The IFAC SMP Advisory Group (SMPAG) welcomes the opportunity to provide input to the International Ethics Standards Board for Accountants (IESBA) Strategy Survey 2022.
Overall, the SMPAG supports the IESBA's focus on developments in sustainability reporting and assurance in its next strategy period. The SMPAG supports the IESBA in exploring its potential role and actions - which might not necessarily involve additional standard setting, but rather non-authoritative guidance.
The Fast Future With IFAC is a conversational podcast series that features innovative SMP practitioners sharing how they’re adapting to the rapidly changing global economy.
Episode four features a conversation with Paul Redmond, an Irish professional accountant. His firm, RDA Accountants Limited, has four offices across Ireland. He has a wide range of experiences and expertise, including the digitalization of accounting practices.
IFAC principal Kristy Illuzzi spoke with Paul about a range of pressing topics for SMPs, including:
Going digital with his firm
Building trust and enabling sustainability
Steppng into advisory services
Building strong relationships with clients
Click below or visit IFAC's iTunes podcast channel to listen to this episode. Be sure to subscribe to catch our next conversation with an innovative practitioner, coming soon.
IFAC welcomes the opportunity to comment on the International Sustainability Standards Board’s (ISSB) Exposure Draft addressing climate-related disclosures (the “Exposure Draft”). As the global voice of the accountancy profession, IFAC represents over 180 Professional Accountancy Organizations in 135 jurisdictions, thereby representing over three million professional accountants. As such, our perspective to this consultation—like that of the ISSB—is global in scope, while also taking into consideration important jurisdictional activities (i.e., such as that in the United States
58% of global companies obtained ESG assurance in 2020
Assurance engagements were mostly limited in scope
61% of ESG assurance services were performed by professional accounting firms, with substantial variation in practice within different jurisdictions
The number of global companies obtaining independent assurance on their environmental, social and governance (ESG) information increased from 51% to 58% in 2020, compared to the previous year, according to new data from the International Federation of Accountants (IFAC), American Institute of CPAs (AICPA) and Chartered Institute of Management Accountants (CIMA), the latter two of which represent the unified voice of the Association of International Certified Professional Accountants.
The 2020 information released today is an update to the accounting bodies’ inaugural study last year that examined global trends in both sustainability-related reporting and its assurance. This latest update offers the first benchmark of progress relative to the original data. A follow-up study that incorporates 2021 information is expected to be released at a later date.
When it comes to ESG assurance, 82% of engagements were limited in scope in 2020, essentially the same as in 2019 (83%). Some 61% of assurance engagements were performed by audit firms on a global basis, a slight decline from the previous year (63%). Jurisdictions with some of the highest rates of assurance performed by professional accountants include Australia, France, Italy, Germany and Spain. In other countries, including South Korea, the United Kingdom and the United States, most assurance engagements are conducted by service providers outside of the accountancy profession. Professional accountants have high professional standards, including independence, and are subject to regulatory oversight, which is critical in this space.
On the reporting side, the study found 92% of global companies provided some ESG data to investors, either through integrated, annual or standalone reports. The use of, or reference to, Sustainability Accounting Standards Board (SASB) standards more than doubled in 2020. This is important because new disclosure proposals from the International Sustainability Standards Board (ISSB) include and build upon SASB standards. (SASB’s parent organization, The Value Reporting Foundation, will consolidate into the IFRS Foundation on Aug. 1, 2022, to support the work of the ISSB.)
“It’s encouraging to see continued high levels of reporting on sustainability information and an overall increase in assurance globally,” said IFAC CEO Kevin Dancey. “But our research tells us that 80% of companies are using multiple frameworks or standards, which results in data that is not consistent, comparable or decision-useful for investors, stakeholders or society at large. Sustainability reporting and assurance will only reach its full potential when it is based on a harmonized global system led by the International Sustainability Standards Board’s comprehensive baseline of disclosure.”
The 2020 study data also shows 89% of companies presented at least some information in each of four categories: greenhouse gasses, other environmental factors, social and governance. Yet only 43% provided assurance for all four categories. The most common area for independent assurance was greenhouse gases (95%).
Seventy percent of global companies that engaged a professional accounting firm to perform the ESG assurance engagement chose the firm that audits their financial statements.
“High-quality reporting requires high-quality assurance,” said Susan S. Coffey, CPA, CGMA, AICPA & CIMA’s CEO of public accounting. “Auditors already have a holistic view of a company’s risk profile, structure and processes, so it makes sense for that firm to also engage in ESG assurance. Professionally qualified and licensed accountants have the requisite expertise, objectivity, integrity and commitment to professional standards that are essential for instilling trust in ESG reporting.”
About the Study
IFAC and AICPA & CIMA partnered with Audit Analytics to understand the state of play involving environmental, social, and governance (ESG) reporting and assurance practices on a global basis. The inaugural version of the study was published last year. This latest update reviewed data from 1,400 global companies from the G20 nations plus Hong Kong S.A.R., China and Singapore. The full methodology is referenced within the study.
About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 180 members and associates in 135 jurisdictions, representing more than 3 million accountants in public practice, education, government service, industry, and commerce.
About the Association of International Certified Professional Accountants, and AICPA & CIMA
The Association of International Certified Professional Accountants (the Association), representing AICPA & CIMA, advances the global accounting and finance profession through its work on behalf of 689,000 AICPA and CIMA members, students and engaged professionals in 196 countries and territories. Together, we are the worldwide leader on public and management accounting issues through advocacy, support for the CPA license and specialized credentials, professional education and thought leadership. We build trust by empowering our members and engaged professionals with the knowledge and opportunities to be leaders in broadening prosperity for a more inclusive, sustainable and resilient future.
The American Institute of CPAs (AICPA), the world’s largest member association representing the CPA profession, sets ethical standards for its members and U.S. auditing standards for private companies, not-for-profit organizations, and federal, state and local governments. It also develops and grades the Uniform CPA Examination and builds the pipeline of future talent for the public accounting profession.
The Chartered Institute of Management Accountants (CIMA) is the world’s leading and largest professional body of management accountants. CIMA works closely with employers and sponsors leading-edge research, constantly updating its professional qualification and professional experience requirements to ensure it remains the employer’s choice when recruiting financially trained business leaders.
The State of Play in Reporting and Assurance of Sustainability Information: Update 2019-2020 Data & Analysis is designed to update understanding (based on 2020 reporting) of market practice for the assurance of environmental, social, and governance (ESG or sustainability) information, globally.
In recent years, technological evolution has changed the way we work and learn—and the pace of change is not slowing. Sponsored by Learnsignal, join IFAC and more than 20 speakers for our three-day virtual summit to hear from a wide-range of experts—including Ben Elder, Meta’s Global Head of Strategic Partnerships; Space Economy’s George Pullen and Samson Williams; Cameron Carr, FinTech Advisor at IOSCO and Dr. Robert Kay, co-founder and Executive Director, Incept Labs—on technology’s impact on the future of our profession.
The IFAC Statements of Membership Obligations (SMOs) provide clear benchmarks to current and potential IFAC member organizations of IFAC’s requirements. The SMOs also serve as the global benchmarking framework and represent the core competencies of strong, credible, high-quality professional accountancy organizations (PAO) that most appropriately serve and function in the public interest.
The IFAC Statements of Membership Obligations (SMOs) provide clear benchmarks to current and potential IFAC member organizations of IFAC’s requirements. The SMOs also serve as the global benchmarking framework and represent the core competencies of strong, credible, high-quality professional accountancy organizations (PAO) that most appropriately serve and function in the public interest.
Functional and information silos within organizations are barriers to delivering high-quality sustainability-related information, which is necessary for decision making and trustworthy corporate reporting. Boards and CEOs are turning to CFOs and finance functions to break down these silos and to drive connectivity between sustainability and financial information and processes, thereby creating a critically important “integrated mindset.”
At its core, an integrated mindset is about improving the quality of sustainability information and processes and connecting these to financial reporting and the value of the business. This leads to better decision making and communication with stakeholders, and consequently to reduced risk and cost of capital, as well as growth opportunities.
The CFO and finance function are essential facilitators of an integrated mindset given their expertise in connecting and prioritizing information—both financial and sustainability-related—into a more integrated corporate reporting process that provides an accurate picture of performance and value creation to the organization, its investors, and other stakeholders.
Business held its position as the most trusted institution in the 2022 Edelman Trust Barometer, which indicated an enormous need for business to continue delivering tangible action and results on society’s most critical issues. IFAC believes that trustworthy, comprehensive corporate reporting is critical to delivering on this need and driving long term value creation and trust.
“Sustainable value creation will not result from siloed thinking and information,” said Kevin Dancey, IFAC CEO. “Enabling management and boards to make informed decisions and deliver decision-useful disclosure for investors requires breaking down functional silos and connecting information on sustainability, value creation, and financial performance. Professional accountants are poised to deliver this integrated mindset, and we're calling on all businesses to take action.”
The International Federation of Accountants (IFAC) is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. Comprised of 180 members and associates in more than 130 countries and jurisdictions, IFAC represents more than 3 million accountants in public practice, education, government service, industry and commerce.
Over four decades, IFAC has represented the global profession and supported the development, adoption, and implementation of international standards that underpin the contributions of today’s global accountancy profession. IFAC has maintained a long-term approach to building and strengthening a global accountancy profession that supports transparent, accountable, and sustainable organizations, financial markets, and economies.
New IFAC initiative highlights the critical role of CFOs and finance functions in enabling an integrated mindset
