During GreenBiz 23 last month, one speaker opined, "If you make sustainability professionals become accountants, they will quit."
That sentiment was regarding the wave of mandatory ESG or corporate sustainability disclosures that have been proposed by governments around the world, some of which have already gone into effect.
Mandatory disclosure, especially audited disclosures, certainly have captured the attention of corporate leaders around the world and shifted some sustainability strategy conversations from goal setting and analysis to measuring, assuring and reporting.
The climate disclosure rule proposed by the U.S. Securities and Exchange Commission has garnered much attention, but it is far from the only regulatory body driving the ESG reporting tidal wave. California is holding hearings on its own Corporate Climate Accountability Disclosure package of bills starting today. Across the Atlantic Ocean from where I sit, the European Union’s Sustainable Finance Disclosure Regulation has investment firms upgrading their ESG management and oversight.
Investors want disclosure
Regulators aren’t the only ones pushing for increased transparency, investors are demanding it too.
When asked if corporate sustainability is becoming all about finance and accounting, Jeff Dangremond, associate director of sustainable finance with sustainability consulting firm Anthesis Group, said: "I think that it is becoming more important to finance and accounting, because of the aspects associated with risk. It’s not that it wasn’t important before, it’s just that nothing clarifies one’s focus more than a potential risk to their access to capital."
Sustainability professionals don’t need to become accountants. Accountants need to become sustainability professionals, and they’re starting to.
With U.S. sustainable investment assets under management reaching $8.4 trillion at the beginning of 2022, Dangremond highlighted how if these organizations do not address ESG concerns, it could damage their relationships with investors and limit their access to funding. As a result, finance and accounting professionals are increasingly being brought in to incorporate ESG considerations into decision-making processes and reports.
Sustainability or accounting?
Has all of this focus on disclosure made sustainability all about accounting? And does this mean that sustainability professionals will have to become accountants?
I’ll be concise: No and no.
Disclosure is a natural evolution in corporate sustainability transformations. First, companies needed to be made aware of sustainability principles. Then they had to be educated about the fundamental importance of those principles to their operations. Alongside that engagement came buy-in and goal setting. But now that many companies have decided to more closely manage their environmental, social and governance performance, data is needed.
We’ve all heard the saying, "You can’t manage what you don’t measure." If we want companies to manage their ESG risk and performance, then they need them to measure it.
I spoke with Rob Fisher, a partner with KPMG’s Global Trusted Solutions business, who is responsible for global ESG transformation and reporting. He told me: "There's also a ton of value in bringing the disciplines we already have to the subject matter. Take something like Sarbanes Oxley, which really codified how we do internal controls over financial reporting. Now we're going to need internal controls over nonfinancial reporting. And it's bringing that discipline and applying it to a new subject matter, because the same issues of, ‘Hey, is this data complete? Accurate? Timely?’ All those things need to be accomplished, and internal controls are a critical element of that."
Accounting for sustainability
Sustainability professionals don’t need to become accountants. Accountants need to become sustainability professionals, and they’re starting to. As one example, Fisher highlighted KPMG’s perspective as "our strategy in our audit practice is that every single person in our audit practice is going to need to be capable at varying levels, to be able to audit sustainability matters, in addition to financial reporting matters."
KPMG and its peers are helping accountants become sustainability professionals so that sustainability professionals don’t have to become accountants. As someone who was required to take three accounting classes as part of my finance degree in college, I thank KPMG for its service.