Is it just me who thinks Accountants should be involved in ESG?

ESG

CPAs and Sustainability: What does it mean for you?

We’ve all heard increased discussion around Environmental, Social, and Governance (ESG) issues. But what does it mean for you? Are you a CPA or a professional working in the finance department, wondering how can you contribute to the discussion of ESG and related reporting? Should you even become involved in ESG discussions? Well, take the next 5 minutes to find out more!

ThisRock is proud to have Bertha Lau guest post for us on this topic. Bertha is a CPA, CA, CFA, and a SCR certificate holder with extensive experience in accounting, finance, and reporting. She is passionate about sustainability and ESG, and takes a helpful perspective.

Where does ESG fit in at a company?

While the term “ESG” was first published in 2004 by the United Nations, the concepts around ESG have been around since 1960s and 1970s, if not earlier. ESG gained prominence in the early 2000s and continues to grow today. Historically, ESG reporting was segregated from other reporting and done by a few sustainability experts. Fast forward to today, and we see ESG reporting entering the mainstream and looking for a home with good fit and governance.

What do accounting professionals bring to the table?

As trained accounting professionals, you already have many skills that you can bring to the ESG table. These include:

  • Data and reporting. Accountants know how to work with numbers. They interpret what the numbers mean to drive insight. These insights are then transformed into reports for both internal and external stakeholders. You know reporting like the back of your hand!
  • Governance. Controls and governance form a large part of what accountants do. Accountants know how to build rigour and controls into processes, ensuring that data is accurate and timely. Accountants know the importance of verifying data and checking for reasonability.
  • Technical skills. Accountants understand the accounting policies that are in place and analyze the impact of upcoming policies. They get the business ready for the implementation of these policies to ensure a smooth transition.
  • Business acumen. Accountants understand how the business works, the risks, the opportunities, and how all these things can impact financials. They connect strategy with finance to help come up with an overall picture and drive growth.

How are these skills important to ESG?

As mentioned above, accountants are skilled with setting up appropriate controls and processes to ensure accurate data. Since accountants already know how to set up processes to gather financial data, it is a logical next step to think that they can also set up processes to gather ESG data. Same could be said for ESG reporting, as financial reporting follows a similar process. We know that ESG reporting and data collection, especially reliable and relevant data collection, is still at its infancy. We believe that accountants are well suited to be leaders and guide ESG data collection and reporting.

One of the goals of the International Sustainability Standards Board setting up IFRS S1 and S2 is to harmonize the reporting around sustainability. Previously, there were multiple standards set up by different organizations, which allowed companies to pick and choose what they want to report, which decreased comparability and relevance across companies. The Canadian Sustainability Standards Board (CSSB) is here to help Canadian companies with sustainability reporting, with standards that closely follow IFRS S1 and S2. Accountants can interpret these policies to determine the impact to their company’s reporting, similar to how IFRS standards are currently interpreted.

Next up, strategy. The Workiva 2024 ESG Practitioners Survey noted that 88% of those surveyed agreed that having a strong ESG reporting program will be a competitive advantage for their company. In fact, in a study done by EDC in the fall of 2023, 70% of small to medium businesses in Canada consider ESG issues when making decisions. Of those, 50% incorporate ESG issues into their policies and objectives. These studies show that business operators closely tie ESG with business strategy.

Another part of strategy is risk assessments. Climate risk assessments should be factored into the general risk assessments done by businesses today. Climate risk assessments may have specific factors to consider, such as flooding and technology changes, but are not significantly different from current risk assessments, which include physical security and technological changes that impact the revenue stream. ESG issues are now becoming a regular factor to consider for strategy, just like pricing and competitive advantages, issues that accountants face on a regular basis.

“Not only do you have the skills to earn a seat at the table, but others also expect you to be at the table.”

Bertha Lau

Is it just me who thinks accountants should be involved?

We’ve covered that you already have some of the skills required to own ESG reporting and incorporate ESG factors into your company’s strategy. Not only do you have the skills to earn a seat at the table, but others also expect you to be at the table. In the 2022 and 2024 surveys done by Accounting for Sustainability, 77% of finance leaders surveyed believe that the CFO is mostly or completely responsible for developing the technology that allows them to share sustainability outcomes. 84% of finance teams already play a role in preparing sustainability-related reporting and disclosure and over 70% have helped their organization track science-based net zero emissions targets. While there is always room for upskilling, as less than half believe that their current finance teams have the skills to support ESG initiatives, this shows that there is an expectation that accounting and finance teams should be involved in ESG reporting, data collection, and the implementation of technology tools that allows for the sharing of sustainability outcomes.

Given that accountants have supported a similar evolution in the standardization of international financial reporting standards and the building up of appropriate governance around the technology we use today for financial reporting, it only makes sense that accountants can and should play a similar role in the evolution of ESG reporting. It is not uncommon to hear of ESG reporting moving to the finance function within companies.

Are you ready to embrace ESG reporting?

Our team can guide you on your journey of ESG reporting. We can help you understand the impact of CSSB’s standards to your company, set up the necessary processes to gather relevant data, and put together ESG reports that are timely and relevant to your stakeholders while providing your company with a competitive edge.

ThisRock can help with your next ESG Report, and work with your Accounting team to get the right numbers! Contact us when you are ready.