ACCA (the Association of Chartered Certified Accountants) champions sustainability in the accounting profession by embedding ESG into its qualification, committing to achieve net zero operations by 2045, and helping to shape global sustainability standards. In response to the Accounting and Financial Reporting Council’s (AFRC) consultation paper on the proposed regulatory framework for sustainability assurance in Hong Kong, ACCA Hong Kong submitted its recommendations based on member feedback and ACCA’s uniquely extensive global experience in best practice. While ACCA agrees with the AFRC’s proposals in general, it makes a number of recommendations regarding the implementation timeline, registration criteria and regulatory approach.

ACCA supports the principle that all entities subject to Mandatory Hong Kong Sustainability Disclosure Standards (HKSDS) Reporting must obtain independent assurance, stressing that a mandatory requirement is fundamental to establishing the credibility of sustainability reports and independent assurance is a critical mechanism for upholding the quality of sustainability disclosures. At the same time, ACCA recognises significant implementation challenges, including potential market confusion, a shortage of skilled practitioners, and the complexity of group structures and cross border operations. To address these challenges, ACCA proposes a phased and communicated implementation, and a clear and accessible public register or digital marker. In addition, regulators could launch a comprehensive and accredited training and certification programme for sustainability assurance practitioners, adopt a global due process and standard, and issue specific guidance on group and cross-border assurance.

On timing, ACCA agrees with the AFRC’s proposal to prioritise Scope 1 and 2 greenhouse gas (GHG) emissions for initial assurance, but urges policymaker to accelerate the proposed timetable to avoid Hong Kong being perceived as a passive follower. ACCA recommends that Phase 1 (limited assurance on Scope 1 and 2) commence in the first financial year of Mandatory HKSDS Reporting, or at the latest the second year, rather than from the third year as proposed. ACCA has reservations about making ‘all remaining disclosures’ subject to assurance in the fifth financial year and about the relatively short two year gap between phases, and recommends a more phased and flexible approach with additional interim steps and a mechanism to accommodate future developments in ISSB standards.

ACCA agrees in principle with the proposal that mandatory assurance must be provided by registered Sustainability Assurance Practitioners (SAPs) and their registered individuals, but cautions against restricting SAP registration to local Public Interest Entity (PIE) auditors. Given the limited number of PIE auditors in Hong Kong, such a restriction could create an insufficient supply of assurance providers as demand grows. Excluding non-PIE auditors would risk stifling a natural pathway for firms to develop sustainability assurance capabilities. ACCA also recommends registration criteria that prioritise ethics and quality management, technical competence, and Continuing Professional Development (CPD) for individuals, allowing for a diversity of qualifying backgrounds while preserving professional standards.

ACCA supports a single regulator model to register and oversee SAPs and their registered individuals, with the Hong Kong Institute of Certified Public Accountants (HKICPA) continuing to lead relevant standard setting. While a single regulator can ensure consistency and credibility across registration, inspection, and enforcement, ACCA recommends that the regulator must include sustainability experts – not only accountants – to ensure multi-disciplinary expertise. The capacity of the regulator is a critical concern as the AFRC currently oversees PIE auditors, while adding sustainability assurance oversight will significantly expand its remit and increase its inspection burden substantially. It is also important to balance regulation with education and market development as the risk of over-regulation may discourage entry, stifle innovation and drive up costs.

As a global champion of sustainability, ACCA continues to empower its members and the wider profession to lead in this critical area. To mark World Earth Day on 22 April, ACCA is hosting a free virtual sustainability conference to equip accounting and finance professionals worldwide for the future. Learn more here.