership from staff-level employees. In flat organisations, employees are supervised less while also being actively encouraged to get involved in decision-making. The idea is to create a more level playing field, allowing the organisation to solve business challenges by leveraging the expertise, talents and passions of the wider workforce. Benefits vs negatives There are several positives and some negatives to a flat organisational structure. On the plus side, a flat organisation can: elevate the employees’ level and sense of responsibility within the organisation; remove excess layers of management and improve the coordination and speed of communication between employees; eliminate middle management salaries, cutting costs; and nurture innovation by allowing specialists to pursue passion projects that serve the organisation. On the flipside, however, a flat structure can also: lead to confusion and potential power struggles if people are not sure who in the leadership team, is responsible for what; produce a lot of generalists, but few or no specialists — the specific role of individual employees may not be apparent; limit the long-term growth of an organisation — management may decide against pursuing new opportunities if they believe doing so might unsettle the existing structure; and struggle to adapt to change unless the company is divided into smaller, more manageable units. Creating passion Research shows that companies must have very clearly defined missions, goals, and growth plans to be successful with a flat structure in the long term. When these elements are figured out, some experts say employees can find a new passion for work. They may feel more motivated to pursue leadership roles and projects that benefit both their own career and the wider company, giving rise to a more positive work culture. Whether or not you are a fan of the flat organisation, however, one thing is for certain: returning wholesale to the hierarchical organisational structure of yesteryear is not a good idea. As transformation and disruptions become the new normal, it is time to start reimagining management. Paul O’Donnell is the CEO of HRM Search Partners.

New technologies can help finance leaders to future-proof their business and think more strategically, writes Danny Buckley. One of the prerequisites of working in a disruptive market is the need to design a more flexible operating model for finance. For many, the need to transform these operating models is no longer an option – it is an imperative. CFOs are reassessing gaps in their operating models to help set better targets and improve their reporting and forecasting capability. Riding the crest of the innovation wave Since the onset of the pandemic two years ago, the rise in automation has given finance teams more scope to concentrate on higher value-added activities. One area of particular interest has been financial forecasting powered by artificial intelligence. Here, AI has the potential to help finance teams generate predictive insights and reduce margins of error — and, at some point in the near future, instant forecasting in real-time may well become the norm. To build a better view of the future in the meantime, organisations will need to embed a culture of innovation — one in which technology and data can be used together for strategic advantage. The finance team will also need to change, opening itself up to new ideas and greater collaboration with others, both within and outside the organisation. On the journey from ‘running’ finance as a function to ‘driving’ finance as a value-added service, CFOs and senior finance leaders will need to focus on: partnering with external parties to provide finance processes or activities requiring specialised technology or knowledge; embracing data ecosystems which could prove crucial as organisations look to share business information across internal boundaries; hiring people with the right skills, giving them a career path, and attracting in-demand talent; and keeping abreast of the constantly changing legislative and regulatory environment. Transformation in operating models may create opportunities for finance-as-a-service. To future-proof operating as seamlessly as possible, CFOs will need to be able to build cross-functional teams. A clear understanding of targeted business interventions will help finance leaders to use data proactively to provide operational insights so that they can drive value at scale. To do this, they with need a solid strategy combining both data and technology. Technology can create a platform for the digital transformation of the finance function and a collaborative architecture connecting a range of ecosystems. Ultimately, it can bring employees, providers, and customers together as a cohesive unit. Danny Buckley is Partner of Financial Services CFO Advisory at EY.

The key to generating profit from within the accounting department is to give your team the time to offer value-added services and strengthen key relationships. Laurent Charpentier explains how. Today’s business climate demands we do more with less and this means that even our most vital cost-management teams are now expected to do more to boost the bottom line. Here are some strategies that can help your accounting team to generate revenue as well as cut costs. Task automation Applying automation to streamline tasks can save you money — take the many vendors who like to offer early payment discounts as one example. By automating invoice and payment processes, your team can capture “early-bird” discounts consistently. This in turn can reduce the cost of company expenses because it means you pay less on invoices and avoid fees on overlooked payments. Automating time-consuming manual tasks also means your accounting staff have more time to focus on strategic tasks. They can concentrate on the payment deadlines for accounts receivables, and on collecting other receivables, such as deposits, structured payment arrangements and delinquent fees. Going paperless Operating an eco-friendly business is the way of the future, but many organisations continue to rely heavily on paper, despite the availability of inexpensive cloud storage — and accounting departments tend to be heavy power users when it comes to paper consumption. Shifting to a mainly paperless model can cut costs on several fronts. It lessens the equipment and ink costs associated with printing and copying. It also reduces the shipping, delivery, storage, and other procurement costs associated with document handling. For receivables, generating invoices digitally and emailing them to clients enhances visibility and accountability, further ensuring more on-time payments. For payables, adopting secure e-check, credit card or even virtual credit card payment policies, cuts down on the number of cheques processed, shortening your payment windows and strengthening vendor relationships. Finally, creating and storing digital records can speed up access to those documents, as well as help to reduce fraud and comply with tax audits. Data silos Data silos are information, files, software or data points accessible by one department but isolated from the rest of the organisation. As organisations grow, these silos can make internal data sharing more complex, resulting in a severe lack of transparency, efficiency, and trust. This is especially detrimental in accounting as it can limit meaningful analysis, create workflow blocks and delay the availability of vital financial data, hindering the organisation’s decision-making process. You can start to dismantle these silos by integrating departments and platforms using enterprise resource planning (ERP) software. This can help to collect and centralise data across multiple departments. Once you eliminate accounting data silos, you can then help to support analysis across the organisation aimed at uncovering insights that can help to improve profitability. Teams will have greater scope to work together and make better decisions. They can identify valuable new opportunities and develop better habits for management spend and keeping costs down. Profit generation Having already saved time and money by automating processes, you can now direct your accounting team’s focus to strengthen relationships with vendors. Paying vendors on time helps to maintain relationships, making it easier to negotiate discounts – and discounts mean wider margins and higher profits. Beyond timely payments and discounts, positive vendor relationships can also help to ensure fewer delays in your materials supply chain – the kind that might delay customer deliveries. Keeping that revenue flowing is key to profitability. With more time, your team can also offer other value-add services to customers. Offering creative financing terms can earn you transaction fees while also making payments easier for them, for example. These and other accounting-related services can boost profitability as well as reduce processing times, fraud, and transaction costs. Laurent Charpentier is the Chief Operations Officer and Chief Innovation Officer at Yooz Inc.