Date posted: 21/01/2021 4 min read

Beyond profit: An opportunity for the finance function

The role of the trusted adviser in the value creation process

In Brief

  • Accounting is the language of business, providing a means of communicating with stakeholders
  • Integrated thinking requires the finance function to move towards accounting for value creation
  • Accountants inherently understand the concept of value and are best placed to be difference makers

By Karen McWilliams FCA, Business Reform Leader and Lydia Tsen CA, Senior Policy Advocate Business Reform

“The phrase ‘purpose beyond profit’ is commonplace, but what does it actually mean? In contrast to the long-held belief that the purpose of a business is to maximise profit for its shareholders, ‘purpose beyond profit’ suggests that the purpose of business should more broadly be to deliver value to all of its stakeholders, extending beyond the narrow shareholders’ circle to encompass its employees, clients, suppliers and the community in which the business operates.”   ̶ The 21st Century Profession

Responses to surveys by Chartered Accountants Australia and New Zealand, as published in The 21st Century Profession, confirmed a significant proportion (94%) of Chartered Accountants believe professions need a purpose beyond profit and one that ensures ongoing value to stakeholders.

Creating and delivering value

Value delivery first requires an understanding of how an organisation creates value. The International Federation of Accountants (IFAC) – a global organisation for the accountancy profession dedicated to serving the public interest – considers that value creation for stakeholders requires an internal management process that works through defining, creating, delivering and sustaining value.

This method necessitates an integrated thinking and reporting approach – one that enables greater corporate accountability, communication and transparency. As noted by the International Integrated Reporting Council (IIRC), “integrated reporting is an evolution of corporate reporting, with a focus on conciseness, strategic relevance and future orientation”.

This newer approach to corporate reporting is best championed by accountants to enable organisations to fully embrace the value creation process and encourage integrated thinking.

Why?

The depth and breadth of accountants’ expertise helps reveal the big picture and chart the best course of action. Managing risk and preparing businesses for future challenges, they are trusted to shape the course of companies, organisations and economies around the world.
Ainslie van Onselen CA ANZ CEO, The 21st Century Profession

Success in adopting an integrated thinking mindset requires creating and demonstrating value for all stakeholders, not just shareholders, and addressing societal expectations related to sustainable development.

For public companies, more effective communication of the drivers of value creation will affect not only market value, but also society’s perceptions of the company.

Accounting is and has been the language of business, providing a means of communicating with stakeholders – initially investors, but now with all those who affected by the value creation process.

Integrated thinking requires the finance function to move from traditional models of financial reporting to one that includes accounting for value creation.

But in this way, accountants are best placed to be the difference makers in the organisation.

Accountants inherently understand the concept of value, what information is needed to measure this value and what is needed to ensure this value is preserved.

The CFO and finance function can help navigate, measure, and communicate what matters to long-term success while dealing with the expectation for short-term resilience and performance.

By communicating information on value creation, the finance function can help to provide insight into the parts of the organisation that have remained hidden in the financials. In doing so, accountants will enable organisations to better identify opportunities and risks as they relate to the overarching strategy.

As difference makers, accountants are well-positioned to lead the value creation process and use their portfolio of skills to drive business decisions for prosperity.

International Federation of Accountants (IFAC) guide on value creation

Click below to find out more about the value creation process.

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International Integrated Reporting Council homepage

Click below to follow developments in the integrated reporting space

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The 21st Century Profession

Access the report and our other commentary below.

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