Prioritise sustainability reporting

In the face of pressing global challenges and the urgency of addressing the climate emergency, achieving a sustainable future has become a priority. One crucial aspect of this effort is the implementation of robust sustainability reporting practices.

The significance of sustainability reporting was at the core of a recent ISSB-ACCA joint stakeholder dinner in Beijing, the outcome of which was a series of recommendations for the successful implementation of sustainability reporting practices.

‘With signs of the climate emergency continuing to grab headlines around the world and a rapidly changing geopolitical and social landscape, time is of the essence,’ said Alan Hatfield, ACCA’s executive director of content, quality and innovation.

He stressed the importance of achieving a ‘just transition’ while balancing the interests of myriad groups.

Half of large organisations and 70% of smaller ones do not have transition plans, Hatfield said, sharing results from a survey of around 1,000 professionals that was included in a new report on implementing a ‘just transition’, launched in November 2023 at the UN’s COP28 climate change conference in Abu Dhabi. According to the report, published by ACCA, PwC and the International Federation of Accountants, ‘43% of professionals agreed that a dedication to sustainability improves a business’s reputation, while 42% stated it increases positive customer perception.’ But Hatfield said that many businesses are held back by a lack of resources, clarity, finance, technical skills and awareness.

Global standard

Sustainability reporting has become critical for organisations worldwide, serving as a means to demonstrate transparency and accountability across their environmental, social, and governance (ESG) practices.

Emmanuel Faber, chair of the International Sustainability Standards Board (ISSB), said that the ISSB standards IFRS S1 and IFRS S2 have been endorsed by the International Organization of Securities Commissions (Iosco) and mark the beginning of a new era in sustainability disclosure.

Meanwhile, the ISSB is also seeking a regional presence and close connection with markets and regulators, said Faber. The establishment of offices in Frankfurt, Montreal and Beijing, highlights the organisation’s commitment to collaboration.

‘The ISSB relies on the multi-location model. We believe that it is important that we are culturally close to the markets that we serve, the regulators with whom we are working,’ said Faber, adding that collaboration with authorities in key jurisdictions like mainland China, Japan, the US, the European Union (EU) and the UK is driving progress.

Collaborative approach

ISSB vice chair Hua Jingdong also stressed the need for equal opportunities in sustainability reporting, particularly for developing countries.

‘If, after five years, the adoption of sustainability reporting happens only in developed countries, then we cannot call ourselves the true international standard,’ said Hua. Capacity building, technical assistance, advocacy and stakeholder readiness are crucial in this regard.

‘Every jurisdiction has a different set of circumstances or regulatory landscape. We need to design curriculum interactions that are bespoke to that particular jurisdiction,’ he said, noting the need for global organisations to work alongside the ISSB in customised partnerships based on each jurisdiction’s needs.

Practical action is crucial, said Professor Zhang Weiguo of Shanghai University of Finance and Economics and visiting professor of management practice at Tsinghua University School of Economics and Management.

‘The Chinese government has a big role to play, both in achieving sustainable development and in realising the United Nations’ Sustainable Development Goals,’ said Zhang, who is also former chief accountant of the China Securities Regulatory Commission and a former member of the International Accounting Standards Board.

Private enterprises and NGOs have played a significant role in driving sustainability too, he continued. Examples are the transformation of steel plants into green energy source, and the creation of micro-insurance products for low-income farmers, fishermen and herders.

Faber reflected on his engagement with mainland China over the past three decades in initiatives like the concept of ‘sponge cities’, which showcased the country’s leading position in sustainable urban development and its commitment to addressing global environmental concerns through innovative solutions

Core partners

Speakers shared the idea that the accounting profession can play an important role during the sustainability journey.

‘We are just at the start of that and we are pivoting now to adoption,’ Faber said. ‘The accounting profession, the Big Four and many others are absolutely core partners to this journey.’

Focusing on the role of the accounting profession, Hua highlighted the importance of financial systems and corporate reporting.

‘The accounting profession is essential in underpinning the foundation of a well-functioning financial system and corporate reporting. It ensures the integrity and transparency of financial information, which is vital for sustainable business practices,’ Hua said.

‘We believe that the accountancy and finance profession can step up to ensure the delivery of sustainability objectives, both in terms of reporting the progress made and in helping organisations make the strategic decisions to deliver against the dual aims of a just transition and business performance,’ said Hatfield.