The role of accountants in business sustainability

In the past few years alone;

• over two thousand companies have committed to climate targets in line with the Paris Agreement through the UN supported Science Based Targets initiative,
• the UN began the ‘Decade of Action’ on Sustainable Development Goals,
• several hundred companies have signed a new corporate Climate Pledge,
• and key countries, such as China and the UK have made net-zero carbon commitments.

Corporations are now under increasing pressure from consumers, employees, activists, courts and shareholders to minimise their social and environmental impact.

In one landmark case last year, a civil court in the Netherlands ordered Shell to cut its carbon emissions by 45% of 2019 levels by 2030; an unprecedented decision that could change the corporate sustainability landscape for years to come.

How can you have a fulfilling accounting career while making a positive impact?

It may come as a surprise, but there are lots of different ways in which accountants are already changing the world right now. If you want a career in accounting, you can also choose a career for good.

1. Effective measuring and reporting are essential to a sustainable future

Transitioning to a sustainable economy and meeting climate targets requires the widespread use of data, measurement, financial planning and transparent reporting. Corporate Social Responsibility (CSR), environmental costs and risks, and sustainability progress and impact all need to be accounted for.

There are a number of different frameworks, initiatives and organisations worldwide already setting the benchmark for sustainability reporting and environmental risk assessment in business:

• The Global Reporting Initiative (GRI) offers the most widely adopted set of sustainable impact reporting standards for corporations worldwide: 75% of the world’s largest 250 companies are now using GRI standards.
• The Sustainable Development Goals comprise 17 Goals, 169 targets and 232 indicators to measure environmental and social progress in Australia and worldwide.
• The Equator Principles provide a baseline and risk management framework for financial institutions to identify, assess and manage environmental and social risks when financing projects.
• The SEEA Ecosystem Accounting (SEEA EA) is a comprehensive statistical framework for measuring ecosystem services, tracking changes in ecosystem assets, and linking this information to economic activity. This framework has been adopted for policy making in over 34 countries and by the UN Statistical Commission.

Accountants need to understand and incorporate these standardised environmental reporting frameworks into their accounting practices, whether they work for a government department, financial institution or corporation.

Sustainability reporting is on the rise, so there is plenty of work to be done. The 2020 KPMG Survey of Sustainability Reporting shows a large-scale adoption of sustainability reporting among the ‘N100:’ the 5,200 companies comprising the largest 100 firms across 52 countries.

Reporting by these companies has increased from just 18% in 2002, to 75% in the 2017 survey, and 80% in 2020. Similarly, a huge 96% of the world’s largest 250 companies (the G250) now report on their sustainability performance.

However, recent research shows that some companies are greenwashing their sustainability reporting. Plus, many are still failing to measure and disclose the financial risks inherent in externalising future environmental costs, and ignoring the impact of carbon prices and climate change when developing their business models.

Accountants have a significant role to play in corporate sustainability auditing, measuring and reporting. They can ensure that reporting is accurate, uniform, transparent, and takes full account of environmental risks.

Professional accountants are uniquely positioned to do this because:

• The accounting skill set is perfectly matched to the functions of auditing, measurement, environmental accounting, developing financial projections, writing CSR reports and conducting risk analysis.
• Accountants are already bound by a code of ethics to report accurately and truthfully in the best interests of society. 
• Accountants have a responsibility to the company they work for and its shareholders to make an accurate assessment and disclosure of all risks and costs, including environmental factors. 

The International Federation of Accountants (IFAC) itself states, “As professional accountants, the chief stewards of business information, we have both an important responsibility and a transformative opportunity to engage in and lead on upcoming changes in corporate reporting, and improve the quality of sustainability information.

Commitments to climate targets are hollow if jurisdictions, and the businesses within jurisdictions, cannot measure progress.”

2. Shaping investments in the ethical finance sector

Last year, over 1,500 global investor groups announced plans to divest $39.2 trillion away from fossil fuels. Even BlackRock, a firm well known for investing in environmentally impactful companies, has pledged to divest from some fossil fuel investments.

The finance sector has a lot of power when it comes to shaping investment in a sustainable future.

Recognising this, there is now a growing shift towards ethical finance. Recent years have seen a boom in investor groups and institutions, such as Australian Ethical Investment or the Investor Group on Climate Change: organisations that factor in environmental, social, and governance (ESG) performance as well as immediate financial returns.

Green investment is also proving to be good business. Many ESG sustainable investments are beginning to outperform standard investments. A growing body of research has also emerged showing that ethics and sustainability matter to a majority of consumers, adding to the business case for sustainability.

According to an analysis by Bloomberg, total value of ESG investments is on track to exceed $53 trillion by 2025, accounting for more than a third of all global investments.

With a background in accounting you can choose to specialise as a professional in this growing sector, and put your skills to good use.

• You could work for an ethical investment fund, company or bank in a variety of roles such as; Investment Accountant, Analyst, Auditor or Financial Advisor.
• Or, if you work for a standard bank or investment fund, you can use your role as an accountant to advocate within your company for more ethical investment.

Accounting for Sustainability is an association of leading accounting bodies who advocate for sustainable finance, regulation and investment, representing over 2.5 million accounting professionals and students globally. They work with CFOs and investors to integrate sustainability into their business models: a great example of the inspiring work that accountants can do.

3. Supporting green start-ups and social enterprises in building their business

Green tech companies, social enterprises and renewable energy start-ups all play a crucial role in transitioning to a sustainable future. From ridesharing to wind power, innovative new business models will be central to rebuilding a net-zero economy.

Although the world of finance is turning more towards environmental business, green start-ups still face unique challenges in attracting investors and competing with established companies, while balancing their triple bottom line.

As an accountant, you have the skills to help some worthy green start-ups develop and grow their business.

You can offer your services to:

• Help sustainable start-ups to develop and follow proper systems of triple bottom line measurement and reporting.
• Assist with the development of their long term business modelling, accounting systems and financial planning.
• Submit their tax assessments, and navigate their taxation, auditing and reporting obligations to the government.

CPA Australia takes a strong stance in favour of climate action and sustainable investment. They provide valuable advice to their members on how they can help advocate for sustainability as professional accountants.

In a recent statement the CPA Australia wrote, “CPA Australia recognises the overwhelming scientific evidence of climate change and the urgency of international and national action to achieve net-zero carbon emissions by 2050.

Accounting is embedded in economic and market systems and cannot be viewed in isolation from the natural environment. The accounting profession has an important role to play in shaping environmentally sensitive business and economic policies.”

As you can see, there are already a lot of professional accountants out there changing the world. Why not join them, and use your skills for good?