The Role of Accountants in Sustainability Reporting
By Sibgha A
It has been a decade since sustainability has become such an important issue for businesses worldwide. Rapidly rising eco-sensitive consumers and stricter governmental environmental controls demand that organisations become more sustainable. And here comes sustainability reporting measures by which corporations can communicate their environmental, social and governance (ESG) performance. Yet, much of the sustainability reporting lies in the hands of marketing or corporate social responsibility departments. Though that is a part of it, it increasingly becomes clear that it is the accountants who form the primary guardians over the accuracy and impact of reporting.
What is Sustainability Reporting?
Sustainability reporting is reporting on company activities related to ESG practices. It reflects on how businesses address issues like resource consumption, carbon emissions, social equity, and corporate governance. Sustainability reports provide transparency, allowing stakeholders such as investors, customers, and employees, to understand an organisation’s role in contributing to or mitigating the impact it may have on the planet and society.
Despite the niche domain, sustainability reporting is growing in importance. Initiatives like the United Nations’ Sustainable Development Goals call for businesses to take responsibility toward natural, as well as social, elements affected by their operations. Along those lines, investors have taken ESG metrics as important criteria, thus it calls upon businesses to provide reliable and transparent information on sustainability.
Traditionally, accountants were all about financial reports. Their objective was to ensure that all relevant financial information of a company, as reported, was correct, complied with the applicable regulatory requirements, and were free from misstatements. Sustainability reports, however, call for similar high standards of completeness and, in this respect, the role of accountants transforms.
Data Integrity and Accuracy
Accountants are trained to handle complex data sets with precision. Their ability to assuredly ensure the correctness of financial reports can be applied to sustainability data as well. Environmental metrics, such as energy consumption or waste reduction, must be measured at an equal level of scrutiny to financial figures, and accountants can ensure that those numbers are credible and greenwashing-free. Bottom line: accountants are trained to ensure accurate financial reporting; hence, they can apply their know-how to sustainability data and ensure that sustainability reports are free from greenwashing by a company exaggerating its environmental efforts.
Standardisation and Compliance
Increasingly becoming standardised, firms are required to report under globally accepted frameworks such as Global Reporting Initiative or Sustainability Accounting Standards Board. These will make ESG data comparable on an industry-by-industry and border-to-border basis, and accountants are well-equipped to do this, given their experience with financial reporting standards. For example, they can ensure compliance with the different regulations of the world and ensure that their sustainability reports were up to par.
Linking ESG with Financial Performance
Integrating metrics of ESG into financial performance remains among the biggest hurdles in sustainability reporting. Investors and stakeholders no longer want to be told what a company is doing for the environment but want to further understand how those actions affect the bottom line. Accountants can find common ground by linking sustainability data with financial data. For instance, they can measure the savings created due to energy-efficient schemes or define the financial risks the firm would face in case of climate change. By connecting ESG performance with financial performance, accountants can help firms prove the bottom-line value created through sustainability efforts.
Driving Strategic Decisions
Beyond reporting, accountants are the biggest players in using sustainability information as input into business strategy. Their advice can help steer organisational choices for and against sustainability because they narrow the arguments toward financial risks and opportunities accompanying sustainability. For example, an accountant might warn the management about the cost implications of not adhering to new environmental legislation or even point out the financial benefits of renewable sources of energy. In this way, accountants must ensure that sustainability is part of the general strategy of the organisation and not just a formality for compliance with regulatory requirements.
In a world that increasingly places its emphasis on sustainability, the business world must rise to the challenge and demonstrate its role in shaping a greener, more equitable future. Though, in theory, sustainability reporting may seem lightyears away from the general accounting environment, accountants are uniquely positioned to ensure the reliability, transparency, and alignment of reporting with business objectives.
Accountants will be empowered to take on a significant role in the development of sustainable practices within organisations through applications of data accuracy, compliance, and strategic thinking skills.
This means, finally, that sustainability is no longer a fad, but a must. In this change, the accountant is no longer just a number-cruncher – he/she is a significant agent of change.
