IPA advocacy update: ESG and sustainability reporting

This year, as the IPA turns 100, we find ourselves not only celebrating the past, but looking towards the future. A large part of our future is impacted by ESG factors – environmental factors, society and social policy, and the governance of these factors.

We are particularly interested in the development of the governance framework, including sustainability reporting standards, and the part this will play in our effort to achieve the United Nations Sustainable Development Goals (SDGs) by 2030.

This week I had the opportunity to join a panel for the ESG Future Foundation, speaking about some of these factors and elaborating on the activities the IPA is and will be undertaking in the name of ESG and the SDGs.

There is a wide range of activities, including:

• Being involved in government consultations on sustainability reporting
• Ongoing thought leadership events
• Developing education courses and training
• Engaging more with members, for example, through the monthly sustainability discussion group and online platform
• Looking at our own sustainability practices and implementing an ESG program, to ‘walk the talk’
• Assessing practical tools and resources for members, clients and employers to use
• Collaborating with other professional associations around the world

We have found that many members want to be involved, they want to do something, but they are not always sure where to start or the best way forward. The IPA’s role is to provide guidance and assistance.

With respect to government consultation, the Australian Accounting Standards Board incorporated the sustainability reporting project into its agenda in February 2022. This project is designed to meet investor demands for improved, high-quality, transparent and reliable reporting for ESG issues.

The goal is to establish standards that are consistent, comparable and translatable between different jurisdictions. IPA was on the Project Advisory Panel and contributed to ongoing consultations from the perspective of small and medium enterprises (SMEs)..

It’s critical that sustainability reporting standards operate between jurisdictions because there has been a lot of development on a country-by-country and regional basis, so we need to promote and support standards that converge and work across jurisdictions.

The IPA's position on sustainability reporting supports aligning Australian sustainability standards with the International Sustainability Standards Board (ISSB), and endorsing a phased approach for the initial application, starting with large entities before reaching SMEs.

The IPA has been advocating for  standards that are scalable for entities of different sizes and complexity. Sustainability reporting by large entities can indirectly impact entities, including SMEs, in their value chain for Scope 3 emission disclosure. So the impact of this on scarce resources needs to be taken into account.

The IPA also endorses the mandatory application of the standards, and the assurance of sustainability reports. These two things are critical if we are to achieve widespread acceptance and application.

The IPA believes that an appropriate standard-setting framework and oversight structure are needed to ensure success, and these should have the ability to draft, deliberate and approve sustainability reporting standards. This will be part of the ongoing infrastructure.

However, we also believe there are issues with the proposed sustainability reporting requirements, given the nature and complexity of Comprehensive Corporate Reporting. These concerns are about the challenges SMEs will face implementing the proposed requirements in their current form, and potential auditing and assurance challenges.

Another concern is that we need to ensure that we have enough suitably skilled professionals with a variety of expertise. So, a lot of upskilling is needed. This will obviously be a growth industry.

Another important consideration is the pace and scope of international developments in sustainability reporting, particularly the future agenda topics of the International Sustainability Standards Board, which are diverse and numerous.

In June 2023, the IPA provided submissions on the ISSB’s first two sustainability standards (IFRS S1 and S2), followed by similar submissions on the Australian government equivalents. The Treasury is expected to finalise proposals and then the framework for assuring the sustainability reports will be announced.

Noteworthy developments include the establishment of an authority (such as a standard-setter or scientific body) to provide supporting information for corporate reporting and potential changes to the standard-setting and oversight structure.

The IPA will closely monitor these developments and actively engage in the sustainability reporting landscape to ensure the best outcomes for members, SMEs, the accounting profession and the community.

Vicki Stylianou is IPA Group Executive Advocacy and Policy.