Increasing trust in sustainability data

Environmental, social, and governance (ESG) issues are increasingly appearing at the top of political, business, and societal agendas. Sustainability has fast become a significant lens through which organisations are being judged by investors, regulators, and wider society.

However, we all know that the journey is not an entirely smooth one. There have been plenty of public controversies over alleged “greenwashing”. As accounting and finance professionals this should cause significant concern because we know how important it is for stakeholders to be able to trust the data organisations produce.

Trust is the keystone of our profession, and it is how we add value to the organisations we serve. Our purpose depends on maintaining this trust, and this commitment must now extend as much to sustainability data as it always has to financials.

This aspect of our work is becoming more pressing because this year we are experiencing a step change in the level of mandatory sustainability reporting. Building on the Integrated Reporting Framework and mapping several of its elements, IFRS standards S1 and S2 issued by the International Sustainability Standards Board have become effective and are being adopted in jurisdictions around the world. In the EU, accounting and finance professionals are already collecting data on sustainability risks, opportunities, and impacts for the first set of annual reports due to include these in 2025.

Building sustainable organisations may require entire business models to be remade, with sustainability built into processes right along the value chain. That means management accountants need to be on top of the concepts and, importantly, the processes for collecting and recording the data in a way that is meaningful and actionable. It is imperative that we seize this opportunity to position ourselves as effective and value-adding business partners with organisations’ ESG and sustainability function.

To build the next generation of sustainable organisations, we need to be thinking much more deeply about how we integrate ESG into all our processes. Risk management is a good example. High performing organisations will have plans in place to mitigate ESG-related risks, and the development of these plans is likely to have uncovered opportunities for innovation, resilience building, and long-term value creation. This shows how embedding ESG will become a central part of how value is identified, created, captured, and recorded.

Adapted from: “Increasing trust in sustainability data”, by Andrew Harding, FCMA, CGMA, chief executive–Management Accounting at AICPA & CIMA, together as the Association of International Certified Professional Accountants, published on FM magazine on 07 June 2024.