Herbert Yung FCPA, Director, Member Engagement and Sustainability Lead at the Hong Kong Institute of CPAs, on how CPAs can drive better sustainability practices in organizations
It is clear that more and more organizations are now beginning to consider how they should align their operations and strategy with sustainability goals while pursuing better business returns. No matter the maturity and management approach of an organization on sustainability, CPAs can definitely make significant contributions in driving positive change and lead the way to achieve sustainability by leveraging their expertise in accounting and financial reporting, as well as their unique knowledge and influence in both operational and strategic areas of the organization. Here are ways CPAs could contribute:
1. Enhancing the understanding of sustainability risks and opportunities
There are many sustainability issues that organizations may face – what should be given priority in view of limited resources and time? Many organizations choose to conduct risk and opportunity assessments to evaluate internal and external environments before embarking on their sustainability journey. Besides the traditional stakeholder engagement and qualitative evaluation approach, CPAs can help quantify the risks and opportunities in terms of enterprise value. While financial performance is not the sole consideration, being able to help visualize and contextualize the financial impact of sustainability issues may help organizations make informed decisions on an objective basis, and get better buy-in from the board.
2. Integrating sustainability into business processes
Sustainability is not an independent matter – to be part of the solution towards global climate change and social challenges, organizations need to integrate sustainability into their operations and explore how they can minimize their negative impact while making contributions through their daily activities. While some changes require specific technical knowledge where initiatives are to be developed by internal or external subject matter experts, CPAs are likely to possess holistic views of the organization as well as know-how when it comes to governance and controls. Therefore, they can advise on the feasibility, resource implications, and how such initiatives could be implemented without disrupting the business.
3. Development of KPIs
In order to monitor and manage sustainability progress over time, performance tracking mechanisms will need to be developed. These commonly come in the form of defining and measuring relevant key performance indicators (KPIs). CPAs could play significant roles in advising on how KPIs could be designed to be more specific, relevant and measurable, and facilitate the understanding of how they could be linked to overall sustainability and financial performance. CPAs’ experience could help organizations in establishing data collection mechanisms, while leveraging existing information and protocols as much as possible to achieve greater efficiency in reporting and monitoring the KPIs.
4. Data analytics
Being able to identify trends and develop insights from data collected throughout the organization’s operations is one of the key factors to become a leader in sustainability in the market. It could be challenging and resource-intensive as the volume of data is typically very large and further processing will likely be required before relevant data can be used. However, CPAs, who are familiar with the analytical interpretation of numbers, are well-placed to unlock the value of data. Leveraging their access to and ability to comprehend operational and financial data sets alongside sustainability information, could inform organizations to take appropriate responses to further enhance performances and reduce risks.
5. Sustainability reporting
As sustainability reporting is moving from a voluntary best practice towards a mandatory disclosure as required by regulators, investors and other stakeholders, having transparent and accurate reporting on sustainability is critical for organizations. A robust reporting system is an essential element in achieving quality disclosures, which means CPAs could be a key contributor through educating staff members on the appropriate reporting principles, establishing control mechanisms, and conducting reviews on the reported information, through making reference to their financial reporting experience and standards. CPAs could also advise on how to better articulate the relationship between sustainability and businesses, in order to meet the expectations of stakeholders and regulatory requirements.
6. Internal communications
Driving sustainability performance requires a change in mindset and joint commitment within the organization. By providing connectivity between leadership and operation teams, CPAs can help serve as an agent of change to facilitate discussions across levels on how organizations could achieve better results and on the way forward, with the commercial benefits such as cost savings and streamlining of operations better articulated throughout. CPAs could also help advise on appropriate sustainability targets considering the ambition and available resources, establish policies to help achieve the goals, and continue monitoring and updating the progress to the board.
To play such critical roles in sustainability, CPAs should acquire knowledge on sustainability subject matters and best practices that are relevant to their organizations. Also, they should be aware of the evolving sustainability reporting frameworks, standards, and requirements, and keep up-to-date with the latest developments and trends on sustainability. The Institute has established the ESG Information Centre on our website, which provides news, articles and learning resources on sustainability that are relevant to the profession. Various CPD courses are also being launched to support our members in getting ready for the growing expectations for CPAs on sustainability.