Is sustainability turning into all about accounting?

Throughout GreenBiz 23 final month, one speaker opined, “For those who make sustainability professionals change into accountants, they may stop.”

That sentiment was relating to the wave of necessary ESG or company sustainability disclosures which have been proposed by governments world wide, a few of which have already gone into impact. 

Necessary disclosure, particularly audited disclosures, definitely have captured the eye of company leaders world wide and shifted some sustainability technique conversations from aim setting and evaluation to measuring, assuring and reporting. 

The climate disclosure rule proposed by the U.S. Securities and Change Fee has garnered a lot consideration, however it’s removed from the one regulatory physique driving the ESG reporting tidal wave. California is holding hearings by itself Corporate Climate Accountability Disclosure package of payments beginning at this time. Throughout the Atlantic Ocean from the place I sit, the European Union’s Sustainable Finance Disclosure Regulation has funding corporations upgrading their ESG management and oversight. 

Buyers need disclosure 

Regulators aren’t the one ones pushing for elevated transparency, traders are demanding it too.

When requested if company sustainability is turning into all about finance and accounting, Jeff Dangremond, affiliate director of sustainable finance with sustainability consulting agency Anthesis Group, mentioned: “I believe that it’s turning into extra vital to finance and accounting, due to the facets related to danger. It’s not that it wasn’t vital earlier than, it’s simply that nothing clarifies one’s focus greater than a possible danger to their entry to capital.”

Sustainability professionals don’t must change into accountants. Accountants must change into sustainability professionals, they usually’re beginning to.

With U.S. sustainable investment assets under management reaching $8.4 trillion originally of 2022, Dangremond highlighted how if these organizations don’t tackle ESG considerations, it might harm their relationships with traders and restrict their entry to funding. Because of this, finance and accounting professionals are more and more being introduced in to include ESG issues into decision-making processes and experiences. 

Sustainability or accounting? 

Has all of this give attention to disclosure made sustainability all about accounting? And does this imply that sustainability professionals must change into accountants? 

I’ll be concise: No and no. 

Disclosure is a pure evolution in company sustainability transformations. First, corporations wanted to be made conscious of sustainability ideas. Then they needed to be educated concerning the basic significance of these ideas to their operations. Alongside that engagement got here buy-in and aim setting. However now that many corporations have determined to extra carefully handle their environmental, social and governance efficiency, knowledge is required. 

We’ve all heard the saying, “You possibly can’t handle what you don’t measure.” If we would like corporations to handle their ESG danger and efficiency, then they want them to measure it. 

I spoke with Rob Fisher, a companion with KPMG’s International Trusted Options enterprise, who’s accountable for world ESG transformation and reporting. He instructed me: “There’s additionally a ton of worth in bringing the disciplines we already need to the subject material. Take one thing like Sarbanes Oxley, which actually codified how we do inner controls over monetary reporting. Now we will want inner controls over nonfinancial reporting. And it is bringing that self-discipline and making use of it to a brand new subject material, as a result of the identical problems with, ‘Hey, is that this knowledge full? Correct? Well timed?’ All these issues must be achieved, and inner controls are a important aspect of that.” 

Accounting for sustainability

Sustainability professionals don’t must change into accountants. Accountants must change into sustainability professionals, they usually’re beginning to. As one instance, Fisher highlighted KPMG’s perspective as “our technique in our audit observe is that each single particular person in our audit observe goes to must be succesful at various ranges, to have the ability to audit sustainability issues, along with monetary reporting issues.” 

KPMG and its peers are serving to accountants change into sustainability professionals in order that sustainability professionals don’t need to change into accountants. As somebody who was required to take three accounting courses as a part of my finance diploma in school, I thank KPMG for its service.