Heightened Regulatory Landscape Will Drive Momentum in 2024 and Create New Opportunities for the Accounting Profession.
NEW YORK (Dec. 18, 2023) – New and emerging regulations and stakeholder demand are increasing pressure on companies to focus on environmental, social and governance (ESG) reporting, which in turn is creating significant opportunities for the accounting profession, according to a new special report from the AICPA and CPA.com.
The report, ESG: A new era in practice opportunities, includes insights from the second annual AICPA and CPA.com ESG Symposium, which brought together top leaders in the ESG space to exchange ideas and perspectives on emerging issues and to discuss the critical role of accounting and finance within the ESG category. It was released during the AICPA & CIMA’s virtual ESG & Sustainability Conference.
“The birth of audit and accounting occurred more than 100 years ago when an economic downturn led to the requirement for companies to provide financial information to operate their businesses. Today that’s shifting as a larger group of stakeholders, including customers, employees and local communities, are expecting companies to provide broader ESG reporting,” said Barry Melancon, CPA, CGMA, CEO of AICPA & CIMA, during this week’s conference. “The accounting profession has a critical role to play to ensure the reliability and comparability of the information. CPAs have the skillset and expertise to design systems to do this.”
The report offers five key takeaways in 2023 related to the growing ESG landscape and the potential for accounting and finance professionals to build on their trusted advisor roles through ESG services, including:
- Critical need for standards. Although various frameworks have been used in the past, the absence of mandates has resulted in a lack of consistency, reliability and comparability. In response, the profession has taken an important role in the development of the International Sustainability Standards Board (ISSB) to create a new reporting system and, ultimately, position firms as leaders in the ESG space.
- Turning point in regulation. Beyond ISSB global standards, the impacts of new and emerging regulations at global, national and state levels, including the recently passed California laws and the Securities and Exchange Commission (SEC)’s proposed climate-disclosure rules, will require businesses to address ESG with the same metrics-based rigor as is applied to financial reporting. The impacts will extend far beyond those jurisdictions and the largest public companies. As part of a larger business’s value chain, smaller companies may be expected to provide their own emissions reporting and will look to their trusted advisors for help.
- Value in CPA assurance. While the global assurance market is growing, the percentage of ESG assurance engagements conducted by audit firms has declined to 57%, down from 63% two years earlier, according to a survey by IFAC and the AICPA & CIMA. CPAs are best positioned to provide proper assurance given their deep expertise and experience in protecting the public interest, backed by the profession’s rigorous attestation standards, oversight structure and independence requirements.
- Quantifying the value in finance. As CFOs continue to seek a financial ROI for sustainability programs, many may be ignoring the societal push from stakeholders, including employees and customers. If finance can evaluate and communicate the value of a company’s sustainability initiatives, it can better articulate impact and value, which can be attractive to talent, customers and business partners.
- Building an ESG practice requires an intentional approach. As with any new service line, having a strong business model strategy, training and awareness are critical to a firm’s success. The report offers best practices to help firms launch or enhance their ESG practice, focusing on areas such as leadership buy-in, leveraging internal and external expertise, customizing services around what your clients truly need, and more.
Looking toward 2024, the demand for ESG services will likely accelerate as the SEC is expected to release disclosure rules for publicly traded companies, adding to a growing number of global and state regulations. During his session at this week’s AICPA & CIMA ESG & Sustainability Conference, Wes Bricker, Vice Chair - US Trust Solutions Co-Leader, PWC, discussed the important role that ESG regulations play in driving consistency in sustainability reporting. “Over the last couple of years, there’s been a lot of progress made on sustainability reporting, but with the emergence of new regulations, we’re now shifting from voluntary reporting toward mandatory reporting,” said Bricker. “We see how some of the regulations overlap, but also how they’re different. We need to connect the dots and not just limit our attention to one.”
The ESG Symposium, 2023 report and ESG & Sustainability Conference are part of the ongoing efforts of the AICPA & CIMA and CPA.com to support accounting and finance professionals in their understanding of the growing ESG landscape and ways to leverage the opportunities to enhance their roles as trusted advisors. “In the coming year, we will continue to build on the momentum to help accounting and finance professionals stay up-to-date on the latest developments in this area and support firms in expanding their services into the ESG category,” noted Erik Asgeirsson, president and CEO, CPA.com.
Additional resources and tools can be found on CPA.com’s ESG Professional Services webpage and the AICPA & CIMA ESG Resource Center.
