The AICPA has outlined six environmental, social and governance (ESG) trends that will impact the accounting and finance professions in 2021, in addition to highlighting five steps companies can take to prepare for ESG reporting and assurance.
“CPAs are uniquely qualified to help organizations increase stakeholder trust and confidence,” says Desiré Carroll, senior manager of public accounting for AICPA. “ESG matters clearly attracted a lot of attention in 2020, and as demand for companies to report their material ESG-related matters, so too does the need for that information to be consistent, accurate and reliable.”
The six ESG trends that AICPA sees impacting the accounting profession and firm clients in 2021 are:
- Rising demand for ESG reporting, particularly under Sustainability Accounting Standards Board (SASB) standards and Task Force on Climate-related Financial Disclosures (TCFD) recommendations.
- Responsibilities for ESG reporting shifting from being the sole responsibility of sustainability and marketing teams to now include accounting and finance professionals.
- Environmental impact as a priority, with companies placing high importance on waste and plastic reduction in their supply chains and setting ambitious goals with accelerated timelines for achieving carbon neutrality.
- The social component of ESG growing, with organizations emphasizing diversity and inclusion in hiring practices, throughout their supply chain and in equal pay and fair labor practices.
- Increased demand for CPA assurance services as companies look to enhance stakeholders’ confidence in the reported ESG information.
- Continued movement toward a global set of sustainability reporting standards.
In light of the above trends, AICPA recommends that organizations take the following steps to get ready for ESG reporting and assurance in 2021:
- Incorporate management of ESG risks into broader enterprise risk management processes.
- Determine the key performance indicators most relevant and important for stakeholders and the sustainability reporting standard or framework that will be used for reporting.
- Assess the types of data sources and determine whether policies exist that ensure the data is reasonable and accurate, comes in a timely and reliable manner and is derived in a way that produces consistent and comparable results.
- Establish appropriate board oversight for critical ESG matters and develop and document internal controls over the data gathering and reporting processes to ensure accuracy and completeness of reported data.
- Consider engaging a CPA firm to perform a readiness assessment to help prepare for an assurance engagement over reported ESG information.