With the growing clamour for businesses to prioritise ESG (environmental, social and governance) matters, it is imperative that accountants especially CFOs and PAIBs (Professional Accountants in Business) step forward to take the lead in the business sustainability space.
MIA as the regulator and developer of the accountancy profession in Malaysia is hence proactively advocating for accountants to upskill on ESG and climate change matters. “These pose a tremendous risk to business sustainability as well as the wellbeing of people and the planet. At the same time, this is an opportunity for accountants to upskill and become more resilient, agile and future relevant in responding to future crises and unexpected scenarios,” said MIA CEO Dr. Nurmazilah Dato’ Mahzan.
Affirming its commitment to ESG and climate governance for business sustainability, MIA recently held its inaugural MIA Climate Change & ESG Conference 2021, which focused on the knowledge and competencies required for accountants to contribute to the global ESG and climate action agenda.
To set the tone for the two-day event, MIA invited Tan Sri Abdul Wahid Omar, Chairman of Bursa Malaysia and a leading proponent of ESG and business sustainability, to deliver the keynote address. The following are some highlights of his address that accountants should note as climate change and ESG matters gain momentum. In particular, Tan Sri Wahid focused on the core competencies and areas that are pertinent for accountants in adding value to their organisations and business.
Sustainability and climate change is not only becoming mainstream on both national and global scales but is also gaining traction within the profession’s domain and competencies. Recently, the International Financial Reporting Standards Foundation (IFRS) resolved to enter the international sustainability standard-setting space. “The involvement of the IFRS will definitely galvanise and accelerate the convergence of the plethora of existing international ESG Frameworks – and we eagerly await to see how the accountants will really contribute to the conversation,” said Tan Sri Wahid.
Accountants can be found in virtually every organisation at all levels of the hierarchy, lending their financial expertise for value creation. “Accountants have the knowledge, understanding, and a profound appreciation of the connection between financial performance, risk management, and ESG/sustainability considerations. Those in leadership positions such as CFOs can provide the critical link between management and stakeholders,” declared Tan Sri Wahid.
Given that the inter-relationship of economic, environmental, and social factors is increasingly material to long-term enterprise value creation, investors and stakeholders now expect companies to report on non-financial issues, risks and opportunities with the same discipline and rigour as financial information. However, it is challenging to capture, measure, analyse and report ESG and climate change information which can be non-linear, qualitative and non-financial in nature. “Accountants can bridge the gap and establish connection between all parts of the business, as well as interpret the numbers meaningfully. More specifically, their rigour in assessing financial information could be extended into the non-financial aspects of the business,” said Tan Sri Wahid.
“Ultimately, we should aim for the quality of non-financial reporting to be on the same standard as financial reporting. This is necessary to facilitate comparability of ESG performance across companies and enable investors to apprise ESG risks, value creation potential and future performance,” he stressed.
With technical competencies and recognised expertise in auditing and assurance, accountants are logical choices as providers of assurance on ESG, climate change and sustainability data. “As the availability, quality, and comparability of ESG data becomes more key, accountants can and must take on the role of providing “assurance” in ensuring the credibility and reliability of sustainability data generated,” said Tan Sri Wahid.
Given these requirements, Tan Sri Wahid concluded that the accountancy profession, without a doubt, is best prepared and suited to take on this task of ESG and sustainability reporting and assurance to support informed decision-making and fulfil stakeholder expectations.