Profession needs ethics training for sustainability reporting
Experts say sustainability reporting practitioners and accountants need education and training to meet new international ethics standards.
Many Australian businesses will be required to report on their climate-related financial performance, raising fresh capability and ethical concerns among accounting and auditing professionals.
Before the ethical questions posed by sustainability reporting can be resolved, finance professionals need to meet the core ‘green skills’ challenge.
Earlier this month, CPA Australia hosted a discussion to discuss the uplift required to meet the International Ethics Standards Board for Accountants’ (IESBA) proposed ethics standards for sustainability assurance.
Panellist Terrence Jeyaretnam, APAC leader, climate change and sustainability services at EY, said the uplift is needed not just among finance professionals, but regulators too.
He explained that ASIC chair Joe Longo confessed to ASIC “not knowing the first thing about sustainability and climate,” at a dinner the night prior.
“So, you’ve got a regulator who has got to be brought up to speed. And then the financial auditor will have final sign-off, so they need to not only have professional due care and subject matter understanding, but also be brought up to speed in the ethics part of sustainability,” he said.
The exposure draft on International Ethics Standards for Sustainability Assurance (IESSA) establishes a framework of ethical conduct for sustainability assurance practitioners and accountants involved in sustainability reporting.
IESBA also released a proposed framework on the engagement of external experts for sustainability reporting.
Panellist Michael Bray, professor of practice (integrated reporting) at Deakin University, sought to correct the misconception that the standards will require practitioners to make unusually forward-looking assurances.
“I think when it comes to this concern about forward-looking statements of information, a lot of it gets confused. There are some assumptions that get made out there that ‘this stuff is asking for forecasts,’ but it’s not,” said Bray.
“Everything about an integrated report is forward-looking. An integrated report describes an organisation’s business, its governance, its strategy, its business model, its risk management – that’s all forward-looking stuff,” he said.
“But what the framework does not require, is the reporting of forecasts and even the ISSB standards don’t require the reporting of forecasts.”
“The dangers are not what surround reporting financial forecasts and projections, but when it comes to describing your business, there are some pretty complex judgments involved in that that go to the heart of expertise of sustainability reporting and assurance practitioners,” he said.
Jeyaretnam said there is no training, even in firms, around the ethical dimensions of sustainability reporting.
“Education, knowledge, practical experience in all of this is lacking to be able to go from where we are now into the world that we’re heading into,” he said.
While he expects firms to build the infrastructure required to meet the ethical challenge, the questions posed by sustainability reporting are not easily resolved.
“Sustainability itself is an ethical issue,” said Jeyaretnam. “There are the common ethical challenges, like independence, and due care … but then you’ve got more significant challenges in things like, what’s a clear understanding of materiality? What’s material? How do you balance one sustainability issue versus another? How do you stop cherry-picking information?”
The event also hosted a discussion on firm culture and governance, the importance of which Ray Subramanian, interim head of policy and advocacy at CPA Australia said had come into view following recent controversies.
“Having the right organisational culture and maintaining strong governance standards are also important prerequisites for well-functioning, sustainable accounting firms,” he said.
“In Australia, against the background of recent Parliamentary inquiries that have raised concerns around ethical failings within some firms, the IESBA project on firm culture and governance is a timely reminder of the validity and effectiveness of the IESBA Code of Ethics on matters such as firm leadership and culture.”
