How can companies integrate sustainability accounting initiatives into strategic management processes? Continuing research in the Strategic Risk Management Lab at DePaul University’s Kellstadt Graduate School of Business studies how companies can develop and execute strategies to create long-term sustainable value. Part of this research includes leading practices in developing the connection between sustainability accounting and strategic management. 


So, let’s examine how three areas of strategic management can elevate an organization’s sustainability accounting.


Part 1: Integrating Strategy Maps in Sustainability Risk Assessment


An organization’s balanced scorecard (BSC) strategy maps can be used to chart a course to navigate internal and external sustainability accounting. Another consideration is the strategic risk assessment process outlined in a 2020 report from the Committee of Sponsoring Organizations of the Treadway Commission (COSO),  which can be used to take an integrated approach to sustainability accounting and reporting. Here, Ray Whittington and Mark L. Frigo elaborate:  


Whittington: We discussed how the Strategic Risk Assessment process and BSC strategy maps can be applied to sustainability accounting initiatives in our article Sustainability and Long-Term Value Creation (Strategic Finance, October 2022) with Robert Hirth. In that article, we discussed how strategy maps can be used to describe and communicate the strategy of a company within an organization, including sustainability and sustainability accounting initiatives. Mark, from your recent discussions with CFOs, CEOs, and board members, what are some new developments?


Frigo: I have observed and recommended two ways companies can better integrate strategic management with sustainability accounting. First, incorporate sustainability accounting initiatives in the Strategic Risk Assessment process as part of enterprise risk management (ERM). Second, use strategy maps to describe and communicate an organization’s sustainability accounting initiatives.


Figure 1 shows a version of the Strategic Risk Assessment process, which includes the use of BSC strategy maps for developing and communicating a sustainability risk management action plan in steps 5 and 6.


Step 5: Develop sustainability risk management action plans:

·      Identify and select risk responses and mitigation activities.

·      Establish risk monitoring and update the assessment process.

·      Describe sustainability accounting disclosures and internal reporting.

·      Develop internal risk reporting and sustainability initiatives with BSC strategy maps.

·      Develop COSO internal control over sustainability reporting (ICSR) initiatives.

·      Develop an e-liability accounting initiative.


Step 6: Communicate sustainability risk profile and action plans in the process using BSC strategy maps to report the sustainability risk profile and action plans to directors, executive management, line management, and risk and control units.


Figure 1: Strategic Risk Assessment for Sustainability


Whittington: From your discussions with CFOs and board members, you have recently developed examples of strategy maps to get companies to either start using them or enhance their existing maps to include sustainability and sustainability accounting initiatives. Can you share an example?


Frigo: Figure 2 is an example of a strategy map for sustainability risk assessment adapted from those recent discussions with CFOs. Notice how logic of BSC strategy maps provides an excellent way to develop, describe, and communicate the sustainability risk management action plan. CFOs are interested in developing new ways to measure the return on investment (ROI) and associated performance measures relating to sustainability initiatives and sustainability investments that can be incorporated into BSC strategy maps and performance measure systems.


Figure 2: Strategy Map with Sustainability Risk Assessment


One approach I’ve recently discussed with CFOs is using a life-cycle analysis for evaluating investments in sustainability initiatives (see Strategic Life-Cycle Analysis: The Role of the CFO by Mark L. Frigo and Bartley J. Madden, Strategic Finance, October 2020). Another option I’ve discussed is using a strategic valuation approach for evaluating the sustainability initiatives (see Sustainability Strategies and Net Zero Goals by Mark L. Frigo, with Robert S. Kaplan and Karthik Ramanna, Strategic Finance, April 2022).


Part 2: New COSO Insights on Sustainability Reporting


COSO’s 2023 report, Achieving Effective Internal Control Over Sustainability Reporting (ICSR): Building Trust and Confidence through the COSO Internal Control—Integrated Framework, reveals new strategies. Here, Frigo and Whittington provide responses to three important questions about how these developments pertain to sustainability accounting.


How can companies integrate elements of the COSO ICSR in their strategic management?


Frigo/Whittington: Prior studies of restatements of sustainable accounting disclosures have introduced some questions about the overall reliability of disclosures. To assist management in improving the quality of sustainability disclosures, COSO published the aforementioned research paper. It was designed to provide supplemental guidance on the application of the COSO Internal Control—Integrated Framework to sustainable business information using the same principles-based approach for internal control over financial reporting (e.g., Sarbanes-Oxley Act of 2002 (SOX) and SOX-like attestations on effective internal control). It indicates that management should:

·      Be committed to developing robust and effective internal control over sustainability-related matters, remembering that sustainable business information like climate measures is more unstructured, estimated, and modeled. And that assurance is necessary to build trust and confidence in reporting and risk assessments to minimize threats such as fraud and greenwashing.

·      Leverage the organization’s controls and existing internal control knowledge with respect to financial reporting.

·      Develop or acquire management and board expertise on sustainability topics.

·      Use a cross-functional team with expertise in sustainable business, internal controls, and reporting. This helps avoid dependence on silos that can create blind spots.


What are the benefits to companies integrating elements of the COSO ICSR into their strategic management?


Frigo/Whittington: The scope of sustainability disclosures continues to increase as investors and regulators express the desire to use the information for investment and regulatory decision making. It’s essential that management leaders get a head start on developing systems for reporting this information—both for their own strategic decisions and for disclosure to the investing public. Management will be rewarded for strategic decisions based on reliable sustainability information. Plus, producing reliable sustainable disclosures to investors may be reflected in the company’s stock price. To learn more about leading practices for taking a strategic and integrated approach to sustainability accounting disclosures, see Ethics-Driven Risk Governance by Mark L. Frigo and Christopher A. Geiger (Strategic Finance, October 2023).


What advice would you give to CFOs regarding integrating elements of the COSO ICSR into their company’s strategic management?


Frigo/Whittington: CFOs need to give sustainability information similar attention as they do other types of internal and external reporting measures. This commitment begins with acquiring internal expertise on the issue and developing internal control systems that produce reliable information to be incorporated into strategic management. The cross-functional teams described above are very useful for developing reporting systems and determining how to best use the information for strategic decisions. CFOs should also educate themselves and the finance function on developments regarding sustainable information and disclosures and best practices to develop internal controls around sustainable disclosures.


Part 3: The Power of Integrated Thinking and Strategic Management


The advantages of integrating strategic management and sustainability accounting are clear. Frigo and Jeffrey C. Thomson, who served two terms on the COSO board, was a coauthor of the ICSR research report that serves as supplemental guidance to the Internal Control—Integrated Framework, and was president and CEO of IMA® (Institute of Management Accountants), discuss the benefits of integrating strategic management and sustainability accounting using the COSO ICSR and COSO ERM frameworks both of which incorporate a systems approach referred to as integrated thinking.


Frigo: Jeff, we were both early advocates for strategic ERM, strategy maps with balanced scorecards, and COSO, which was ahead of its time when advocating for systems thinking and integrated thinking during the 1980s.


Jeffrey C. ThomsonAgree, Mark. Sometimes it seems that in business, what was old is new again. For example, in the world of sustainability accounting, there’s no doubt that mandatory disclosures to comply with evolving regulations and reporting standards around the world—focused initially on climate risk—are top of mind. But the key enablers to accurate reporting and compliance (which is core to protecting a company’s reputation) are building long-term value through integrated thinking, scenario planning to reduce the cone of uncertainty, and frameworks like the BSC strategy maps and COSO Internal Control—Integrated Framework, which emphasize the long-term vision for enterprise governance, strategy, and performance management. In addition, the strategy-driven frameworks that you have developed can help with reporting.


Frigo: Strategy-driven risk management and value creation thinking are the keys to long-term sustainable value creation in today’s world. This includes innovative sustainability strategies aligned with long-term value creation and effective internal control. What advice would you give to CFOs regarding integrating elements of the COSO ICSR into a company’s strategic management?


Thomson: If you haven’t already, start or accelerate your implementation of sustainable business management into your company’s DNA—your mission, purpose, values, governance, and strategy, rather than a “bolt on” approach just to meet mandatory disclosure requirements, to build value for the long term. COSO’s ICSR is not only important for short-term mandatory disclosures, but also helps shape a longer-term view by building trust and confidence in sustainable business information for enterprise decision making. (Think: energy transitions, data modeling, anticipating various futures, etc., all enabled by effective internal controls). It’s plain and simple: Accountants and CFOs might lead the charge; effective internal control and risk management is everyone’s responsibility because it’s good for business.


Frigo: Agreed. Getting started and avoiding the status quo is the key. Taking that longer-term view also means taking actions that can overcome inertia—doing nothing. CFOs can take the lead by using the Strategic Risk Assessment process, designed to help companies take a longer-term view. (To learn more, see The CFO and Strategic Risk Management by Mark L. Frigo and Richard J. Anderson, Strategic Finance, January 2021).


Jeff, in your opinion what are some of the key benefits to boards of directors taking a strategic approach on sustainability accounting?


Thomson: I think of today’s future-ready board as the front lines of corporate governance—especially in a world characterized by disruption, fragmentation, speed, lack of trust, uncertainty, and incredible transformational potential. Directors must work with management to understand the various futures and how to adapt and anticipate. I’m a big advocate of actionable and anticipatory strategy frameworks. They’re a disciplined and practical way to drive a value mindset throughout an organization. And that’s true of sustainability accounting.


Frigo: I agree. Actionable strategy frameworks like Return Driven Strategy (see Mark L. Frigo and Joel Litman, Driven: Business Strategy, Human Actions, and the Creation of Wealth, Strategy & Execution, LLC, 2007) are the foundation of the Strategic Risk Assessment process—all of which can help board and executive teams be future-focused. This framework can also be used to strengthen an organization’s strategic resilience (see Resiliency and Strategic Risk Management by Mark L. Frigo and Dennis H. Chookaszian, Strategic Finance, May 2023).


Strategic Sustainability Advantage


CFOs and finance organizations have a great opportunity to lead by applying these ideas and practices to improve sustainability accounting:

  • Use the Strategic Risk Assessment process along with strategy maps to sharpen perspectives.
  • Apply the COSO Internal Control—Integrated Framework to foster a longer-term view of enterprise governance.
  • Form cross-functional teams to coordinate systems development.
  • Develop and execute an action plan for the finance function to build knowledge and expertise in integrating strategic management and sustainability accounting.



This article is part of the Creating Long-Term Sustainable Value Creation series (see Creating Long-Term Sustainable Value by Mark L. Frigo and Dominic Barton in the October 2018 issue of Strategic Finance) and part of the Sustainability Accounting & Reporting Initiative in the Strategy, Execution and Valuation Initiative and Strategic Risk Management Lab at DePaul University, which focuses on leading practices in sustainability accounting and reporting to help corporate professionals, advisors, and investors create and protect long-term value.


The Sustainability Accounting & Reporting Initiative, in the Strategy, Execution and Valuation Initiative and Strategic Risk Management Lab at DePaul University, focuses on leading practices in sustainability accounting and reporting to help corporate professionals, advisors, and investors create and protect long-term value. To learn more, email



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