The Future of ESG Reporting: Do Accountants Get It?

If you ever had the opinion that accountants were a pallid, homogenous crowd set in their ways, remove that image from your thoughts now. This afternoon's GRI Conference session on the shared future of accountants and environmental, social, and governance reporting (ESG) showcased a lively debate over what's on the horizon for reporting this coming decade. Six professionals across different continents generally agreed that their profession "gets it" . . . to a degree. They suggested, however, that accountants are frequently pulled into different directions by various stakeholders. And as the movement to intertwine financial and ESG reporting progresses, accountants face a host of challenges.

Henk de Bruin of Philips, the Dutch electronics giant, outlined how his organization serves as a case study. Two years ago, his accounting and ESG teams were tasked with meeting the CEO's mandate to integrate CSR and financial information in a year's time. Back in 2002, Philips had already taken a step by including its financial summary in its 2002 ESG report. What De Bruin's ESG team, working with its accountants, had to grasp was how to match the reporting needs of Philip's many different stakeholders. Working with an outside firm, the company's accountants learned how to report on qualitative data that cannot easily be quantified--and while a learning curve exists, "it can be done." Nevertheless, the learning will not end anytime soon: there will be more demand for financial, non-financial, and even "extra-financial" data, and accountants simply need to adjust with the times.

The news from the United States was a tad more cautious, according to Eric Israel, a managing director at KPMG. While integrated reporting has not yet reached the level of sophistication seen in Europe, huge regulatory changes are springing more and more companies into action. Between the US Securities and Exchange Commission's (SEC) suggested climate change related guidelines in February, and the Environmental Protection Agency's (EPA) requirement that heavy greenhouse gas emitters submit such data beginning next year, accountants simply will have no choice but to adapt to such changing demands. Furthermore, Wal-Mart's initiative requiring its suppliers to meet its sustainability guidelines will push more companies into action if they want to remain competitive. The issue for many US based accountants is that they often lack the necessary reporting tools--not to mention the lack of any coherent ESG reporting standards in the USA.

Mike Krzus of Grant Thornton reframed the debate: Why is it important that accountants get it? Mr. Krzus stressed that no corporation can be viable in the long term unless they adopt the GRI approach. A sense that US accountants are far behind, standing on a table with its legs on fire, permeated the room. Mr. Krzus assured them that the table legs were not aflame, but just smoldering. The key to accountants' future coexisting with the growing demands of ESG reporting is in its future professionals. Accountants are a small group within a company that has to shoulder a huge burden. Therefore, younger accountants coming out of school had better hope that universities will widen their education, which now is a window focused on numbers--that window must expand into a wide entrance that welcomes a growing social and environmental debate.