Accountants will be in the vanguard of businesses' battle to avert climate catastrophe. But they may have to acquire and update their skills if they are to fulfil their purpose to ‘create, protect and report value’ (according to the United Nations report on the state of the climate) as the effort against climate change progresses.
According to Thomas Verheye, principal adviser on green finance at the European Commission, speaking at an EU Skills webinar in May co-hosted by ACCA, IFAC and the Green Finance Platform, ‘Accountants and accounting will be quintessential for making the green transition a reality… for overcoming the prevailing silo-based approaches in tackling the sustainability challenge, bringing actionable information to economic and financial decision-makers that currently struggle to translate the sustainability jargon in a corporate management context, and for ensuring the green transition is inclusive, by not only “growing the green”, but also “greening the grey” part of the economy.’
Accountants will play a vital role in helping business not only devise and report on more sustainable strategies, but also comply with a host of regulatory measures intended to edge companies towards climate-friendly models.
‘The call to the finance and accounting profession is clear: if we don’t act, we will lose opportunities’
Wave of regulation
These models mostly take the form of reporting frameworks. In Europe, companies face the prospect of implementing a new corporate sustainability reporting directive (set to replace the non-financial reporting directive) as well as the corporate sustainability due diligence directive. The US is currently working on the introduction of its own climate risk reporting rules.
In the UK, companies have to report using guidelines from the G20’s Taskforce on Climate-related Financial Disclosures (TCFD). The UK government has also pledged to adopt new standards under development at the International Sustainability Standards Board (ISSB), launched last year at the Cop26 climate summit in Glasgow. Under Provision 1 of the UK’s corporate governance code, boards should already be describing the ‘sustainability’ of their business models in annual reports.
These developments will make huge demands on accountants’ skills and knowledge.
ACCA lists sustainability as one of the seven core capabilities required by accountants, and has introduced integrated reporting as part of its qualification.
But specific skills will depend on specific business activities and the role occupied by accountants. Broadly they will include: an understanding of the changes happening in the environment and their impact on business strategy; collaboration and cooperation across the ‘entire investment chain’; and managing uncertainty.
Helen Partridge, director of accountancy education of the International Federation of Accountants (IFAC), sees more reasons for accountants to acquire new skills. She told the EU Skills Week webinar: ‘The call to the finance and accounting profession is clear: if we don’t act, we will lose opportunities.’
Failure to move, she warned, could see accountants lose their relevancy, fail to attract newcomers to the profession, and fall short of meeting their mandate to act in the public interest.
Skills include the ability to connect long-term society challenges to business operations
According to Jeremy McDaniels, a sustainable finance adviser at the Institute of International Finance, the emergence of new reporting frameworks places a premium on skills. But he also stressed the importance of being able to measure and disclose risks, and to integrate priorities such as biodiversity and social justice into financial decision-making.
‘While needs will vary in terms of business activities and functions,’ McDaniels told webinar attendees, ‘all professionals will need an understanding of what is at stake, capacities in managing uncertainty and dynamic environments, and the skills to work collaboratively towards common goals across stakeholder groups.’
For Orla Collins, ACCA president and deputy managing director at Aberdeen Asset Management, ‘accounting for the true cost of capital’ will support investors in their analysis of how companies affect the planet. That means bringing together accounting and sustainability reporting.
‘ACCA members should be part of the process of harmonising sustainability standards with the accounting standards to shape the future,’ she added.
Nancy Kamp-Roelands, professor of non-financial reporting at the University of Groningen, outlined the skills she sees coming to the fore for professional accountants. These include the ability to connect long-term society challenges to business operations and to identify the information needed for internal decision-making as well as external accountability.
She also urged accountants to learn how to analyse the concept of value in ‘multiple capitals rather than the concept of financial value’. There will also be a need to use data as part of a broad strategy over the short, medium and long term, and the ability to measure and report on a variety of indicators.
‘During my 30 years in the field of standard-setting and education, I have experienced that additional skills are needed,’ she told the webinar.
‘Our broad skill set is an exceptionally strong starting point for attaining the skills for the green transition’
Skills in strategic planning may also be required. Verheye said he would like to see the development of a curriculum that would ‘promote standardised natural capital accounting’ and cover ‘all key environmental areas’. That chimed with MEP Victor Negrescu, who told the webinar that skills development could not be managed from an ‘office somewhere in Brussels’, but would need ‘concrete partnerships’ between different organisations.
While the discussion raised the need for more work developing and upgrading skills, Alan Johnson FCCA, president of IFAC, struck a note of an optimism. The knowledge and skills gap, though daunting, is ‘relatively narrow’ for accountants compared to other professions. Current capabilities among qualified accountants come close to what is needed.
‘Our broad skillset,’ added Johnson, ‘is an exceptionally strong starting point for attaining the skills for the green transition.’