Plastic reduction, zero-waste efforts, and carbon neutral supply chains — these are just some of the many ways in which industries and individuals do their due diligence to slow down climate change. Greater transparency about sustainability efforts is being demanded from organizations by socially conscious consumers if these companies want to be recognized as sustainable.
ESG accounting skills, aka environmental, social and governance, are in high demand in 2021 due to a number of factors, from new scientific reports about climate change to an increasingly aware stakeholder pool. As the sustainability conversation grows larger and the requirements for classifications and tax breaks tighten, accounting for sustainability will evolve from a nice-to-have to a must-have for all businesses. Accountants with ESG skills will be at the forefront of the competition during this surge in demand for sustainability accounting.
What is ESG and sustainability accounting?
First, what does ESG stand for? Environmental, social and governance (ESG) by definition refers to a company’s level of interest in environmental sustainability and ethics. Accounting for sustainability is a way to report a company’s adherence to environmental, social and governance criteria so that investors and other key business accounts can determine whether or not an organization is socially and environmentally conscious. It’s also used as a way to screen an organization's approach around its employees, supply chain, customers, and locations to determine any potential investing risks as they relate to sustainability and the ecological impact of operations.
Why do ESG skills matter for accountants?
Oil spills, emissions and other environmental blunders have a bigger impact than just earning a bad reputation for companies; these crises have severe financial implications that cause a company’s stock prices to plummet and that can in turn lead to devastating organizational changes. Many companies have suffered from lack of or poor sustainability accounting that has resulted in unfortunate outcomes.
Tim Gearty, national director and editor-in-chief at Becker, conducts 40 to 50 sessions per month on ESG for companies across different industries, and urges accountants to prioritize ESG education.
“[Accountants are] understanding the demand because the demand for ESG is coming from the SEC, national business councils, the World Economic Forum, the AICPA, the Global Reporting Initiative, the European Union, and of course asset managers for these funds. They’re all demanding standards, so whether it’s a sustainability fund or just a report that’s being issued by a company, [the company] can be ultimately verifiable so the individuals in the public can rest assured that the information is accurate and not manipulated.”
(Source: AccountingToday)
The scrutinizing consumer of 2021 continues to expect more and more from companies. Businesses that meet ESG criteria can avoid damaging outcomes while also earning new business and revenue from a broad wave of new, eco-conscious buyers and investors. Learning ESG accounting is an added strength and expertise for every accounting practice, as it can make you an attractive hire for businesses that have shifted their vision to prioritize sustainable and inclusive efforts. As an accountant at a firm, being knowledgeable in ESG reporting can help you better serve clients who are looking to become more environmentally friendly, and helps you maintain a competitive edge, as it shows you are forward thinking in your accounting skillset.
What do accountants need to learn to become proficient in ESG?
As you begin incorporating ESG accounting into your work, you’ll be responsible for identifying KPIs related to ESG criteria and building frameworks for clients to meet these KPIs. You’ll also establish what qualifies as acceptable data to account for, and how often that data will be sourced in order to reflect accurate reporting. You may also be responsible for creating assessments or developing standards for reporting.
To be truly capable in ESG accounting, you must be able to distinguish between historical and present corporate governance, recognize pillars of corporate social responsibility (CSR), and comprehend environmental, social, and governance (ESG) models. You’ll also need to know how to identify drivers of corporate governance and how to measure those governance efforts. You’ll need to be aware of any challenges or obstacles — and know how to troubleshoot them. There also will likely be a need for you to uphold SASB standards.
Why should accountants become proficient in ESG reporting?
As pressures rise for organizations to become sustainable and inclusive, there will be increased demand for ESG-capable accountants year-over-year. However, there may not be enough CPAs who are qualified to conduct and lead sustainability accounting as the demand rises. This emergent skills gap can put you ahead of the demand.
In addition to being competent while demand is high, becoming proficient in ESG will help you be ready to act when businesses need you. You can answer the demand faster than your competition, who may not have the needed skills to report on ESG criteria. This gives you more opportunities to build your expertise in ESG and sustainability accounting practices in the meantime.
According to the Institute of Internal Auditors report, “Organizational well-being is tied not only to financial strategies and metrics, but also to those that reflect environmental, social, and governance aspects. This holistic approach is indispensable to long-term value creation. Therefore, strategic planning, risk management, and all related assurance must incorporate all four dimensions.”
This means that ESG-related risk management will be just as important as financial strategies typically handled by CPAs. Assessing risks associated with sustainability accounting is becoming of greater concern each day. So, familiarizing yourself with Enterprise Risk Management (ERM) as it relates to ESG auditing can better protect and support your practice and your accounts.
How can accountants gain ESG competency?
It’s clear that ESG education should be high on your priority list to increase your demand as an accountant. An ESG certification or ESG training course is a great place to jumpstart your expertise in the subject. If you’re still in school, look for ESG courses offered by your university or college. If you’re already a practicing accountant or CPA, ESG courses can help satisfy your continuing professional education (CPE) requirements while allowing you to build highly in-demand skills.
One great way to earn competency is to learn the essentials and requirements through both accredited and non-accredited courses led by instructors with experience in ESG, CSR, and SASB standards. Becker offers two high value CPE ESG online courses for gaining competency in these areas:
○ Why incorporate environmental, social, and governance (ESG)
○ Expectations of corporate governance and social responsibility in today’s world
Put it into practice
Once you’ve developed core competencies in ESG and accounting for sustainability, you can begin to offer these practices to your clients and communicate the value of these services to prospects. As your accounting practice builds experience around ESG criteria and audits, you’ll be able to not only handle obstacles and challenges related to sustainability reporting efforts, but also use your accounting skills to make a positive change for the future.
Explore all of Becker's CPE courses on ESG topics and beyond for accounting and financial professionals.
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