The role of accountants in achieving sustainability
A major focus has always been the role of accountants in assisting businesses to become sustainable, that is, to embed sustainability throughout the business, from formulating strategy to improving processes, measuring performance to making a clear business case for sustainability initiatives; and answering the critical question of “but how much will it cost?”
The IPA wants to help members and the profession be part of the change to a more sustainable economy and community.
It starts with having a certain mindset and may need a cultural shift. This involves a change in thinking solely about financial performance to thinking about transparency and what progress is being made on environmental, social and governance (ESG) issues. Stakeholders, including governments and shareholders, are demanding more information about how firms are impacting society and the environment.
According to the Governance and Accountability Institute, ESG reporting has increased by more than four times since 2011 among S&P 500 companies, and as global interest grows there have been calls for more uniform metrics. The Institute contends that ESG reporting “provides more accountability, enhances legitimacy, increases profitability and improves governance, and as climate change affects all markets and presents risks that shareholders can no longer ignore, investors are demanding answers about ESG fundamentals in the investment process”.
In Australia, a 2020 PwC report states that two out of five ASX 200 companies in Australia have limited ESG reporting to the market. However, more than 80 per cent disclosed their ESG strategy to stakeholders. (Source: ESG reporting – are we keeping pace? PwC, 2020).
On a more micro level, accountants advise businesses about risks and opportunities and possess the correct skillset to measure ESG, so with more direction and development, they are the natural starting point.
Accountancy Europe deputy CEO Hilde Blomme says, “Governments and companies alike are starting to acknowledge that non-financial reporting, such as on ESG matters, is essential. Accountants can be a strategic partner in the transition to a more sustainable future. They already have the right skill set to measure ESG impact and disclose these results.
“Accountants also offer an independent expert opinion and can verify how accurate and exhaustive the data reported is.”
So, while the motivation and the mindset are there, Ms Blomme identifies the need for a universal standard:
“The real work now is to develop global standards for ESG reporting. There is much progress in non-financial reporting, but there is also proliferation of standards and frameworks. The time has come to consolidate these to make reporting more consistent, transparent and comparable,” added Ms Blomme.
Accountants have transferable expertise and can also adapt existing skillsets to help businesses satisfy numerous stakeholder concerns; and thereby deal with ESG issues. For instance, we know that environmental costs have to be understood and allocated, so they can be managed and prices set appropriately.
In addition, all other relevant costs must be considered when assessing project proposals; and risk must be adequately managed, which requires strategies to address and mitigate them. These are all traditional skills for accountants.
I have written before about the United Nations (UN) Sustainable Development Goals, which provide an ambitious agenda by 2030. It is worth reiterating that accountants have a critical role to play in achieving the SDGs. This is reflected in the strategic plan of the International Federation of Accountants (IFAC), which has ‘anchored’ its strategy to the SDGs.
The IPA has taken this on board and is developing an initiative around SDG 8.4, which focuses on decoupling economic growth from environmental degradation. Sustainable consumption and production are part of this and what we are particularly interested in is the move to diversify, innovate and upgrade for economic productivity.
These have been common themes for the IPA Deakin SME Research Centre. There is a lot more to come on this and we hope that members will get on board with our initiative.
We hope that we have encouraged you to take the next step in your own sustainability journey.