Technology and climate change are rapidly changing how we do business and the skillset needed to function effectively in the current business environment. Climate change is considered as the greatest threat to the future of humankind. Technology is impacting all aspects of how businesses are conducted. It has changed how businesses communicate with customers, marketing and advertising, manufacturing, purchasing and sales.
This presents threats and opportunities for businesses and how they exploit that will determine whether a business will continue to operate as a going concern. The discussions that follow looks at how businesses are being impacted by climate change and technology.
Technology
Technology has dramatically changed every aspect of a business’ operations and how we do business. Technology is evolving so rapidly that one cannot help but be overwhelmed, ready or not. Organizations have to be able to redefine themselves at a much faster pace. Below are a few instances of how technology is changing the business landscape.
Mobility and connectivity
Technology has made it possible to handle every aspect of a business operation away from the office and from any part of the world with the right software and internet connectivity. Everything- from customer service, sales and invoicing as well as business back end processes can be done at the click of a button. It has made it easier for people to stay in touch. With government restrictions caused by the COVID19 pandemic resulting in employees working from home, businesses have been able to provide services to their clients, and co-workers have been able to stay in touch seamlessly either through a video call or chat at a moment’s notice. The economic impact of COVID19 would have been far more damaging had the pandemic happened 20 years ago.
Competition
The exponential growth in technology has had an impact on every sector of the economy, and no business, be it formal or informal, can escape its effects. Technology has literally changed the structure of competition in industries and has created competitive advantage by giving companies new ways to outperform one other. It has levelled the playing field, giving small companies the opportunity to compete with large corporations.
For instance, just by the use of an app, Uber, although does not own any taxis, have the biggest taxi company in the world. According to uber, there were 91 million monthly active platform consumers and 14 million trips completed each day worldwide as of December 2018. This has put the business viability of traditional taxis at risk. Another example is Airbnb, the world’s largest accommodation holder and yet they own no real estate.
Banks in Ghana have been paying attention to the competition that technology has brought through mobile telecommunications. They are now losing their grip on the payments market as alternatives such as mobile money payments become increasingly available. According to data from the Bank of Ghana, the total value of mobile money transactions exceeded the value of cheque transactions, by GH¢389 billion in 2020. Banks have had to make considerable investments in developing their own customer focused digital offering as well as integrating mobile money payment options in their digital offerings.
Impact on accountancy roles
The pace of technological change is having wide-ranging effects on the accountancy profession. These changes bring both opportunities and threats for professional accountants. Technology is the single biggest factor impacting the accountancy function now and in the future. With businesses now being transformed by cyber-physical systems leading to the development of several technology trends, the way accountants and finance professionals perform their roles has been impacted.
Workplace automation and digitalization will require a different skillset for the accountants and finance professionals in order to stay relevant and also enjoy the enviable role they place in organisations. Accountants and finance professionals should be able to analyse how Big Data, increased computing power and cloud-based services, Artificial Intelligence, Intelligence of Things (Combining Internet of Things and Artificial Intelligence) and Blockchain can be used strategically to achieve the objectives of their organisations.
Data is no longer about numbers and spreadsheets as accountants have been familiar with for years. It includes unstructured data, collected from a variety of sources and in high volumes that can be analysed using natural language processing, a branch of artificial intelligence that helps computers understand, interpret, and manipulate human language. This allows for monitoring the status of financial matters in real-time.
Intelligence of Things allows devices and machines to communicate and operate without human intervention. This offers advantages to accounting systems by helping accountants track ledgers, transactions and other records in real-time, making accounting activities such as audits much more stress-free.
Some accounting skills are expected to decline in importance in the coming years due to workplace automation. These skills may include manual calculation and filing of tax returns as well as routine back-office work. Compliance reporting is also expected to become more automated through technology and analytical tools. Accountants will need to develop skills leverage on the capabilities of automation. The advancement of technology for business operations requires additional well-developed skills such as advanced data analysis (big data analytics), interpretation skills, and decision-making skills.
Cyber Security
Cyber security breaches are widespread in today’s business environment. As technology becomes sophisticated, so are the threats. Businesses need to take steps to safeguard their confidential data and other sensitive information. Smaller sized businesses are increasingly vulnerable. A 2017 study by Symantec found that email malware affected small businesses and large enterprises in equal proportions. A simple cost-effective way available to businesses to protect their valuable data is undertaking penetration testing. A penetration test is a simulated cyber-attack against your computer system to identify vulnerabilities that can be exploited. It can involve the attempted breaching of any number of application systems such as APIs and frontend/backend servers to uncover vulnerabilities.
It does not matter the attitude that one has towards technology – technophobia or a technophile. The speed with which technology is advancing is not going to reduce any time soon, and businesses that fail to embrace it will be left behind while the ones that keep up will reap the benefits. Owners of businesses, irrespective of size must know how technology affects their business- for better or worse, and how to apply the advancements to their advantage. The government, as a matter of priority, must invest in the digital infrastructure of the country so that businesses and individuals can reap the maximum benefits of this digital age.
Climate change
Climate change is arguably the greatest challenge facing humanity presently. The effects of climate change are not only an environmental problem, but it goes to the very heart of global security – Flooding, diseases and famine resulting in migration on an unprecedented scale in areas of already high tension, drought and crop-failure leading to intensified competition for food, water and energy in regions where resources are already stretched to the limit, and economic disruption threatening global peace and security. According the FAO, the human race will face a big challenge in providing food and livelihoods to a population likely to exceed 9 billion people by 2050.
There have been increased talks among government agencies, major corporations and scientists about human-caused climate change and the steps that can be taken to address them. A growing number of companies have come to accept that ignoring the threats posed by global warming is a mistake, and they are already taking steps.
The impact of climate change or businesses may be direct, for instance concerns of the Coca-Cola bottling company with regard to water scarcity in India, while others are indirect, such as how insurance companies assess natural disaster risk. With these impacts, companies are investing in new processes to mitigate the risk. Investors have also taken a cue and are directing their investments to companies that seek to combat climate change and environmental destruction. According to the 2018 Global Sustainability Investment Review by GSIA, sustainable investing assets in the five major markets (United States, Europe, Japan, Canada, and Australia/New Zealand) stood at $30.7 trillion at the start of 2018- marking, a 34% increase in the amount for 2016. However, it is important to emphasize here that the appetite of the major banks of the world is still quite high. According to the Banking on Climate Change report of 2020, 35 of the leading investment firms in the world have invested $2.7 trillion into fossil fuels since the Paris Agreement. In the next few years, businesses will have to be able to demonstrate that their operations do not adversely impact on the environment before they can attract the needed investment for their operations.
There is a consistent increase in consumers’ willingness to purchase products with a social benefit. Consumers are increasingly expectant that businesses do more than make profit. As a result, they are continually modifying their behaviour, including their purchasing power. This presupposes that businesses marketing goods that are environmentally sustainable will have a competitive advantage over their counterparts that engage in marketing environmentally unfriendly alternatives. In a 2015 survey of 30,000 respondents in 60 countries conducted by Nielsen, 66% of the respondents indicated that they would pay more for sustainable brands and products.
In the not too distant future, companies will only be able to attract investments or demand for their products when they are able to demonstrate that they operate in an environmentally sustainable manner. In addition to the annual reports to shareholders and other external stakeholders, companies must be able to produce sustainability reports, also known as Environmental, Social and Governance (ESG) reports. Companies can adopt the Global Reporting Initiative (GRI) framework that will help in identifying, gathering, and reporting this information in a clear and comparative manner. The GRI is an international independent standards organization that helps businesses and governments understand and communicate their impacts on issues such as climate change, human rights, and corruption.
Evolve, or die!
About the writer
The writer is a chartered management accountant. He is an associate member of the Chartered Institute of Management Accountants, UK (CIMA, UK), and a member of the Institute of Chartered Accountants, Ghana (ICA, Ghana).
Email: [email protected]
