Sustainability Reporting: Why It Matters to Accounting Professionals and What They Should Know

Governments around the world are starting to implement regulations requiring companies to disclose their sustainability performance. 

The European Union Corporate Sustainability Reporting Directive (CSRD), for example, came into effect in January 2023, requiring "large" and listed companies operating within the EU to publish reports on their environmental and social impact activities. 

In the Philippines, the Securities and Exchange Commission (SEC) has also issued Sustainability Reporting Guidelines for publicly listed companies, putting the onus on corporations to respond to sustainability challenges. 

These reporting requirements go beyond optics; they’re a response to a very real threat. Since the Industrial Revolution, the dependable, resilient, natural world has been the foundation of a booming global economy.

 Our planet’s natural ecosystem is our most vital resource, underpinning all economic activity. A healthy natural world is the foundation for all cash flows, all supply chains, and all investment values. 

As emphasised by Elizabeth Maruma Mrema, Assistant Secretary General of the UN and Co-Chair of the Taskforce on Nature-related Financial Disclosures, “The loss of biodiversity has reached unprecedented rates in the history of humankind. It’s not just an environmental issue, it’s an economic issue, it’s a financial issue and a developmental issue.” 

How Accounting Translates to Sustainability

It's important to note that regulations around sustainability reporting are still evolving. However, the trend is clear: governments and regulators are increasingly requiring companies to be more transparent about their environmental and social impacts. 

This creates a need for robust sustainability reporting practices, which is why it's become such a hot topic in the accounting field. Fortunately for accounting professionals, much of the skills and knowledge they already possess can be applied to sustainability reporting. 

Here’s a closer look at these skills:

• Data Analysis: Accountants are skilled at analysing complex data sets. This skill is valuable because tracking and analysing things like resource use, emissions, and social impacts are at the core of sustainability reporting.

• Financial Reporting: Accountants are experts in preparing reports that follow specific standards. This skill translates to sustainability reporting, which involves adhering to guidelines when disclosing a company’s environmental impact.

• Compliance: Accountants are adept at complying with financial regulations and standards. As sustainability reporting becomes even more pronounced, similar reportorial requirements will continue to emerge. Accountants can leverage their expertise with compliance to navigate this new landscape.  

However, despite these core skills, accountants still need to update their knowledge to meet the growing demand for high-quality, sustainability-related information. 

Upskilling for Sustainability 

To help close the gaps that will emerge from heightened sustainability reporting requirements, IFAC (International Federation of Accountants) released a sustainability education framework. 

The publication highlights focus areas for professional accountants: technical expertise, business acumen, behavioural competence, and ethics and professional values.  

Here are some of the key points:

• Technical Expertise

Accountants are skilled at analysing and interpreting data and information to produce reports that support decision-making. In this new age of sustainability reporting, professional accountants must explore ways to measure performance and analyse new types of sustainability-related data sets and scenarios to inform decision-making. This involves designing, implementing, and evaluating systems, processes, and controls for sustainability reporting.

• Business Acumen

In addition to understanding and evaluating evolving business models, accountants are well-versed in developing and assessing governance and risk management procedures. With the emerging sustainability reporting landscape, accountants must also learn to recognise the correlation between financial and sustainability risks and opportunities. This will allow them to balance the impacts of business strategies on value chains and sustainable practices. 

• Behavioural Competence

Accountants are analytical thinkers, working collaboratively across teams, organisations, specialities, and experts. With the new sustainability reporting requirements, they must apply their analytical skills and accounting pedigree to new data types and sustainability-related activities. This will allow them to effectively analyse future scenarios and come up with alternatives to risks and uncertainties. 

• Ethics and Professional Values

As sustainability requirements continue to evolve, more restrictive regulations and standards will emerge. Accountants must adhere to their ethical foundations while delivering quality services that protect the public interest. Their professional judgement will be especially pivotal when preparing and providing assurance on sustainability-related disclosures. 

Sustainability Reporting: A Call To Action

As the world intensifies its focus on sustainability, the role of accounting professionals becomes even more critical. 

The transition to sustainability-focused accounting practices goes beyond a shift in reporting standards; it’s a profound expansion of how we define business success and sustainability. For accounting professionals, the time to deepen your understanding of sustainability, its metrics, and its business implications is now. 

Embrace the opportunity to lead in your field, to influence positive changes, and to ensure that your profession remains indispensable in a world that increasingly values transparency and accountability in sustainability. 

As accountants, you have the power to shape the future of business—a future where financial success is harmoniously aligned with planetary health and societal well-being. Make sustainability reporting your expertise and lead the charge towards a more accountable and sustainable world.