Accountants ‘the linchpins’ in push for ESG standards
The increase in regulation and desire of stakeholders to meet greater sustainability levels means companies will lean on tax professionals to help achieve compliance.
Accountants are vital for businesses striving to meet greater environmental, social and governance (ESG) obligations, according to a report by CPA Australia, though they lack formal training for it.
Senior manager of business and investment at CPA Australia Gavan Ord said accountants would need help meeting the ESG challenge or the skills shortage would simply get worse.
“In Australia, almost a third (31 per cent) of businesses said their finance and accounting team was the business unit responsible for ESG adoption and only a quarter had a dedicated sustainability team,” said Mr Ord.
“The accounting profession is facing significant pressure as demand for ESG skills rise.”
“We’re already facing a skills shortage in Australia and the demand from businesses for accountants to help them with ESG reporting and measuring is only adding to this challenge.”
Mr Ord said the report found accountants were being relied upon by businesses to prepare sustainability reports, data management and even obtain green finance, particularly as Australian firms began to take ESG obligations seriously.
“ESG is becoming an integral part of accountants’ roles in Australia and across the world,” he said. “We must ensure accountants are upskilling to meet the growing needs of businesses in ESG.”
Mr Ord said successive governments had failed to take a stance on ESG regulations, leaving businesses chasing their tails and “lagging their Asia-Pacific peers on this measure”.
CPA Australia’s report found regulation was the major driver for ESG investment across the Asia-Pacific but in Australia, only one in five businesses said it was a motivating factor.
Mr Ord said the result could be seen as positive.
“A cause for optimism in Australia is that businesses who choose to pursue ESG do so for strategic reasons,” he said. “They see the value beyond meeting regulatory requirements.”
The report found the top three drivers of ESG adoption were regulation, at 46 per cent, leadership from the board or senior management, at 44 per cent, and reputational risk at 39 per cent.
However, Mr Ord said Australian firms stood out as being motivated to ESG by the potential for brand damage.
“Reputational risk is a big driver of ESG adoption in Australia, at 42 per cent, with leadership from the board or senior management the second most significant influence at 36 per cent,” he said.
A recent survey by HLB Mann Judd found many businesses adopting ESG believed it could offer a competitive advantage.
The firm’s Adelaide corporate advisory partner, Katelyn Adams, said businesses were looking to meet greater ESG expectations of stakeholders as a way to attract additional funding and strengthen their organisation.
“They know it is the right thing to do but they also know it can potentially put them ahead of their competitors,” said Ms Adams.
“If they are looking to attract more funding those key investors really are looking at companies to have a strong ESG piece.”
“Many investors are finding companies that have strong ESG practices in place more attractive. A company that can clearly communicate its ESG objectives demonstrates commitment to acting as a good corporate citizen.”
The CPA Australia report found the greatest challenge to ESG adoption was difficulty measuring and tracking performance, at 38 per cent, the lack of standardised reporting standards and frameworks, 35 per cent, and the cost, 34 per cent.
“We want the federal government to give businesses more direction in the upcoming budget,” said Mr Ord.
“We need a renewables transition plan with detailed interim goals, targets and metrics that helps businesses plan for the future.”
“We want the Australian Accounting Standards Board to be given additional and extended funding to develop climate reporting standards in the first instance, and broader sustainability-related standards in the future. Businesses too often struggle with measuring ESG performance.”
While larger firms are already more likely to adopt ESG practices, Mr Ord called for the government to provide greater support for smaller organisations to implement sustainability measures and help attract greater funding.
“The federal government should consider incentives to encourage smaller businesses to seek advice on how ESG impacts on their business strategy and how seeking energy efficiency can aid the transition to a lower carbon state,” he said.
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