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Sustainability accounting: ‘The biggest disrupter’

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From Accounting Today: As companies find that customers and investors are looking for more and more disclosures of what they are doing about environmental issues, climate change risks, and diversity and racial justice, accounting firms are starting to provide assurance and attestation services around environmental, social and governance reporting to meet that growing demand.

While the Big Four have been providing sustainability-related services for years, smaller firms are starting to move cautiously into the space. They are leveraging some of the standards that have been developed by groups like the Sustainability Accounting Standards Board, the Global Reporting Initiative, the International Integrated Reporting Council, the Climate Disclosure Standards Board and the Carbon Disclosure Project. Those groups are currently working on harmonizing their standards and frameworks, laying the groundwork for an international sustainability standards board that the International Financial Reporting Standards Foundation has proposed creating, and which it would oversee alongside the International Accounting Standards Board.

Outside the reporting frameworks, some certifications are also gaining corporate adherents, such as the B Corp certification from B Lab, and accounting firms are helping clients gain compliance. “We launched our Sensiba Center for Sustainability in the fall of last year, and it really hit the ground running,” said Jennifer Cantero, director of marketing and sustainability at Sensiba San Filippo, a Regional Leader in Pleasanton, California. “We’ve got some folks reaching out for B Corp certification assistance. A lot of our current clients and new clients — folks we haven’t even had a chance to meet yet ­— are reaching out because we are one of the few firms that are doing this right now.”

Besides B Corp certification, Sensiba also offers SASB compliance services. “In the private company world, we don’t have any required reporting under SASB, but the SASB framework provides a really good roadmap for businesses to look at,” said audit partner Scott Anderson. “It’s more introspective. What do we need to do to be more sustainable? What are the risks we aren’t currently thinking about? It’s just a really good framework to be able to evaluate your business on.”

Reporting what matters

The increasing popularity of ESG funds among investors has prompted the Securities and Exchange Commission to focus more on the trend under its acting chair, Allison Herren Lee. In particular, the SEC has sharpened its focus on climate-related financial disclosures. The SEC issued a risk alert in April about “potentially misleading statements regarding ESG investing processes and representations” during examinations of investment advisors, registered investment companies and private funds engaged in ESG investing.

Accountants and auditors could provide better assurance around such claims to investors. “There are a lot of companies saying they’re eco-friendly or environmentally conscious when really it’s greenwashing and marketing spin,” said Cantero. “This actually gets a stamp where we’ve literally had our assessment audited by a third party and say we’re doing all of the things in terms of governance, how we treat our customers, how we treat our clients, how we treat our community, and then how we’re treating our resources and environment.”

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