New sustainability reporting standards are a game changer for businesses
In June, the International Sustainability Standards Board (ISSB) published its long-awaited inaugural standards for sustainability reporting. The launch of the standards is widely regarded as a hugely important milestone in the global fight against climate change.
By providing a global baseline for businesses to report comparable information on sustainability issues, the new standards should make sustainability reporting more consistent, connected, and meaningful. In turn, the requirement to produce more integrated reporting should further drive businesses to adopt authentic and focused sustainability-led strategies.
While it’s up to individual jurisdictions when and how they implement these standards, many are taking active steps to adopt them, including the UK. And in any case, many organisations will want to adopt them because of the expectations of stakeholders, especially investors, and for reasons of integrity – because it’s the right and transparent thing to do.
Critically, the standards should enable investors, financial markets and society more generally to understand how different businesses are helping to bring about positive change. In future, those businesses that make the greatest progress on sustainability issues will be well placed to attract cost-effective capital, efficiently manage their risks, meet their evolving regulatory obligations, and attract and retain loyal customers.
Accounting for a better world
The launch of the new reporting standards is testament to how serious the accountancy and finance profession is about tackling the climate emergency. For example, ACCA helped the ISSB to shape these first two standards and will continue to support its important work. Through our qualifications, research and policies, we also highlight the role of accountants in creating a fairer and more sustainable world. One of our highest-profile initiatives is our agenda for action, which aims to equip the accountancy profession for the public good on issues such as sustainability, ethics and inclusion.
Every day, in organisations all around the world, finance professionals at every level are taking on new responsibilities and extending their remit as they play their part in building a more sustainable future.
A joint report by ACCA and accountancy firm BDO highlights that, in many organisations, the chief financial officer (CFO) is already evolving into a chief value officer (CVO) – even if they’re not officially known by that job title. While they retain their core financial responsibilities, the CFO-turned-CVO is accountable for the delivery of all their organisation’s core types of value, including human, natural and social value.
While accountants will always need financial acumen, they must also develop additional mindsets and skillsets to play their part in the future. This is so they can take a sufficiently holistic view of both financial and non-financial value creation. For example, they will need to better understand data, as well as the emerging technological tools that will enable them to extract value from that data. They should also be able to consider the needs, expectations, and requirements of a broad range of stakeholders – from regulators, investors and other financial stakeholders through to customers, employees and the broader community. We’re about to publish more support in this area, focusing on ‘integrative thinking’, which will support CFOs on this.
This direction of travel bodes well for the future of the finance profession, especially given the ongoing skills shortage. The finance careers of the future will offer even greater breadth, variety and excitement than today, increasing the ability of the profession to attract, retain and motivate talent. And sustainability is a growing area of career and job opportunity for existing finance professionals.
Transition to a more sustainable future
Adoption of the ISSB’s new sustainability reporting standards is set to happen at pace. The first corporate reports aligned with the new standards will be for 2024 reports that are published in 2025. As a result, we are on the cusp of a transformational new era – an era that will force us to completely rethink how we consider business success.
Going forward, it will be unacceptable – and potentially not possible – for businesses to measure success in purely narrow financial terms, based on the results of the last year or the last quarter. As business leaders, we will have a responsibility to take a much broader view of what success looks like. The future of our organisations – and our society overall – depends on our ability to achieve a just transition to a more sustainable future. This will be a future where long-term economic, environmental and social factors are considered alongside short-term commercial performance.
ACCA research, Accounting for society’s values, highlights that finance professionals, in particular, have a huge opportunity to help drive the transition and keep sustainability at the top of organisational agendas. To do so, they will need to understand how their organisation creates value for its stakeholders and monitor and measure performance against goals. They should also act as an ethical adviser to their business, helping to build public trust by providing independent and objective input into key decisions.
Climate change is arguably the greatest risk facing our world today. By default, then, it is also the greatest risk facing businesses. Addressing climate change – along with the other major social, economic and environmental challenges we face as a planet – is not just about doing the right thing, it is a business imperative. The ISSB’s sustainability reporting standards will help to create a better, fairer and more sustainable world that works for all.
Helen Brand OBE, chief executive, ACCA
You can read the research mentioned in this article at accaglobal.com/insights