What Role Do Accountants Play in ESG Reporting?

“What Role Do Accountants Play in ESG Reporting?” is a question I’ve heard asked more and more recently. The answer, for me at least, is potentially a very pivotal one. It means establishing your baseline, setting up a way to track and monitor progress and report your outcomes, both success and failure.

 

ESG Landscape Trends 

Now is a good time to reflect. Here we can look at the ESG trends that were set out for 2024, some of which could continue into this year. I’ll definitely be taking the opportunity to review what our ESG plans will include this year, and there’s plenty to think about in that respect.
 

1. Circular Economy focused on longevity, reusing and recycling.

2. Transparency and Traceability demanded for stakeholders and supply chains.

3. Regulations are ever-tightening.

4. Technological Innovations enable better monitoring and managing of ESG.

5. Social Responsibility emphasis is growing to focus more on diversity and inclusion. 

From my own experience, when we set out to measure, manage, improve and report our own ESG, I’ve found there can be a pretty steep learning curve for the SME, and there are relatively few companies that cater to our needs really well.

Moving forward

Having now reflected on last year’s trends, let’s take a look at the predicted ESG trends for this year. There is a great article by ESG Pro Ltd, discussing the key points to focus on this year around ESG, you can read the article for yourselves here. But, to summarise:
 
1. The Expanding Influence of the CSRD (Corporate Sustainability Reporting Directive). It’s expansion is crossing over beyond just Europe, calling for tighter reporting requirements worldwide.
 
2. The Integration of ESG into Core Business Strategy, it will become a necessary integration for leading companies. There will be set goals, better oversight, and become a long-term value creation.
 
3. Enhanced Social Responsibility and Human Rights Due Diligence. Businesses will need to show through active steps that they are protecting human rights throughout their operations.
 
4. The Growing Importance of Data and Technology in ESG Reporting. AI will now be used to process large amounts of ESG Data.
 
5. The Middle East’s Growing ESG Commitment. They plan to ramp up green finance, now realising the importance of acting sustainably.

ESG and Accountants

Given the solution involves measuring where you are now, setting targets for the future, setting budgets for cost, people and time, then tracking and reporting all of that (sound familiar?), I automatically assumed that one of the most naturally gifted professions for these tasks would be accountants.

The president and CEO of the AICPA, Barry Melancon, once noted “that out of all the ESG assurance engagements worldwide in 2021 (the most recent year for which data is available), only 57% were conducted by accounting firms”. Barry thinks, as I do, “that reporting, consulting and assurance services around environmental, social and governance issues represent an enormous business opportunity for the future — but that accountants may not be getting as big a share of that as they should”. Money left on the table?

In the book ‘The Human Firm’, Will Farrell, discusses how accountants can go beyond digital to build a scalable, client-centric business that can articulate value in terms of both your clients and your employees, in order to differentiate a firm. I could be well out of line, but maybe that could include accountants taking up a leading role in advising and supporting their clients with ESG?

Well, I may not be the only one thinking this. I have visited a few different accounting conferences over the last few years. At each of these events, there have been stands, exhibitors and presenters showing and telling accountants all about ESG and the opportunity for them in this space.