Late last year I had a revelation — that ESG was a unifying force that tied together all the non-traditional accounting services that were being provided by accounting firms. My firm is a non-traditional CPA firm. We provide business transformation services to small and midsized entities and nonprofits. Some people don't consider my firm a CPA firm because we deal with process improvement, innovation and technology adoption, and people practices. But I realized that we are a prime example of the wide range of ESG advisory services in action.
In September 2023, I was able to attend the CPA.com/AICPA ESG Symposium, where many leaders in the ESG space gathered to discuss the current trends and evolution of opportunities for accounting firms. Much of what was shared showed that the profession is still early in its ESG journey, but it is ready for early adopters. Standards are consolidating, and accounting practices and technology in the carbon accounting space are maturing quickly. The Big Four and other large firms already have established practices — mostly in the advisory space. It was clear that while the upcoming Securities and Exchange Commission reporting requirements were going to be applicable to public companies, there is going to be a definite trickle down to their supply chains and through that impact private companies too.
While the symposium was focused on the environmental aspect, when you look at the social and governance aspects of ESG, you will see that many firms are already helping their clients in those areas. Cybersecurity and privacy falls under social. Enterprise risk management falls under governance. And I've been seeing a blossoming of HR consulting practices starting up in many firms, many of which are providing advisory services that would fall under the social aspect. When you look at ESG in this broader context, if you're not an early adopter, you could focus first on these other areas which already have well-defined practices and guidance.
There is still first-mover advantage
This broader view of ESG was what I helped lead PrimeGlobal firms through exploring in a workshop in August 2023 that examined three opportunities in ESG: environmental attestation readiness, corporate social responsibility reporting, and workplace safety advisory services. Five firms from PrimeGlobal spent the day getting an introduction to the standards, talking with experts in each of the areas to understand what the area covered and opportunities to provide services to clients, and thinking through the implications of incorporating these into their practice.
I facilitated the practice management session and there was definitely a trend in my discussions with the attendees:
- Very few, if any, firms in their markets that were offering these services.
- While ESG was new, the client journey for ESG would be very similar to service organization controls, SOC: awareness, readiness, reporting, and attestation.
- This was not something that one could come up to speed quickly on. Time was needed to understand the subject matter, and see how traditional accounting skills would be adapted. It is very similar to how we had to learn cybersecurity and adapt to provide advisory and assurance services on cybersecurity.
The bottom line: Firms need to start preparing and up-skilling now to be ready. They should also start having discussions on ESG topics with their clients and prospects to figure out what opportunities lie in their market and established client bases. With awareness and readiness being the first two opportunity areas, firms who engage in these conversations early will have an advantage over other firms, even an incumbent auditor.
Antony Nettleton, a CPA and managing partner of Top 100 Firm Sikich, said, "ESG presents a significant opportunity to align with our clients on a transformative journey. Choosing ESG isn't merely a decision; it represents a strategic investment in our client's future prosperity, underscoring our commitment to making a positive impact on the world."
Choose an ESG path and start now
Because of the breadth of areas that ESG covers, I encourage firms to look at the areas covered by each aspect of ESG — environmental, social and governance. Figure out which ones are applicable to your clients (or prospects) and start to get more depth in your understanding of that area. Initiate conversations both externally and internally to see what resonates with clients and prospects, and also with your teams. When there is resonance with both, you've identified a good opportunity to use as a starting point. Explore together and learn together — you might not make a lot of profit from the first engagement or two, but chalk these up to learning and refine your knowledge and approach.
Firms that early-adopt ESG and incorporate these areas into their practices will be better positioned to deliver these services when they reach full market demand. Follow the business pattens that you already know (e.g. SOC and cybersecurity) and leverage lessons learned from growing those practices to ESG and you will reap the rewards.
