Chartered accountants have the potential to be major players in the sustainability arena, according to a new report published today (Wednesday) by the Institute of Chartered Accountants in England & Wales (ICAEW).
By assuring corporate performance in areas such as human rights and greenhouse gas emissions, accountants in practice can make businesses more accountable to investors and regulators. Through collecting, reviewing and interpreting information relating to environmental and social impacts, those in business can make sustainability benchmarking more reliable.
While entering this field of work presents many challenges for accountants, not least because of the paucity of suitable reporting criteria, the Institute of Chartered Accountants says the opportunities are considerable.
ICAEW President Paul Druckman commented: “Chartered accountants have a long history of responding to new market opportunities and shifts in public expectations. I personally think the profession should take a lead on sustainability because it is in the public interest. But even from a hard-headed business perspective, this is an area of work into which accountants can and should diversify because governments and consumers will increasingly demand sustainable corporate behaviour.
“I cannot think of any other profession better qualified to help business demonstrate that their commitment to sustainability is more than warm words. While our members in business and the larger accountancy practices are already actively engaged in work on sustainability, those in the smaller practices have not, as yet, experienced any significant demand for services in this area. That is likely to change in the next few years, particularly as their clients in supply chains come under pressure to conform to environmental and social codes and standards.”
The report, Sustainability: the role of accountants, prepared by principal author Robert Langford in consultation with a wide range of experts, argues that UK accountants are well equipped for the challenges posed by sustainability reporting and assurance. They have the right skill set, are experienced in business risk issues, and are likely to have a prominent role in preparing and assuring the new statutory Operating and Financial Review (OFR). The OFR is expected to include information about the environment, employee relations, supply chain issues and social and community impacts, where that information is relevant for an assessment of the company.
The ICAEW's report identifies a number of mechanisms used to enhance environmental, social and economic performance. Each of these mechanisms is dependent on credible information flows if they are to operate effectively – an area in which accountants specialise.
For example, supply chain pressure is one mechanism where accountants are likely to become involved in the preparation and monitoring of purchasing policies, together with the design and operation of management systems. Tradable permits is another area where there will be a substantial role for accountants in reviewing information, assessing the implications and contributing to the management of market trading.
The Institute has also conducted a survey of the managing partners of 143 accountancy firms to find out the extent of the demand for services relating to sustainability. Most of the firms surveyed were smaller practices, having between 2 to 10 partners.
Unsurprisingly, only 10% of respondents had so far received any demand from clients for guidance on environmental or social regulations and taxes. However, this is the main area in which demand for practitioner services is expected to increase in the next three to five years, with 52% of respondents predicting at least some demand for advice.
About one in five firms also envisage a need in the next few years to provide services in appraising environmental initiatives or setting a sustainable development strategy.