Sustainability Reporting Flashcards
What is sustainability accounting (IMPORTANT)
-> corporate social responsibility reporting
-> represents activities that have a direct impact on society, environment, and economic performance of an organisation
-> sustainability report gives stakeholders an understanding of an entity’s role in and contribution to society
Creation of a new standard setting board
3rd November 2021
IFRS Foundation Trustees announced the creation of a new standard setting board, the international sustainability standards board (ISSB) to help meet demand of comprehensive global baseline of sustainability related disclosure standards that provide investors with info about companies sustainability related risks and opportunities to help them make informed decisions
First two Sustainability Disclosure Standards
- IFRS S1 general requirement for disclosure of sustainability related financial information
- IFRS S2 climate related disclosures
IFRS S1 general requirements for disclosure of sustainability related financial information
-> is to require an entity to disclose info about its sustainability related risks and opportunities that is useful to users of general purpose financial reports in making decisions relating to providing resources to the entity
IFRS 1 requirements for disclosing info about an entity’s sustainability related risks and opportunities
- Governance process, controls and procedures the entity uses to monitor, manage and oversee sustainability related risks and opportunities
- The entity’s strategy for managing sustainability related risk and opportunities
- The process the entity uses to identify, assess, prioritise, and monitor sustainability related risks and opportunities
- The entity’s performance in relation to sustainability related risks and opportunities
IFRS 2 Climate related disclosures
-> objective is to require an entity to disclose info about its climate related risks and opportunities that useful to users of general purpose financial reports in making decisions relating to providing resources to the entity
IFRS 2 requirements for disclosing info about an entity’s climate related risks and opportunities
- Governance process, controls and procedures the entity uses to monitor, manage and oversee climate related risks and opportunities
- The entity’s strategy for managing climate related risk and opportunities
- The process the entity uses to identify, assess, prioritise, and monitor climate related risks and opportunities
- The entity’s performance in relation to climate related risks and opportunities
What is included in sustainability accounting (3 key elements)
(IMPORTANT)
- Environmental factors
-energy
-water
-greenhouse gases
-emissions
-hazardous and non hazardous waste
-recycling
-packaging - Social factors
-community investment
-working conditions
-human rights and fair trade
-public policy
-diversity
-safety
-anti corruption - Economic factors
-accountability/transparency
-corporate governance
-stakeholder value
-economic performance
-financial performance
-> consider issues that materially affect their business starlets including creation of value as well as risk and liability
-> address actions in order for the business to appropriately respond to sustainable growth based on its findings
Why reporting on sustainability issues (IMPORTANT)
-it’s ethical
-government funding will increasingly focus on sustainable businesses
-will be a reduction in repetitional and regulatory risk
-sustainable products and services are a growth area
-short term, profit based models are now less relevant for many investors
Reporting initiatives
- United Nations Global Compact (UNCG), which is a voluntary initiative that encourages entities to report actions taken to implement UN principles in respect of human rights, labour, the environment, and anti corruption
- Global reporting initiative (GRI), which encourages entities to produce a balanced report that represents the positive and negative impacts on society and the environment
- The international integrated reporting framework, which encourages entitles to report on ow they create value in the short, medium, and long term by discussing their impact on a range of capitals
Accountants role in sustainability (IMPORTANT)
- Reporting
-experience of reporting and understanding of how important it is from a regulatory, voluntary, and legal perspective - Risk
-can give advice on risk management, and on the implications for an organisation if it opts to start reporting on sustainability issues voluntarily - Establishing frameworks
-accountants understand how to collect, measure, and analyse data
-so are able to develop frameworks to report on it - Policy
-often falls on accountants to develop accounting policy - Information provision
-accountants are trained to provide clear and reliable data, establish a business case, get her evidence and put the supporting procedures in place
Problems with sustainability reporting (IMPORTANT)
- No worldwide agreed standards on sustainability reporting yet. This limits the ability of stakeholders to compare one company’s sustainability reporting with another.
- Those that have voluntarily adopted the reporting early, are facing difficulties with it due to lack of experience in the field. This can lead to lack of credibility in the data reported if it’s not completed in accordance with the guidelines and frameworks that are out there now
- Data collection on sustainability is time consuming and companies are having to collect data across many different sources (carbon emissions, recycling, packaging, gender lay gap, human rights, corporate governance).
- The quality of the data is poor, unreliable data is a major problem for businesses today. If they are basing decisions on unreliable data then the consequences can be disastrous and costly
- Producing a yearly report that is not actionable, with huge amounts of data from, various sources can lead to reports loaded with info, but then struggle to implement the recommended actions or pull any value out of the data collected
