Sustainability and responsible business practices:
In the early days of environmental, social and governance (ESG) development, there was a lot of debate about the conflict between being a good corporate citizen versus optimizing profits and returns to shareholders and owners. But nowadays, the focus on sustainability has combined with a realization that businesses are accountable to stakeholders beyond just their shareholders. (In fact, this has always been true in Canada, although the Canadian business community has been unduly influenced by American business culture and Milton Friedman’s famous, “The social responsibility of business is to increase its profits.”)
A good summary of the Canadian position can be found in the 2022 report by Peter Dey and Sarah Kaplan, 360° Governance: Where are the Directors in a World in Crisis?
“It is increasingly clear that corporations depend on a wide variety of stakeholders to function effectively. Customers, the planet, workers, communities and others offer the resources and markets required to grow businesses. And, while corporations contribute jobs, innovation and economic growth to our country, corporate operations have also contributed to creating or exacerbating social problems: climate change, income inequality, gender inequality, the opioid crisis, etc.
Too often, these social costs have been treated as “externalities,” outside the scope of action for companies. At a time when a company’s primary responsibility has been to produce short-term returns to its shareholders, they have been dismissed as simply the cost of doing business. Yet, for an accumulating set of reasons, stakeholder concerns are now corporate concerns.”
So, to the extent that improved controls enhance broader objectives, such as improving the community, the environment, or even customer service, it may be wrong to simply consider the “cost” of such enhancements. Engaging with the community by sourcing supplies locally, supporting local events and in general being a “good corporate citizen” are all examples of building resilience and goodwill, and contribute to improved internal control since they can help the organization achieve its objectives.
Data is valuable
We know that accounting data is valuable and financial managers safeguard it. Accounting records are reconciled, audited, balanced and analyzed to maintain accuracy and reliability. One of the deep lessons in the modern world is the importance and value of all data, not just accounting records. The finance area may play a major role in enhancing internal control within their organizations by helping improve the accuracy and usefulness of non-accounting information sloshing around in all areas. Website hits, customer queries, marketing campaign statistics, and quality measurements, are all examples of data that can be vital to the organization where finance could play a role in ensuring it is of high quality.
Similarly, just as accounting data is protected, because of its value, so indeed all data within the organization needs a “security mindset” to ensure that it cannot be exploited by outsiders. For example, third-party cookies may reveal patterns of browsing and internet searches by employees that may be valuable data to a competitor or other actor outside the organization. An internal control focus will not only ensure that non-accounting data is accurate and useful, but help maintain security and privacy.