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This article was first published in the July/August 2016 international edition of Accounting and Business magazine.

While sustainability reporting originally meant ‘accounting for the environment’ (beginning with estimating contingent liabilities associated with environmental damage), its scope has grown over the past 20 years to embrace environmental, social, governance (ESG) reporting, and measuring and reporting non-financial capitals.

Many arguments have been made that it is these non-financial elements that drive a company’s value, creating (or destroying) capacity. Given the central role of finance in measuring, reporting and managing the value of the company, it seems quite odd to me that more CFOs aren’t driving the sustainability agendas of their companies. Most CFOs I’ve spoken with on the subject, particularly in Canada, would tend to agree.

Stats from Deloitte (CFOs and sustainability, 2013) show that less than half of CFOs (43%) are called on as a matter of course to help set the sustainability strategy of the company, and only 45% are responsible for driving the execution of that strategy.

While it’s merely a speculation until further forthcoming research begs the question, this might reflect a general lack of interest on the part of corporate boards, or perhaps tells the tale of the current confusion around sustainability measurement and disclosure in general. As this edition of AB went to press, ACCA released its latest research Lost in the right direction, where it describes the current ESG reporting landscape around the world, and concludes that it is indeed a labyrinth. 

Earlier this year, KPMG released its review (Carrots and sticks) of the sustainability/environmental reporting landscape. It finds a surge in sustainability reporting, with roughly 400 different instruments being applied in 64 countries. They include regulation and reporting requirements, self-regulation through specific industry frameworks, requirements or recommendations for public reporting on a single topic such as greenhouse gas emissions, voluntary standards and guidelines, and standards on assurance. Small wonder that CFOs are giving it a miss.

Meanwhile there’s one more to come for European CFOs. The European Commission is in the process of inking the final version of directive 2014/95/EU on the disclosure of non-financial and diversity information by certain large undertakings and groups. The directive lays down that the companies affected must include in the management report a non-financial statement containing information relating to, as a minimum, the environment, social and employee matters, respect for human rights, and anti-corruption and bribery. The new disclosure requirements relating to non-financial information apply to large public interest entities with more than 500 employees.  

The Global Reporting Initiative (GRI) will also be transforming its G4 guidelines into GRI standards with new rigour, while, back in the US, the Sustainability Accounting Standards Board (SASB) continues to refine its already well-crafted standards designed for Securities and Exchange Commission registrants.

For CFOs attempting to navigate this landscape, a good starting point is ACCA’s Lost in the right direction

Ramona Dzinkowski is a Canadian economist and editor-in-chief of
the Sustainable Accounting Review