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CLIMATE ACTION AND THE ACCOUNTING Profession

The document discusses the urgent need for the accountancy profession to lead climate action as organizations face the climate emergency and its associated risks. It highlights findings from a survey of finance professionals, revealing a gap between intentions and necessary actions for climate strategy integration. The report calls for executive buy-in, meaningful reporting on non-financial information, and government support to help organizations achieve net zero targets.

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0% found this document useful (0 votes)
3 views4 pages

CLIMATE ACTION AND THE ACCOUNTING Profession

The document discusses the urgent need for the accountancy profession to lead climate action as organizations face the climate emergency and its associated risks. It highlights findings from a survey of finance professionals, revealing a gap between intentions and necessary actions for climate strategy integration. The report calls for executive buy-in, meaningful reporting on non-financial information, and government support to help organizations achieve net zero targets.

Uploaded by

ACC200 M
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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CLIMATE ACTION AND

THE ACCOUNTANCY
PROFESSION: BUILDING
A SUSTAINABLE FUTURE

Belatedly, but with increasing urgency, organisations are finally starting to grasp the scale of
the climate emergency that our world is facing. And the challenges we must confront if we are
to have any hope of restricting global greenhouse gas (GHG) emissions to 1.5°C – as the latest
IPCC report released ahead of the United Nations Climate Change Conference (COP26) makes
clear in the starkest terms.

This change is being driven by several factors including to change within organisations for them to achieve carbon
government policy, regulation, investor pressure, consumer emission reductions at the pace and scale that is required.
action and the growing presence within organisations of Gen
Z employees – who are particularly aware and vocal about To inform our thinking we commissioned a survey of more
how their futures will be shaped by climate action or inaction. than 3,000 accountancy and finance professionals from the
Most recently, the Covid-19 pandemic has further underlined global ACCA community spread across the corporate, public,
to all generations of employees just how vulnerable their financial, and non-profit sectors. We asked small, medium,
organisations can be to existential risks. and large-sized businesses how climate risk is being
addressed in their own organisations. We also conducted
As they do so, these organisations are focusing on the value a series of regional roundtables around the world to
of their environmental and social impacts – both negative and provide context on the major climate risk themes being
positive – to their own business and greater society. This is considered globally.
prompting a shift within organisations whereby climate risk
is no longer seen as the responsibility of a few specialists. These findings and discussions emphasise an appetite for fully
Instead, organisations are looking to accountancy and finance embracing climate considerations at the very core of business
professionals to show leadership; and develop and implement strategy. They also show an understanding and desire among
strategy around climate and nature-related impacts on accountancy and finance professionals to play a central role
business models. in shaping this strategy and leading organisations into the
future. However, the findings and opinions also reveal just how
In this new report, we consider just how accountancy and disconnected the good intentions are from the urgency of
finance professionals can provide leadership – and what needs climate action that is needed.

Discover the full report: www.accaglobal.com/gb/en/professional-insights/


pro-accountants-the-future/climate-action-accountancy-profession.html
Some headline findings:
n 75% say it’s important that accountancy and finance teams are involved in supporting their organisations to tackle
climate change.
n 29% say that climate change considerations play a significant or central role in financial decision making.
n Just 15% say their organisations have set targets to be net zero compliant by 2050 (the internationally agreed goal for
mitigating global warming – whereby greenhouse gases entering the atmosphere are balanced by their removal from
the atmosphere).
n Only 23% integrate climate key performance indicators (KPIs) into their business strategy and/or risk frameworks.
n 52% believe climate change regulation will impact their organisation over the next five years.
n Only 38% feel that their organisation will be willing to invest much more than today in addressing climate change over
the next three to five years.
n 73% say it’s important that their future career involves taking action on climate change.

The time to act is now


Very few organisations are progressing at the pace and scale needed to counter the devastating and
world-altering threats that climate change is bringing. To meet this challenge, organisations need to put
accountancy and finance professionals at the heart of climate action strategy and implementation.
They should start by focusing on integrating finance and sustainability expertise in the following areas:

Business strategy Science based targets to guide decision making


The belief that environmental impacts should be considered Evaluating the financial value of decarbonisation will play a
separately to business performance is over. The future success critical role in overall business strategy in the coming years.
for all organisations will be shaped by how they adapt their The problem at present is that many organisations lack the
business to meet the challenge of climate change. This means KPIs needed to reinforce climate strategy and actions. Only
climate and nature-related considerations must be central to 23% integrate climate KPIs into their business strategy and/
organisations’ overall business strategy. or risk frameworks, according to our survey. Adhering to
established science based targets will help develop KPIs that
Governance can guide organisations towards decarbonisation successfully.
For climate action strategy to be effective it needs to be
embraced at executive board level before being embedded Accounting frameworks and standards
throughout the organisation. Executive buy-in sets the tone for Given the growing influence that climate-related risks are
other parts of the organisation to drive climate action. having on business performance, prospects, and viability, it
is crucial that organisations manage and report on the value
The road to decarbonisation they create, preserve and erode. This now needs to be seen
Organisations cannot reduce what cannot be measured. through a different lens – one that reflects and integrates
Organisations of all sizes will have to reduce their GHG both financial and non-financial considerations. Accountancy
emissions over the next few decades to meet climate change and finance professionals within organisations will play
targets set by governments. This will involve measuring, a central role in helping to integrate climate and other
accounting for and reducing emissions generated by the environmental and social value into traditional reporting
organisation, its suppliers – and, ultimately, the consumers – as well as identifying and providing analysis on the
who use its products. interdependencies of these risks.
Next steps for accountancy and finance professionals
The climate agenda will redefine the world of business over the coming decades and meeting this
challenge is a long-term process. However, there are certain steps that need to be taken right now to
accelerate the transition. These include:

n Get executive level buy-in for climate action: the tone belonging to wider non-financial considerations need
set by organisation leaders plays an important role in strengthening. This includes global initiatives to enhance
influencing climate action. The impact of climate risks climate and broader sustainability-related reporting
should be on the agenda of board meetings – both in through standards set by a new International Sustainability
terms of how climate and natural capital risks impact the Standards Board (ISSB) that will address material impacts
organisation and, conversely, how its operations affect on an organisation’s enterprise value. And guiding this
climate and natural capital. still evolving approach to ensure that financial and non-
financial reporting are connected and integrated within
n Play a lead role in supporting boards and executive
a clear narrative – so that organisations can account for
leadership in net zero transition plans which cover
their real value to society.
strategies the organisation will undertake to achieve net zero
status by 2050 – or preferably earlier. These plans should n Foster integrity and trust: there is a need for transparency
include key targets that need to be achieved by 2030. and reliability in the sustainability-related information
that is presented and used. Leverage the robust,
n Place climate risk, environmental, social and governance
transparent and trustworthy methods of assurance that
(ESG) and net zero at the heart of organisational
exist for financial information. And apply this rigour to
strategy: the days of treating sustainability and strategy
non-financial impacts such as climate action, nature
as two separate priorities are over. Expand strategic
and biodiversity as they become central to strategy,
considerations beyond financial returns and competitive
performance and reporting. Assurance will increasingly
advantage. The long-term impact of climate change
cover not just reporting but processes, risk management
means that these risks need to be fully integrated, and
and controls. Achieving this will play a key role in
‘priced into’ the strategy.
minimising greenwashing, which misrepresents the true
n Take a holistic approach to decision making: focus on performance of sustainability indicators.
integrating ESG, climate KPIs and risk considerations into
n Increase awareness and education: there is a pressing need
decision making, from strategic to operational levels. Adopt
to raise the level of knowledge and understanding, both to
a holistic view of the entire value chain that should play a
recognise climate change as an urgent ‘burning platform’
lead role in identifying and sourcing what constitutes
– and to respond accordingly. Expand understanding
‘decision relevant’ data. This needs to involve leveraging
of ‘in-scope’ issues to get involved with. In too many
science-based targets across the organisation’s entire value
organisations, expertise in climate risk and ESG still resides
chain and the use of its products to inform decision making.
in a small group of sustainability experts; this must change
Where possible, the financial impact of climate issues
rapidly and become embedded in organisations’ culture.
should be quantified to support such decision making.
Gen Z professionals will help lead this development. Also,
n Report meaningfully on non-financial information: while small businesses need particular attention and support
norms for financial reporting are well established, those here, having been heavily impacted by the pandemic.
Call to action to governments
n Governments must raise their efforts in not just setting net zero targets by a specified year, but also intermittent
targets for the end of each decade leading up to 2050. More importantly, they need to outline strategies and plans
to realise the achievement of those targets. This should cover key industries, energy sources, mandates for business
and society – as well as including policy interventions that both incentivise and disincentivise required outcomes for
the wellbeing of future generations.
n Most organisations are being reactive by awaiting government direction. As a result many, especially those without
the necessary human or financial resource, are woefully unprepared to meet net zero targets. Governments must
help business through practical guidance and support if net zero goals are to be achieved, including through the
involvement of local and regional authorities. This includes supporting them to:
• transform to more environmentally friendly ways of operating.
• deliver business changes that reduce carbon emissions.
• design ways of tracking progress on carbon reduction and net zero targets.
n Governments must help organisations gain access to the expertise required to meet net zero, whether that is through
up/re-skilling employees, or providing free or cost-effective external support. Governments must step in to provide
organisations of all sizes access to this guidance, support, and the tools they will need to meet carbon reduction and net
zero. Here, there is a role for knowledge hubs where governments and those organisations leading the way in carbon
reduction and net zero can provide expertise and support tools, which can be adopted by the wider business community.
n Governments need to work together. The climate crisis does not recognise borders and many businesses and
organisations operate internationally, if not directly then often indirectly via supply chains. It is therefore vital that
governments work together to create a collaborative and symbiotic approach to supporting businesses and
organisations, particularly SMEs, in preparing for and delivering carbon reduction and net zero targets.

Discover the full report: www.accaglobal.com/gb/en/professional-insights/


pro-accountants-the-future/climate-action-accountancy-profession.html

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