Environmental, social and governance (ESG) issues are steadily becoming the responsibility of accounting and finance professionals, according to the Association of International Certified Professional Accountants.
In a release on Wednesday, the Association shared six ESG trends affecting accounting and finance professionals in 2021, with a main point being a shift in responsibility of ESG matters from sustainability and marketing departments to the inclusion of accounting and finance teams. The Association's findings were based on conversations with its members, global standard-setters and executives at CPA firms who head ESG reporting and accounting efforts.
“CPAs are uniquely qualified to help organizations increase stakeholder trust and confidence,” said Desiré Carroll, senior manager – public accounting at the Association, in a statement. “Our members expect the need for ESG-related assurance services to increase significantly over the next three years. ESG matters clearly attracted a lot of attention in 2020, and as demand for companies to report their material ESG-related matters [increases], so too does the need for that information to be consistent, accurate and reliable."
The Association's other reported ESG trends impacting the accounting profession and CPA firms’ clients in 2021 include:
- An increased demand for ESG reporting, namely under Sustainability Accounting Standards Board standards and Task Force on Climate-related Financial Disclosures recommendations.
- A call for more environmental-focused policies, with companies placing high importance on waste and plastic reduction in their supply chains and setting ambitious goals with accelerated timelines for achieving carbon neutrality.
- Increasing diversity with ESG, with organizations emphasizing diversity and inclusion in hiring practices, throughout their supply chain and in equal pay and fair labor practices.
- Demand for CPA assurance services as companies look to enhance stakeholders’ confidence in the reported ESG information.
- A call for a global set of sustainability reporting standards.
The Association suggests the following to increase preparedness for 2021 ESG reporting and assurance:
- Incorporate management of ESG risks into broader enterprise risk management processes.
- Determine what KPIs are most relevant for stakeholders and the sustainability reporting standard or framework that will be used for reporting.
- Assess the types of data sources and determine whether policies exist that ensure the data is reasonable and accurate, comes in a timely and reliable manner, and is derived in a way that produces consistent and comparable results.
- Establish appropriate board oversight over critical ESG matters and develop and document internal controls over the data gathering and reporting processes to ensure accuracy and completeness of reported data.
- Consider engaging a CPA firm to perform a readiness assessment to help prepare for an assurance engagement over the reported ESG information.
