Accountants can help small businesses meet sustainability goals

Accounting

The Association of Chartered Accountants, and Chartered Accountants Australia and New Zealand, released a playbook Wednesday to help accountants and their small and medium-size business clients reach their sustainability goals.

The guide, How SMEs can create a more sustainable world, discusses the benefits that sustainable actions can have for both business success and the environment, including practical steps for embedding sustainable practices within small and midsized entities, case studies from around the world, and links to different tools and resources.

Accountants are increasingly being called upon to help businesses with environmental, social and governance reporting as urgent calls grow around the world for efforts to combat the accelerating pace of climate change. The United Nations convened its COP26 climate conference in Glasgow, Scotland earlier this month in an effort to convince governments around the world to step up their commitments to reduce greenhouse gas emissions and reliance on fossil fuels, but the conference was largely seen as falling short of its goals. While many large companies have made commitments in the past year to reach net zero emissions, small and midsized entities will need to do their part as well, and accountants may be able to help.

“Governments, having adopted ambitious sustainable development goals for the end of this decade, are ramping up regulation to encourage and enforce ‘green action’,” said ACCA chief executive Helen Brand in a statement. “Many of these businesses are on the edge of survival and these measures should not be a burden on SMEs already impacted by the pandemic. Therefore, it’s very important to align recovery packages with sustainability incentives. This playbook is essential in supporting SMEs with their sustainable transformations and reporting on these achievements.”

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The playbook includes guidance from more than 30 businesses, both from SMEs, SMPs (small and medium-sized practices) and bigger businesses who work closely with them including The Balcony Garden, Sage, Taylors Wines, Intuit, Xero, WE Accounting, along with accountants and business leaders from around the world.

The playbook from the ACCA and CA ANZ describes what sustainable development is, making the business case for sustainability, and illustrating the role of the profession. It includes guidance on how to have the conversation about climate change, illustrating the need for urgent action, and explaining what is happening globally.

Accounting firms like PricewaterhouseCoopers have been helping clients, mostly at larger organizations, deal with ESG reporting and sustainability issues, as well as the implications for taxation as countries contemplate taxes on carbon emissions and provide tax credits for renewable energy, as the Biden administration has proposed in the Build Back Better Act that the House passed last Friday, with further action expected in the Senate.

“When you think about business leaders and looking to address ESG issues, a lot of times they go to the E, the S and the G, and when you think about it in all three areas, the T, the tax is horizontal across all of them in terms of thinking about it and no different than other departments,” said Kathryn Kaminsky, vice chair and U.S. Trust Solutions co-leader at PwC. “We just think it’s really important that business leaders understand how tax does touch those areas and then the societal expectations on tax.”

She believes it’s important for the tax directors at companies to understand where ESG fits into their tax and business strategy. “When you look at tax planning and operations, they’re all still very much broadly part of an ESG strategy,” Kaminsky recently told Accounting Today. “Where we see it’s done so well is when tax just has a seat at the table and they make sure that their views are being heard. You always want the tax director to be there to talk about it, and this is what’s happening with ESG. Rules are changing quickly. There’s the international aspect, and there’s the U.S. aspect. It’s making sure that the focus on taxes doesn’t go away and the tax implications are not on the back end. What should we be thinking about? It always gets done so much better when they’re there at the beginning.”

Small businesses can get involved in sustainability efforts as well. The ACCA and CA ANZ report discusses how small and midsized entities should be considering sustainability in their business operations and decisions, demonstrating different ways where action can be taken to address challenges such as reducing emission levels (including how to set targets and measure emissions), waste and inequality. The guide also explains science-based targets, the Paris Agreement, the United Nations’ Sustainable Development Goals, how to create ambitious strategies for sustainable future growth, and how to provide more integrity in the process by taking a principles-based approach to sustainability.

“We are really pleased to launch this playbook during such a critical time in the climate change agenda,” said Julie Missimore, ACCA’s head of USA policy, in a statement. “COP26 was a couple of weeks ago and what is clear is business as usual is no longer an option. We face a climate emergency. Sustainability is an urgent, global project. In the U.S., SMEs make up a large part of the economy — so the small business community is definitely the drivers of change in the sustainability roll-out across the country.”

Last week, the International Federation Accountants released its own report on how small businesses and their accounting advisors can use sustainability information. “Sustainability Information for Small Businesses: The Opportunity for Practitioners,” discusses the benefits of sustainability information for businesses and how they can achieve better-informed decisions, enhanced strategic and risk management, and more thorough and valuable reporting to outside stakeholders. The publication talks about the range of emerging services that practitioners can provide to their clients, including advisory services, reporting, agreed-upon procedures engagements and assurance services.

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