Accountants need to help their organisations meet rising investor demand for nonfinancial information, an International Federation of Accountants (IFAC) report suggests.
Investors increasingly are using environmental, social and governance (ESG) information to determine how organisations will perform over long periods.
In order to meet that demand, accountants need to apply their standards to the process of collecting, analysing and reporting ESG data while supporting the addition of ESG factors to management systems, according to the report, which was released last week.
The report, “Investor Demand for Environmental, Social and Governance Disclosures: Implications for Professional Accountants in Business”, describes five key recommendations for accountants:
- Communicate effectively with investors to determine what ESG information they need.
- Improve information and disclosure quality by adding ESG factors and non-financial performance information into governance and accountability arrangements.
- Link financial and non-financial performance to improve understanding of sustainable value creation.
- Improve usefulness of reporting and transparency by making ESG disclosures timely, consistent and comparable.
- Gather and aggregate data from different parts of the organisation to support internal and external decision making.
Investors are now able to assess financial outcomes of various ESG factors, the report says. That is leading investors to focus on the ESG factors that create value and competitive advantages that drive financial performance.
The report reinforces the results of a recent study commissioned by the AICPA and CIMA that was released last month in conjunction with the launch of the new CGMA designation for management accountants worldwide.
Conducted by Oxford Economics, the study indicated that CEOs worldwide will place more emphasis on non-financial aspects of their businesses as they map out their futures over the next 18 to 24 months. Twelve percent of CEOs surveyed said they are most likely to turn to their finance team to measure non-financial value.
—Ken Tysiac (ktysiac@aicpa.org) is a CGMA Magazine senior editor.