Shownotes
The rise of sustainability in business reporting requires CPAs to develop new skills and a new knowledge set. This may seem daunting, but Blake Phillips sees it as a way of future-proofing your career.
Blake Phillips is the director of the School of Accounting and Finance at the University of Waterloo. He is the co-developer of a new program at the university, one that is aimed at training tomorrow’s green financial experts. The Bachelor of Sustainability and Financial Management officially starts in Fall 2022. The program’s fusion of sustainability and financial management is unique in Canada and highlights the integrated set of skills that will be in high demand in coming years.
Phillips makes the point that accountants, who are well versed in financial systems, need to ensure that they gain the appropriate knowledge to understand financial, social and natural systems equally.
University of Waterloo Sustainability and Financial Management program
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Transcripts
Neil Morrison:
Welcome to Season Three of Foresight: The CPA Podcast. I'm Neil Morrison.
In our first episode in this season, Bettina Pierre Gilles argued that we are in sort of a golden age for accountants. The skills of the CPA are becoming increasingly relevant as the financial world shifts towards sustainability. There's a growing need for consistent standards, reporting and systems of verification. Bettina made it clear, she saw sustainability as an opportunity for CPAs to flex their auditing muscle.
But our next guest says for CPAs to really dominate this space, they will need to develop some new skills and a new knowledge set. Now this may seem daunting, but Blake Phillips sees it as a way of future proofing your career. Blake Phillips is the Director of the School of Accounting and Finance at the University of Waterloo. He is the co-developer of a brand new program at the school aimed at training a new breed of green financial experts. The Bachelor of Sustainability and Financial Management officially starts this year. And according to Blake, this program is very different from what's on offer at other business schools.
Blake Phillips:
So I think the key difference there is the fusion of sustainability and financial management in a unique way that has never been done before in Canada. So we have taken preexisting courses that were within the School of Accounting and Finance and preexisting courses which were in the Faculty of Environment. So those are the foundational elements that are brought together. And so it's that unique fusion that isn't really being done anywhere else. So it's defining a new discipline if you will, of a blend of financial management and sustainability.
Neil Morrison:
And do the students come out of the program with core accounting skills? Are they eligible for the CPA exam at the end of this?
Blake Phillips:
They are. So if you take the BSFM, which is a Bachelors Sustainability and Financial Management, and then select that corporate sustainability specialization option, you're taking all of the same CPA accredited courses that students in our Accounting and Financial Management program would take, or in any of our other accounting programs. We have joined accounting programs with the Faculty of Science and with the Faculty of Math. So all of those students are together within those courses. So it has that same pathway that the other accounting students are studying that leads to the CPA accreditation.
Neil Morrison:
So at the end of the program, they can do the same things as someone from a more traditional pathway towards the CPA. What else can they do? What can they do that someone going through a traditional stream would not be able to do?
Blake Phillips:
Well, without having more exposure to sustainability, you're not that strategic thinker that looks beyond sort of financial outcomes, right? And that's the key learning within the BSFM that is maybe absent from other business programs that... And I'm not suggesting that there aren't any sustainability objectives in all of... The business schools around the world right now are reacting to the demand for sustainability outcomes in business education and are integrating them in different ways. But that's the key thing that you're missing from a traditional business program, is that primary financial perspective. So what do these jobs look like? Well, it's almost everything. So whether you're going to be that redefining the strategic thinking of the firm, or looking for sustainability opportunities into product space. It is really endless what you can do. And the demand for that student with the joint competencies and financial management and sustainability is through the roof right now. So you have all the traditional job lines as you've pointed out, plus all of these other sustainability integration job lines that are unique to students that focus on that discipline.
Neil Morrison:
So you said the demand for it is through the roof. I know it's very early days of the program, but have you gotten any response from industry and how have they responded to it?
Blake Phillips:
So we've done very little marketing. As I said, we officially launch this fall and there's 50 students coming into the program. And we had 20 students that were shadowing the program. And our key employers through the co-op space at Waterloo have heard about the program or alumni have heard about the program and they've immediately been interested in, "Okay, how can I hire these students? When are they going to be available for co-op?" And with absolutely no marketing, we've had all of the major accounting firms and a lot of other firms just reaching out saying, "How do I employ these students? How could I get in front of these students? How do I make them aware of the opportunities within our firm?"
I had one firm say to me, "So how many students are there?" I said, "Well, there's 20." He said, "Okay." I'm like, "Well, what do you mean by, okay?" He's like, "Well, we'll take them." I'm like, "Well, what do you mean you'll take them? You'll take all 20?" He's like, "Yeah, we can easily hire all 20." And I said, "Okay, well, that'll be up to them, but it's nice to know that that demand is out there."
Neil Morrison:
What do you think they're seeing? I don't know if they've communicated this to you, what are they seeing as the benefits of this new sort of accountant?
Blake Phillips:
Well, I think they're seeing what I think the world is broadly seeing right now. The world is framing a new financial system. So you can think of this really sort of stemming right from the foundation of, what is the purpose of the firm, right? And originally the key stakeholder and only major stakeholder of the firm, was the shareholder. And that was what the firm's primary goal was, was to create wealth for shareholders. And now there's a recognition that the stakeholder base is far larger than just the shareholders. If you're a company and you're polluting the water, or you're creating carbon, or you're cutting down trees, or you're having negative social impacts on the community in which you work, that doesn't just affect your shareholders. It affects everyone in the community and pollution just doesn't hang over that factory and sit there in one place. It doesn't care about international borders. It just moves around the world, right?
So really every person in the world has a stake and has an interest in how that firm is operating. And so when you shift your mindset from a shareholder base to a broad stakeholder, where it's the entire society of the world, that you're considering as your stakeholder, then how you measure success becomes very different. Because someone in Australia that notices the pollution that came across the ocean from somewhere in North America, has no interest in the financial outcome of that firm. All they care about is that the pollution is on their back door. And so when you transition in this new mindset and this new way of thinking, and essentially what we're defining here is a new way of measuring and defining success.
And all of the firms around the world see this on the horizon. Reporting guidelines are coming out. Requirements are coming out. There's demand from government to make changes in this direction. There's demand from employees that want to work for a company that is sustainability minded. There's demands from the consuming public that want to make sure that the products they're purchasing have been sustainably produced, and that they're going back into a closed loop and they're not producing a lot of garbage. And so all of these demands are mounting. So when you look at sort of maybe the major accounting firms, when all of their clients are coming to them saying, "We need to wrap our minds around this. We need to get ahead of the curve on this. We can't hire anybody. We can't find talent that has this joint competency, because they're so scarce. We need you to help us." And they see that. And they're trying to ramp up in that space.
Neil Morrison:
I want to get a look at the program, it's development, as you said, it's brand new. I want to get to when the idea came to you for this sort of program. What was happening? I don't know if there was an aha moment, if there was something that just jumped out at you that, "Oh, this is something we should do."
Blake Phillips:
I talked about how we feel like there's been this surge in momentum. And I still feel like maybe two years ago and my sustainability colleagues would say, "No, this has been going on for years and years and years, you've just been living under a rock." But in the financial management space, this didn't really seem to have a ton of traction until you started seeing guys like Mike Carney, going out, walking out and saying, "This is big. This is a re-imagination and a restructuring of the entire financial system." And even then I think people like, "Okay, yeah, I hear this. We need to move towards sustainability goals." But it just didn't seem to have that wave.
And it was really just a coincidental, my boss, the director at the School of Accounting and Finance and the Dean at the Faculty of Environment, connecting at an university event and saying, "You know, we should collaborate. I think there's some synergy here." And it was as simple as that. I'd love to be able to say that there was this framing moment and all of a sudden this, aha. And yeah, this bolt of lightning came from above and said, "Thou shalt." But it was really more of a desire to be collaborative on campus. But it also tied in with my prior training.
Neil Morrison:
Yeah, because you have a PhD in finance, but you didn't start there, did you?
Blake Phillips:
No. So at one point in my life, I was a professional biologist, professional Forrester, partner in a civil culture firm. And civil culture is essentially the part of forestry that is the ecosystem restoration. And that was the space that I thought I was going to work in. As a partner, I said, "I really don't have a good sense of business. I've done these health science and forest training. I've done two introductory economics courses. I really don't have a good foundation on managing a business." So I went to the University of Alberta and did Masters of Business Administration and a Masters of Forestry jointly together, looking to gain those competencies in business management. And while I was there, got kind of bit by the bug if you will, of continuing my learning and that was where I decided to go on and do a PhD in finance.
So I had that background before I had transitioned into the financial management space. So it was a natural when the director said, "Hey, you think you would be interested in getting a collaboration, going with the Faculty of Environment?" I leapt at the opportunity, because it just resonated so well with my original training and my background in that space. And it felt really natural going back, because I was able to cross over between the two faculties, so comfortably and immediately be a good collaborator on their side, because I really had an understanding of where they were coming from and the training that they were seeking.
Neil Morrison:
You were already living in both worlds at the same time.
Blake Phillips:
Yeah, essentially. It's ironic. At the time when I was proposing my PhD thesis at the University of Alberta, I said to my supervisor, I said, "I want to do sustainable finance. That's where I want my thesis to be. That's what I want to focus in." And he said, "You know what? If you do that, you're going to be unemployable. You're welcome to sort of dabble in that niche field when you get tenure. But if you want to get a job in finance at a reputable university, you need to do a more traditional area of research." And so that was about 15 years ago and he probably wasn't wrong. So we've come a long ways, but I think probably a lot of people would argue, not nearly quickly enough, as far as the demand for people with that joint competency now.
Neil Morrison:
Well, and I think people might also wonder how genuine is the shift? Is this just corporations responding to something that's a current trend, but down the road, the truth is what they'll always be looking for are straightforward financial accountants or people who are focused on finances? And that this is just a response to where things are right now, socially or politically.
Blake Phillips:
Yeah, I think it is a good question. And for that reason, we focus a lot on what I'll refer to as the business case for sustainability. And some of my colleagues in environment would shudder at that term. By that, what I mean is that there is a lot of financial value to embracing sustainability outcomes. So the focus of the program is to recognize that sustainability is not a cost center. There are inherently the requirement for short term compromises between financial, social and natural systems. I'm not going to suggest that they can all coexist equally and that there never a compromise needs to be made between them, but there is a huge amount of value, for shareholders, financial value for shareholders that is created by embracing sustainability outcomes.
So I'll give you an example that was recently in the press about Coca-Cola moving away from the green Sprite bottle, right? It's iconic, right? Every Sprite's come in a bottle that color. There's a couple other brands that fall under their banner that come in that. And so they've recognized the value in conforming their... So it's not that a green bottle isn't recyclable. It's that a green bottle is less easily recycled back into another bottle and more frequently gets turned into a jacket or something else. And so in order to try to achieve a full closed loop system where the bottle is used, ground up into particles and then reformed into a bottle and reused in a perfect closed loop, they've said, "Let's go to a white bottle, but we'll have the green coloring on the label." So there's going to be significant value for Coca-Cola doing it that way. Better for the environment, better for them. If they can achieve a true closed loop where their bottles are just being cycled and they're refilling them, there's going to be financial benefits for them as well.
Another example that we often use as a case when we're teaching sustainability, is Walmart looking at how they are selling their laundry detergent and pressuring their suppliers saying, "Look, you need to figure out a way to get all of this onto a much smaller pallet, because we need more space in our trucks." And so that's where a concentrated detergent came from. Well, you need it to take less space. Well, let's put it in a smaller bottle. Why are we shipping water around the world? Water's available anywhere. What the unique ingredient is the cleaning agents, right? Make the bottle smaller, make it concentrated. It takes up less space. And think about the value proposition there for Walmart. Massive, absolutely massive. And the value for the environment is water was saved. There's less fuel being consumed shipping. There's less trucks. There's less space in the warehouse being taken up. It goes on and on and on.
And I'll acknowledge, I've cherry picked a few prime examples, but there are lots and lots of others. And so it's often just not really looking and not really thinking about it. Just, this is always the way that we've done it. And so if we can achieve those closed loop systems, and if you can figure out a way to be less inefficient or more efficient, I should say, then it's going to have financial benefits, right? So ultimately that's what we're trying to teach these students, is to look for those opportunities, the triple win, the triple bottom line benefit.
And also even if it is just, well, there's a big compromise here. We're going to do this because it's better for the environment and it's going to cost us more to produce it, but recognizing that the value proposition financially for that is then in the communications piece. And making the consumer aware that, "Hey, when you buy this product, this is why you're buying it. And this is why you should buy it over the competitors." Which circles us back to this, so why is this so important within the accounting space? Why are you and I sitting here talking about this today on a CPA broadcast? And it's that certification piece that is so important, right? And you say, "Well, how do we know that this isn't all just green washing or this isn't a trend?" And that's essentially what the role of accountants has been, but in the financial system space, where we have certified and accredited that these financial statements are accurate and they're material. And so that stakeholders are informed and can act on that information.
So we need to do the same in the natural systems in the social systems space, because right now it's the wild, wild west. The disclosures are discretionary. There's very loose guidelines or no guidelines regarding what you disclose, what you don't disclose. You can pick and choose what you want to disclose. You can present it in a positive light. And in order for the value to be captured, where a company makes a positive sustainability choice that maybe does cost more to produce the item, but it's sustainably far better outcome for society, that the consumer knows that and is able to make an informed decision and rewards the firm for that innovation. So that's where this, the key piece of this is that communications piece, that accountability piece, that transparency, consistency, integrated reporting so that all stakeholders are informed and can make informed decisions from whether I'm investing or whether I'm on the cereal aisle in Walmart picking out what I'm going to have for breakfast tomorrow.
Neil Morrison:
Yeah. You have an en analogy for how things are developing for accountants. You've compared them to marathon runners versus triathletes.
Blake Phillips:
Yeah. Well I think that the analogy is apt and both my wife and I are runners. And so this is a space that it just came to be. But you're right. We've been running a single sport for a long time. That's the marathon. And so now when you think about, well we're expanding from financial systems to financial, social and natural systems, and I need to know all of them and understand each of them equally, it's like a triathlon, but the average accountant can't swim and doesn't own a bike. And it's the analogy of course, lots of accountants could swim like that.
But, it's sort of like, "Well, how do I transition into a world where success was defined by my aptitude in one characteristic and now all of a sudden it's a three prong? And all three contribute equally to the outcome of the firm. And I have to understand all three." And probably as an educator, we can think about what are one of the more challenging concepts to teach? It's intangibles. How do I measure the value of goodwill? How do I measure the value of a brand or a trademark? And that's a lot of social systems and natural systems are those intangibles. There are lots of tangibles for natural systems. We can measure carbon output. We can measure water quality. We can measure air pollution, but it's very difficult in social systems. We can see maybe diversity is observable on a board, but inclusion is not. So there might be diverse people on the board, but not everyone has a voice on the board. And so these are very challenging things to teach and require a whole new breadth of competencies that just quite frankly, don't exist within business schools.
Neil Morrison:
But I do wonder if now, other business schools and other accounting and finance programs are going to start moving in this direction? So I wonder if you're soon going to have some more competition in Canada in this space?
Blake Phillips:
Well, I think, hopefully we will be, because we certainly can't train all of the talent. We can't even come close. So I'm saying to students like, "Look, if you're two, three years in, and you're not in the BSFM, and you're going to be graduating, you're going to be graduating without the competencies that you need, because we're catching up." And so that's just the reality that we're contending with. There needs to be an education for the incoming accountants of the future, but there's a huge population of accountants that are going to be working in the industry for 20 or 30 years more and need to top up in these competencies in order to continue to be successful and honestly, even relevant.
Neil Morrison:
Right. It is going to be central to their ability to advance in their careers. It's the way it sounds.
Blake Phillips:
It is. It is. Yeah, absolutely. Hopefully five or 10 years from now, you'll look at an accountant and say, "Hang on, you didn't do any sustainability courses? So social systems, natural systems, you just studied financial systems. Well, you don't even know a third of the job. How can you...?" Hopefully the mindset will trend that way. It needs to, for us to achieve the sustainability outcomes as a society that we have to achieve. The onus is on us as educators to prepare students that are forward thinking and are ready to jump into this really complex world and deal with these compromises and new ways of thinking and new ways of measuring and defining success.
Neil Morrison:
It's an exciting sounding program. Honestly, I would've loved to have taken this. I think if I was starting again, it would definitely be on my radar and it comes at a really exciting time. So thank you so much for sharing it with us, for letting us know. And yeah, it's been an inspiring conversation.
Blake Phillips:
Oh, it's my absolute pleasure. So, thanks for having me.
Neil Morrison:
Blake Phillips is the Director of the School of Accounting and Finance at the University of Waterloo and he spoke to us from Tobermory, Ontario.
You heard Blake talk about how ten years from now employers will expect more from CPAs than just a solid grounding in finance. Financial reporting and leadership will only be part of their job. Well, that future might be coming sooner than the next decade.
Guy Cormier is the president and CEO of Desjardins Group. On our next episode, he talks about how at Desjardins, there’s no longer a separation between the folks who work on the finance side of the business and those who work on ESG goals like Sustainability. ESG goals are now fully integrated with financial goals.
“One thing that I'm really proud of is the fact that now ESG is integrated in our business activities. And that's where I think there's a threat when you try to do ESG, but beside your company. You have a department beside; you have a VP beside. We were like that five, ten years ago, but now I feel that we integrate it in each of our business sectors. We have people who are totally dedicated with our senior executive vice president, with our management team. Their job is just to look at how we run our businesses, embedding ESG in all of our decisions and our processes.”
That’s Guy Cormier, the president and CEO of Desjardins Group speaking on our next episode of the Foresight podcast. You’ll want to listen in. He has some provocative things to say about the future of capitalism.
But that's it for this second episode of Season Three of Foresight: The CPA Podcast.
If you're new to the podcast, why not check out some of the episodes in Seasons One and Two? We've covered a lot of ground about the changing landscape of the accounting profession. If you like this podcast, please share it, review it or rate it. It all really helps others to find it. I will be back in two weeks. I'm Neil Morrison. Thanks for listening.
