Understanding ESG Reporting for Accounting Firms
In an era where corporate responsibility is gaining prominence, Environmental, Social, and Governance (ESG) reporting has become a fundament for businesses aiming to highlight their commitment to sustainability and ethical practices. For accounting firms, understanding, and effectively navigating the realm of ESG reporting is not just a compliance requirement; it is a strategic move that can shape the future of financial reporting.
Considering this perspective, this article explores the trends in sustainability, the concept of sustainability accounting, and the potential for accounting practices to redefine their business achievements by adhering to the most rigorous standards of corporate social responsibility.
What is sustainability?
The term “sustainability” lacks a universally agreed-upon definition, yet many refer to the United Nations’ 1987 Brundtland Report for guidance. This report advocates for development that satisfies current needs without compromising those of future generations. It emphasises the importance of fostering a healthy planet capable of fulfilling essential needs, such as clean air, food, shelter, and water.
Although the measure of sustainability through corporate social responsibility is uncertain, given that the information is provided by the company itself and is not consistently audited, the potential impact of sustainable accounting is substantial and can play a crucial role in shaping the future. Recent legislative changes in New Zealand and the UK mandate climate-related ESG disclosures for organisations, prompting a shift in the accounting industry’s approach to corporate reporting. As sustainability finance disclosures gain prominence, accounting firms must align with ESG reporting standards and commit to social impact. The role of accountants in ESG reporting involves understanding and reducing environmental impact, promoting ethical practices, and adhering to governance policies. ESG initiatives encompass areas beyond operational efficiency, encouraging conscious decision-making on energy usage, environmental footprint, human rights, and ethical standards.
Here are some ways that a company can contribute to ESG in accounting:
Achieve B Corp Certification
This certification confirms that a business meets rigorous standards in performance, accountability, and transparency, considering factors such as employee benefits, charitable contributions, supply chain practices, and input materials. Some accounting firms in Australia and New Zealand have already obtained B Corp certification.
Utilise ESG tools and technology for process digitisation
Implementing client portals, cloud-hosted accounting practice management software, and workflow automation enables companies to seize the opportunity to embrace accounting practice management software as a crucial “go paperless” initiative.
Participate in charitable events and initiatives: Sponsor and engage in local charitable causes, not only as a morally responsible action but also to develop employee engagement, sustainability, and community relationships.
Participate in charitable events and initiatives
Sponsor and engage in local charitable causes, not only as a morally responsible action but also to develop employee engagement, sustainability, and community relationships.
Identify ESG risks and opportunities and establish ESG goals
Conduct an audit to determine where your accounting firm can positively or negatively influence ESG factors and set clear objectives and key performance indicators (KPIs) to guide actions and measure progress.
Transitioning to a paperless and digital environment not only offers undeniable ESG benefits but also provides a clear audit trail. In a paperless office utilising accounting practice management software, processes are streamlined. This efficiency allows for time and resources saved on administration and bookkeeping, enabling a more productive allocation of resources. Embracing a paperless approach with accounting software not only reduces printing costs but also redirects administrative efforts toward more efficient and valuable activities within the accounting practice.
In conclusion, understanding ESG reporting is not just about compliance; it is a journey towards a more sustainable and responsible business environment. Accounting firms, as trusted advisors, could guide their clients through this transformative process, ensuring that financial and non-financial metrics align seamlessly. By embracing the principles of ESG reporting, accounting firms not only contribute to the greater good but also position themselves as key players in shaping the future of corporate accountability and transparency.
Morris, K. (2023) ESG reporting for accounting firms: How accountants can make a positive environmental impact, ESG reporting for accounting firms | The Access Group. Available at: https://www.theaccessgroup.com/en-au/blog/act-esg-reporting-for-accountants/#:~:text=ESG%20reporting%20is%20a%20form,t%20negatively%20affect%20the%20world. (Accessed: 19 December 2023).