The unprecedented challenges posed by COVID-19 have reminded us that we are an interconnected global community. While this crisis rightly has dominated our attention, we must not lose sight of progress on the broader aims of the Sustainable Development Goals and the Paris Climate Agreement. Like the pandemic, our response must transcend national boundaries, engage the public and private sectors – and the pace has to quicken.
Corporations are essential to sustainable development. We live in a globalised economy where some multinational companies have revenues that exceed the GDP of many countries, workforces in the millions and supply chains that touch every corner of the world. The good news is that most large companies recognise their responsibility and voluntarily report their progress, using the GRI Standards, which are the world’s most widely used for sustainability reporting.
It is crucial that all businesses recognise their impacts on society. This means a changed outlook in boardrooms and C-suites – from a solely inward-facing consideration of financially material business impacts to a broader recognition of the full impacts to society.
Yet, without a full understanding of these impacts, businesses cannot enact the changes needed to improve their sustainability performance. At the core of the issue is transparency. And not just any transparency. For more than two decades, GRI has advanced the practice of reporting and managing impacts − those material to the company and the world around it. This kind of disclosure is needed to advance sustainable development and provide the accountability demanded by investors, consumers, employees, governments and civil society.
The quality of reporting is a critical issue. For transparency to be an effective tool, the disclosures must be complete, accurate and timely. Many companies do an excellent job, but more work is needed to raise the bar when it comes to the robustness and relevance of sustainability data. Companies and their accountants play a big role to help improve quality. Policymakers must also step in with mandates that require consistent, reliable, high-quality ESG disclosure. I am very encouraged by the commitment from the EU to enhance the non-financial reporting directive under their ‘Green Deal’.
The accountancy profession plays a major role here. For example, the Accounting for Sustainability call to action in response to climate change, signed by 14 accountancy bodies around the world, emphasised the influential role of accountants in supporting businesses to respond to the climate emergency. This includes using their expertise to provide ‘financial and strategic analysis, disclosure, scenario analysis and assurance’ while ‘ensuring transparency and appropriate disclosure around climate-related risks and opportunities’.
As Michael Izza (CEO of the Institute of Chartered Accountants in England and Wales) put it at the World Economic Forum 2020: ‘It’s not just about collecting the data, it’s what you do with it. He then identified the importance of accountants using their skills to measure, report, audit and assure data. I wholeheartedly agree.
The reality is that good corporate governance requires a long-term perspective that understands, considers and balances the multiple and competing demands of stakeholders. Robust, reliable and complete ESG disclosure, based on global reporting standards, is one of the tools available to corporate leaders to make this possible. If the pandemic has taught us anything it is that we face multi-faceted challenges as one interconnected global society.
Now more than ever we must all be good stewards of one another and the global commons.
A version of this article originally appeared in the ICAEW Quarterly (magazine of the Institute of Chartered Accountants in England and Wales).
AUTHOR | Tim Mohin, Chief Executive, Global Reporting Initiative (GRI)