Why CPAs Are a Natural Fit For Sustainability Accounting
As citizens’ concerns around environmental, social, and governance issues like global warming, deforestation, diversity, and pollution grow ever larger, companies worldwide are responding and adjusting their practices.
Many businesses now issue detailed accounts of their sustainability efforts in the form of Environmental, Social, and Governance (ESG) reports. These documents include comprehensive figures and statistics, and accountants possess the skills necessary to help produce them.
As the importance of sustainability accounting (sometimes called ESG accounting) grows over time, businesses will increasingly call upon accountants to help produce such materials. This marks a noteworthy — and positive — development for those in the profession. It’s one of the ways that accountants are making a difference.
We spoke with Rosemary McGuire, Director of External Reporting, Research, Guidance and Support at CPA Canada, about the growing place sustainability accounting has within the profession and what it means for businesses and accountants in the long term.
Are you seeing CPAs becoming more involved in sustainability accounting for their employers or clients?
Yes, we’re definitely seeing CPAs becoming more involved in this area because companies are wrestling with various business, reporting, and compliance issues associated with sustainability.
One area of focus is determining what ESG information to report externally and how to report it. These are questions closely related to the work of CPAs because of our skills in measurement, reporting, and assurance. The CPA profession is well-positioned to deliver consistent, comparable, and reliable ESG disclosures that investors and other stakeholders need.
Beyond reporting, however, it’s also essential to understand sustainability from an organizational decision-making perspective, and as part of an organization’s ability to create long-term value.
We’re seeing greater integration of sustainability issues into organizational strategy, finance, operations, and communications. CPAs play a critical role in developing the information and insights necessary to help organizations respond to sustainability-related risks and opportunities in all these areas.
So we need to look at sustainability from multiple dimensions to get the complete perspective on how this impacts the CPA profession.
How new is the field of sustainability accounting? Is the concept of reporting on sustainability widely known throughout the accounting profession?
Sustainability reporting is not new and has been practiced for decades. Organizations have employed a number of different approaches to communicate their ESG priorities.
What has changed, particularly in the last few years, is that sustainability accounting is no longer a ‘nice-to-have’ but is a business, investing, and regulatory imperative. Organizations are expected to take responsibility for their impacts on society. There is broad recognition of the urgent need to address sustainability issues like climate change and there has been a surge of interest in sustainability disclosures across all sectors from investors, regulators, governments, and the wider public.
However, the current landscape of multiple voluntary sustainability reporting frameworks makes compliance costly while making it difficult for investors and other stakeholders to compare results. There are calls for greater transparency and accountability in this area, which would be improved with a single set of globally accepted sustainability reporting standards. That’s why the International Financial Reporting Standards (IFRS) Foundation, the organization responsible for developing global accounting standards, is spearheading a move to create a new International Sustainability Standards Board.
Are there any skill sets or types of work experience that especially lend themselves to sustainability accounting?
The traditional skill set of the CPA is well-suited to meet the growing sustainability-related needs of organizations. Broad business acumen, data analysis, risk management, measurement, internal controls design, corporate reporting, and assurance skills all lend themselves to sustainability accounting. A CPA’s objective mindset also adds tremendous value.
It is also important to note that sustainability data is not always financial in nature – for example, data on emissions, energy consumption, and diversity in the workforce. We recognize that specialized knowledge, skills, and experience may be required or desirable in certain areas and CPAs will likely work alongside experts from other disciplines.
Is there a generational mindset that resonates especially with sustainability accounting? Are younger accountants more interested in this area?
Younger CPAs are interested in this space and are looking at ways they can contribute and make a difference. They’ve grown up in this era of heightened transparency on all fronts, so these kinds of issues are top-of-mind for them.
CPAs have long helped organizations respond to uncertainty, improve decision-making, and identify new business opportunities, and this now includes enhancing management and transparency of ESG issues – something that really resonates with younger CPAs.
Also consider that a greater focus on sustainability, environmental, and governance issues aligns with our profession’s broader purpose, which is acting in the public interest while contributing to economic and social development. So there is an expectation from CPAs entering the profession that they will be involved heavily with addressing these issues.
How could engaging in sustainability accounting help a CPA’s career?
There’s no defined specialization in sustainability accounting as of yet. There very well could be in the future. The goal with this type of accounting is not that it is siloed and resides in its own separate department, however. We expect sustainability will naturally evolve to be a part of a CPA’s day-to-day activities and scope of responsibility.
It’s a question of when the CPA will get involved, rather than if. All the signs we see point to sustainability being reported alongside everything that organizations are required to do on the financial reporting front. Sustainability issues are different in nature. They’re more complex and subjective in many ways. But a CPA brings that rigor and credibility to this information in the same way they do to more traditional streams of data and can help build the bridge between sustainability and financial performance. So getting familiar with sustainability accounting now will absolutely serve CPAs well in their longer-term career.
How do you expect this field to evolve?
We can expect a sharper focus on sustainability in the future, with implications for public policy, how companies are run, and capital allocation decisions. Enhanced sustainability accounting and reporting practices will become part of how companies build trust with their stakeholders.
I also want to acknowledge the evolving view of business responsibility. The purpose of a corporation to promote an economy that serves all is often referred to as “stakeholder capitalism.” Proficiency in business is going to require this lens to apply to all business activities. As a result, you’re going to have to demonstrate how sustainability has been embedded through all business decisions. New management approaches, tools, and standards will be required to evaluate performance in a more holistic way.
Could you describe the role CPA Canada is playing in the sustainability space?
Serving the public interest is core to the Canadian CPA profession. That includes dealing with climate change and other societal issues that impact Canadians’ economic well-being and quality of life.
As CPAs, we’re looking at these issues on several different fronts. We’re committed to advancing better policy and regulation in this area, supporting the IFRS Foundation initiative toward an International Sustainability Standards Board, and working with other global institutions on sustainability and standard-setting activity.
Secondly, we’re ensuring CPAs are well-equipped to address challenges that arise in the future. We’re looking at the way sustainability accounting changes the way we educate CPAs. We recently initiated a comprehensive review of our pre-certification requirements for competencies and skills the CPA will need even to enter the program and how sustainability factors into these.
We believe that sustainability will be core to a CPA’s role in the future, whether that’s in a business context, governance, reporting, or assurance. We’re looking at how we build upon the required skills and competencies that CPAs already have to ensure that they are well-positioned to tackle these new challenges head-on.
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As companies of all sizes increase the level of reporting on their sustainability efforts, accountants will be a natural choice to help them do so accurately and confidently.
At CaseWare, we’re doing our part to foster sustainability in the accounting profession with our software and cloud solutions that help reduce paper use and thereby reduce waste and pollution. Learn more about how CaseWare is fostering paperless accounting to help create a more sustainable future.