ESG opportunities are here

As compliance requirements for environmental, social, and governance (ESG) loom and reporting on sustainability-related issues becomes the norm, businesses will look to accounting firms for assistance. Whether your client is a Securities and Exchange Commission-registrant or a company with multiple customers and vendors, reporting guidelines with respect to climate initiatives are coming into focus.

Climate-related initiatives and reporting may be a sensitive topic, but employees, consumers and investors increasingly demand transparency about business operations. Sustainability is becoming integral to investment decisions, supplier relationships and client satisfaction, and the focus on ESG presents opportunities to firms.

ESG regulations and reporting standards have gained momentum.

For firms serving public registrants, the SEC is planning new disclosure rules. As issuers and auditors prepare for SEC reporting under these new rules, they are advised to understand the focus the SEC is putting on ESG issues. The SEC proposed rule on climate-related disclosures includes assurance requirements.

In June, the International Sustainability Standards Board (ISSB) issued its first two Sustainability Disclosure Standards: IFRS S1, General Requirements for Disclosure of Sustainability-related Financial Information, and IFRS S2, Climate-related Disclosures, that will take effect Jan. 1, 2024. A number of countries have already signalled their intent to mandate the application of these standards for ESG reporting.

Companies with international operations will be affected, and firms with global clients need to pay attention.

The European Union (EU) issued the Corporate Sustainability Reporting Directive (CSRD) to articulate rules concerning the environmental and social information that companies must report. The associated European Sustainability Reporting Standards (ESRS) will apply to EU companies and foreign companies, including U.S. companies.

ESG assurance is on the rise.

Opportunity knocks and public accounting firms are increasingly offering assurance services. Recent AICPA® & CIMA® survey results revealed that of 27 of the top 100 U.S. accounting firms, 84% envision offering ESG assurance in one to three years.

For firms seeking to conduct ESG reporting and assurance services, the survey’s most-noted challenge was gathering “the necessary internal resources and experts to perform the work.” This need can be met by educational resources and staff who are passionate about environmental sustainability.

ESG assurance is an exciting opportunity for the next generation who are considering joining the accounting and finance profession and are keen to have employment that aligns with their personal values.

It’s time to seize opportunities to expand into ESG.

CPAs have experience monitoring and analyzing data, evaluating potential risks and bringing rigor to processes and internal controls. Knowledge, plus experience, make accounting and finance professionals ideal to advise clients on strategy, compliance, disclosures and corporate reporting.

With ESG information increasingly being provided alongside financial information, companies trust accounting firms to advise on how to design ESG initiatives, develop strategic plans, and implement processes to meet reporting requirements.

ESG may be a new area for your firm, and staff may need additional education to serve clients seeking sustainability-related services. To meet the market demand, investing in ESG learning programs will benefit firms of all sizes.

If your firm already provides ESG advisory and assurance services and you want to increase competence, or you’d like to include ESG as part of your service offerings but aren’t sure where to start, we have resources to navigate your journey.

The Fundamentals of ESG Certificate course and the Fundamentals of Sustainability Accounting (FSA) Credential® provide current and relevant information, fostering a firm’s ability to unleash their potential in ESG service offerings.

To expand on fundamentals, AICPA & CIMA — jointly with the University of Oxford’s Saïd Business School — offer the ESG and Sustainable Financial Strategy Course. Completion of the course highlights a finance professional’s capability to mitigate risks and allocate resources. Firm staff that provide advisory services would have the ability to advise business leaders on how to incorporate ESG into their strategic plans for sustainable business operations.

International awareness on the complexity of supply chains and business operations, and the growing demands of investors and consumers have accelerated the need to offer sustainability-related services. We will continue to develop and update resources to support your firms’ preparedness.

To find out more about our ESG offering please email AICPA/CIMA

Article by Miti Ampoma