Sustainability and climate change are presenting complex organizational problems and major shifts in how businesses need to conduct themselves to prosper.
Over the past five years, the United States has been hit with more than 100 events costing $600 billion in losses — according to the National Oceanic Atmospheric Administration, which tracks the impact of extreme weather events. Business disruptions with physical damage, productivity loss, and supply change breakdown increases uncertainty which cause risk.
Why sustainability is a top strategic initiative and why it matters
The Paris agreement signed by 196 countries in 2016, introduced a legally binding international treaty on climate change, which requires economic and social transformation. Countries agreed to reduce emissions and transition to a low- or zero-carbon economy. Moving to this low-carbon economy is expected to cost over $100 trillion over the next 20 years. This presents a huge commercial opportunity with the need for standards and regulations to be put in place, to track and monitor the transition. Accountants are primely positioned to lead these activities with a unique skillset including ownership of processes, systems, and data as well as responsibility for reporting and assurance.
Why sustainability reporting is here to stay: Global civic pressure is accelerating
Sustainability reporting regulations came into force for both public and private companies in 2023 and 2024:
European Union: Corporate Sustainability Reporting Disclosure Act: — Large companies and listed companies need to publish and obtain assurance on regular reports for the social and environmental risks they face; and how their activities affect people and the environment.
Securities and Exchange Commission: The Enhancement and Standardization of Climate-Related Disclosures for Investors — Registrants need to disclose certain climate-related information in registration statements and annual reports. Note: The SEC rules are pending review by the Eighth Circuit Court, and the SEC has stayed implementation of the rules.
California passed two new laws requiring businesses to disclose their carbon emissions and climate-related financial risks.
The Climate Corporate Data Accountability Act (SB 253) requires large businesses operating in California to publicly report and obtain assurance on their greenhouse gas emissions.
The Climate Related Financial Risk Act (SB 261) mandates that companies disclose the threats they face because of climate change.
Corporate Responsibility: Access the support you need for success
AICPA® & CIMA® is helping its members through the low-carbon transformation with a wide range of practical support:
Advocacy for transparency and accountability: AICPA & CIMA plays a key role in the International Sustainability Standards Board (ISSB) of the IFRS® Foundation, which develops and approves IFRS Sustainability Disclosure Standards.
Professional development and education: Learn the fundamentals of sustainability and the pillars of environmental, social, and governance (ESG) with the ESG and Sustainable Financial Strategy Course — in partnership with the University of Oxford, Saïd Business School. Our Sustainability and Business Thought Leadership Series resources encompass vital guidelines and recommendations for organizations looking to integrate sustainability into their operations and reporting.
Extensive range of courses: Fundamentals of ESG Certificate, AICPA & CIMA respond to GHG Protocol Surveys, New SEC Climate Rules — The Practitioner’s Role
Research and thought leadership: Our Future of Finance 2.0 global report found that 70% of respondents believe accountants have a vital role to play in helping businesses achieve net zero within the next three to five years. Additional resources include Sustainability Assurance Engagements and Why CPAs for ESG Assurance.
Check out more resources.