Carbon accounting ‘the next frontier of compliance’ says Xero
Carbon accounting services will be critical for ensuring small business clients aren’t locked out of corporate supply chains in coming years, the software firm says.
Carbon accounting will be an increasingly important service for clients in coming years with sustainability reporting to soon become mandatory, according to Xero chief customer officer Rachel Powell.
“We’re seeing the need for businesses large and small to start calculating their carbon emissions,” said Ms Powell speaking at Xerocon in Sydney this week.
“There’s a number of reasons why this is important. Firstly, calculating your carbon accounting proves the value of a sustainable business. Take a landscaping business, for example, that’s moving from diesel to electric equipment. Calculating the carbon emission proves the value of them switching and might help them access tax advantages for sustainable products.”
Calculating the carbon emissions can also protect a business against accusations of greenwashing.
The release of the sustainability standards by the International Sustainability Standards Board will also drive the importance of carbon accounting services, according to Ms Powell.
Treasury released a consultation paper on the government’s plan to implement mandatory climate reporting standards, following the release of the ISSB standards in June.
The ISSB standards represent the “next frontier of compliance” and will become the basis for accounting standards in every jurisdiction, she said.
“So, in the near future, reporting on carbon emissions may no longer be optional, it may be mandatory,” she stated.
“I’ll give you an example of how that might play out. Let’s say you’re an advisor to a small business and it’s a cafe that provides morning tea for the legal firm down the road,” she said.
“That legal firm is going to have to report on their carbon emissions including any of the goods and services associated with the firm that they procure goods from.
“This means that the cafe may need to think about a lot more than just producing good food for that legal firm, they’ll also need to supply the legal firm with the information that they need.”
Ms Powell said it is essential that accounting firms help small businesses navigate this space to ensure they don’t end up getting "locked out of the corporate supply chain".
“It doesn’t matter if you’ve got 20 staff or you’re a sole proprietor, this is something we should all be thinking about,” she said.
The Institute of Public Accountants said that many SMEs are unlikely to have the capabilities and resources to comply with certain aspects of the ISSB standards once they become applicable.
In its submission to Treasury, IPA said while the phased implementation of mandatory climate-related financial disclosure in Australia will enable practitioners operating in the SME sector time to acquire the necessary resources, capacity and expertise to implement or provide services relating to CFD, certain aspects will still be challenging.
Some of the disclosures such as scenario analysis would still be complex and difficult to undertake for SMEs, despite the transitional period proposed by Treasury, the accounting body said previously.
“Accordingly, our support for the disclosure proposals is conditional upon ISSB’s potential simplification of the requirements for SMEs and guidance developed by the ISSB or the marketplace to assist SMEs in undertaking the analysis when the sustainability standards become applicable for SMEs,” the IPA said.
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