The issue? While the proposal would focus on providing pertinent information to investors, those same investors tend to be short-term thinkers and sustainability is inherently a long-term concept. There are other frameworks and proposals, including a current proposal by the International Financial Reporting Standards (IFRS) - followed by companies in many countries - to create their own sustainability accounting standards. That’s more in line with a long-term view of sustainability itself and is one of the features that differentiates the Global Reporting Initiative from other measures. This approach captures many different elements of a company’s business operations. This can include local communities and employees. That means that information on how a company’s actions affect many different parties - not just shareholders - is reported. Among the most popular is the Global Reporting Initiative, which takes a multi-stakeholder perspective. There are currently a number of different ways to report ESG information. It's time to train accountants in sustainability There is huge potential here, however, for sustainability accounting to play a key role. Because their ESG disclosures are voluntary, businesses don’t have to divulge anything they don’t want to, and there are few consequences for grand, baseless claims or non-disclosure. This means that a company’s true sustainability performance is difficult to accurately gauge. While many firms provide this information voluntarily, many say one thing but do another, burnishing their reputation, for example, while continuing to pollute. Third-party organizations use this company-provided information as the basis to create different ratings and assessments, meaning there are serious issues with their analyses. This makes it very different than financial information, which is subject to detailed audits. Much of the information used to gauge a firm’s sustainability is provided by the company itself, and it’s not always audited. Measuring sustainability is where it gets tricky. They also pressure firms to improve their ESG performance, or they divest from some companies completely. Sustainable responsible investing (SRI), or ESG investing, uses this information about a company to inform investment decisions.ĮSG investors are attracted to companies that meet certain ESG criteria while they avoid investing in companies they believe are unethical, like tobacco or gun manufacturers ( known as sin stocks). This has naturally made investors sit up and take notice. There is growing evidence that companies that take their environmental and social responsibilities seriously perform better financially. What is ESG?ĮSG refers to the environmental, social and governance information about a firm. Investors are usually interested in a firm’s financial performance, including ESG. In the 1970s, CEOs made 20 to 30 times more money than the average employee - today, they make 300 times more.Ĭommunities may be interested in how much pollution or greenhouse gases a firm is producing so that their neighbourhoods remain clean and safe. Employees may be interested in wage inequality - for example, how much more the CEO makes than the average worker. Various stakeholders have different interests. Sustainability accounting is the practice of measuring, analyzing and reporting a company’s social and environmental impacts. These regulators require audited, financial information from public firms, but the same cannot be said for sustainability information that’s mostly voluntary and typically not audited.Īs a result, we are left with missing information, or subject to volumes of information about what firms want to talk about, likely in an effort to enhance their reputation. Regulators like the Securities and Exchange Commission in the United States and the Canadian Securities Administrators in Canada also set rules around what information publicly traded companies are required to disclose. Governments play an important role too, creating and enforcing regulations such as putting a price on carbon to disincentivize its use. If these companies produced sustainable goods and services while consumers also took individual responsibility, it could have a powerful impact. It’s estimated that 71 per cent of all greenhouse gas emissions come from just 100 companies, including ExxonMobil and Shell. We buy products and services produced by companies, so they need to be responsible too. As consumers, we can make changes to our lifestyles to reduce our waste and use cleaner energy sources, but that’s not enough. We all have a role to play in achieving sustainability, and these roles are interconnected. (Pixabay) Who’s responsible for sustainability? Rich people are particular polluters and contribute to climate change much more than everyday citizens.
0 Comments
Leave a Reply. |