There is no “opt-out” for accounting and finance professionals

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Like financial information, issues of environmental, social and governance (ESG) and sustainable development information are called upon to form an integral part of an accountant’s work.

In a recent FM podcast, Association President and CIMA President Paul Ash said that with more companies integrating ESG into their strategies, the accounting profession must help organizations meet their goals ESG.

“I don’t think they [management accountants] have an option… because there is no opt-out on ESG, ”said Ash, who is also the CEO of Emerge Earth, a company that aims to use artificial intelligence to deliver real-time carbon emissions data. Like it or not, ESG already defines us and our profession in so many ways. “

He added that management and accountants have “an extraordinary opportunity” to lead sustainability reporting.

Ash’s Interview is the latest episode in a five-part ESG podcast series, featuring perspectives from standard setters, an investor, and business leaders.

In recent years, the impact of businesses on the environment and on society has come under increasing scrutiny from investors and regulators. ESG and sustainable development reports are also moving from a voluntary basis to a mandatory basis. Globally, the EU is leading in this regard.

Earlier this year, the trading bloc announced a proposal to extend its sustainability reporting requirements to all large businesses and companies listed on EU regulated markets. Companies will be required to provide an audit (assurance) on their reported information. The first set of standards would be adopted by October 2022, and companies based in the EU or with significant market operations will need to prepare now to comply with the directive.

The IFRS Foundation has also proposed to create an International Sustainability Standards Council to develop globally accepted sustainability standards, in line with the market demand for a consistent and comparable set of sustainability information.

“Companies do not have the option of choosing whether these [sustainability issues] are real problems. The problems are there whether companies recognize them or not, ”said Jeffrey Hales, Ph.D., professor of accounting at the University of Texas at Austin and chairman of the Sustainability Accounting Standards Board (SASB) in an episode of the ESG podcast series. “Management accounting is actually part of this conversation because of the important role that management accounting plays in analyzing information. “

Matthew Hurn, OBE, FCMA, CGMA, the CFO of disruptive investments at Abu Dhabi-owned Mubadala Investment Company, said ESG shouldn’t be a checkbox exercise.

Hurn, who was also interviewed on the series, said that if organizations saw ESG simply as a compliance issue, it would miss the larger picture that organizations should live up to ESG values.

“[We] believe wholeheartedly in what we do. Part of our business has been investing in renewable space for over a decade, “Hurn said.” So [ESG] it resonates a lot with us. “

He added that much has been focused on the “E” aspect of ESG, and that it is now easy to obtain data such as carbon emissions, use of raw materials and the waste created.

Hurn urges companies to address ESG issues, and companies that fail to scale to become more sustainable in their practices may lose customers or investors.

“Has the bulb moment arrived?” Is it a fad? Is it going away? Hurn said. “If I look at my kids and their approach to life and the future, they’re not going to invest in most of the traditional businesses that you see listed today. They don’t resonate.”

Along with the growing awareness that companies need to change the way they operate, board members play a crucial role in bringing ESG issues to the fore, said Jeremy Osborn, FCMA, CGMA, Director of Commercial Relations and networks to the Value Reporting Foundation.

The Value Reporting Foundation was created by the merger of SASB and the International Integrated Reporting Council (IIRC) to improve the consistency of ESG and sustainable development reports.

In an episode of the ESG podcast series, Osborn said that integrated thinking can help boards and senior executives make decisions to create long-term value.

He gives the example of a company that decides to invest in capital to illustrate the application of integrated thinking. Integrated thinking includes six capitals – financial, manufactured, intellectual, human, natural and social and relational – in business considerations. If a company deciding on the location of a factory uses a traditional accounting approach, the answer might be to build the factory in region X.

“But when the same decision is subjected to a slightly different set of calculations and the organization considers what the impacts of that decision would be, for example, on the erosion of natural capital [and] what benefits would we create for the company that will help the staff and serve this factory… [then rather] than necessarily leading to the same conclusion that it should be located in region X, the answer could be region Y. “

Osborn added that by considering the other impacts a business can have on other stakeholders, rather than just its finances, an organization is able to optimize value creation. As a management philosophy, integrated thinking fits well with the current focus on ESG and sustainability, as it enables board members and senior management to manage resources and create value in as many capitals as is relevant to the organizations business model.

Ash said that as ESG reporting gains momentum, management accountants will need to collaborate with others to obtain reliable data on all aspects of ESG.

“Management accountants have always been at the center of any business activity, and I am very confident that this will continue to be the case.”

Alexis See Tho ([email protected]) is a FM deputy editor of the magazine.



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