The landscape of business reporting is undergoing a significant transformation. While financial reporting remains essential, there’s a growing demand for businesses to demonstrate their commitment to environmental and social responsibility through sustainability reporting. This shift is placing accountants at the forefront of a rapidly evolving field, requiring them to adapt and expand their expertise.
However, accountants are finding themselves caught in the middle of this shift as the lines between financial and non-financial reporting blur. In this blog, we’ll explore why sustainability reporting is an essential companion to financial reporting, and explore how accountants can leverage this growing field to create value and enhance their services.
Why sustainability reporting matters
Sustainability reporting provides a holistic view of a company’s performance, encompassing its impact on the planet and wider society. This information is crucial for investors, consumers, and regulators who want to understand the full picture of a company’s operations and its commitment to sustainable practices. By embracing sustainability reporting, businesses can demonstrate transparency, build trust, and enhance their reputation in an increasingly values-driven marketplace.
As organisations grapple with these ever-shifting reporting requirements, accountants are expected to be steadfast guides to keep them on track. This expectation is particularly prevalent within smaller companies, where resources are scarce and the finance department is leading on sustainability management.
This presents a significant opportunity for accounting professionals to step up and provide valuable expertise in navigating the complexities of sustainability reporting. By developing a deep understanding of reporting frameworks, data management, and stakeholder communication, accountants can become trusted advisors to their clients, helping them not only meet regulatory requirements but also unlock the strategic benefits of sustainability.
Key concepts and terminology
To navigate this evolving landscape, it’s essential to understand key concepts and terminology:
- ESG (Environmental, Social, and Governance): Encompasses a company’s impact on the environment (e.g. carbon emissions, resource use), society (e.g. labour standards, human rights), and its governance practices (e.g. ethics, accountability)
- Double Materiality: Recognises that companies must consider both how sustainability issues impact their business (e.g. climate change affecting supply chains) and how their business impacts the world (e.g. contributing to carbon emissions)
- Sustainability-Related Risks and Opportunities (SRROs): The potential positive and negative impacts that sustainability issues can have on a business, such as resource scarcity, changing consumer preferences, or opportunities for innovation and reputation enhancement
Introduction to key frameworks
Several frameworks guide sustainability reporting, providing standards and guidelines for businesses. You can download our Starting Guide to Demystifying The Reporting and Disclosure Landscape for a clear breakdown of key reporting standards and disclosures, but for accounting professionals, here are the three that you should be aware of:
Corporate Sustainability Reporting Directive (CSRD)
The Corporate Sustainability Reporting Directive (CSRD) introduces a new era of transparency in business reporting, requiring companies to disclose detailed information on their sustainability performance alongside their financial results:
- Applies to large EU companies and those operating in the EU
- Requires reporting on environmental, social, and governance metrics
- Demands detailed disclosure across over 1,100 data points
- Is integrated with financial reporting requirements
If you would like to learn more about preparing for CSRD, read our blog on what good CSRD governance looks like.
Task Force on Climate-related Financial Disclosures (TCFD)
The TCFD helps companies understand how climate change may impact their financial performance, enabling them to proactively mitigate risks and capitalise on opportunities.
- Global framework focusing on climate-related risks
- Increasingly mandated by regulators worldwide
- Requires scenario analysis and risk assessment
- Integrates climate risks into the organisation’s primary financial statements. For listed companies, this is compulsory.
Streamlined Energy & Carbon Reporting (SECR)
A UK regulation requiring businesses to report on their annual energy use and associated scope 1 and 2 carbon emissions, aiming to increase awareness and drive action on energy efficiency and emissions reduction.
- Businesses must meet at least 2 of the following criteria – >£36 million turnover, >£18 million balance sheet assets, >250 full-time employees
- Requires reporting on total UK annual energy consumption (electricity, gas, transport fuels)
- Includes Scope 1 (direct) and Scope 2 (indirect) emissions associated with that energy use
- Aims to increase awareness and drive action on energy efficiency and emissions reduction
Taking the first steps
It can seem daunting at first, but by taking a structured approach, you can confidently navigate this evolving landscape and position your firm as a leader in this critical field. Here’s how to get started:
- Assess your firm’s current capabilities: Evaluate your team’s existing knowledge and experience in sustainability reporting and identify areas for improvement
- Identify training needs: Determine the specific training or development programs your team needs to build expertise in areas like carbon accounting, ESG reporting, or specific frameworks
- Develop service offerings: Consider how to integrate sustainability reporting into your existing services or create new offerings that cater to the growing demand for sustainability expertise
- Build partnerships: Collaborate with sustainability experts to complement your in-house capabilities and provide specialised support
By taking these initial steps, you can position your firm as a leader in this evolving field and provide valuable support to your clients as they navigate the complexities of sustainability reporting.
At Seismic, we simplify sustainability regulations, disclosures and frameworks into clear, actionable language. Speak with one of our experts today.
