Thought Leadership

There is a lot of buzz around Environmental Social and Governance (ESG) reporting. With the SEC moving toward requiring sustainability disclosures and many large public companies and government entities starting to do ESG reporting themselves, there is a trickledown effect that won’t go away and will impact smaller companies and nonprofits who serve or supply these organizations.

Additionally, research is increasingly showing that organizations who address the broader definition of sustainability by aligning their vision, mission, values, and address overall stakeholder needs are higher performing in many aspects. Public ESG companies are also showing higher financial returns.

The increasing consolidation and clarification of ESG reporting standards and their underlying business practices and metrics is creating additional momentum around the topics addressed by ESG. There is potential parallel between where SOC and cybersecurity advisory services were 5 years ago and the path ESG will likely follow in the coming years.

Privacy and cybersecurity fall under the Governance aspect of ESG. And just as there continues to be a huge opportunity for firms in cybersecurity advisory services, there is a growing opportunity for firms to help clients by providing advisory services in other ESG areas shown in the table below (source: COSO).

In April 2023, COSO published additional guidance adapting its Internal Control - Integrated Framework (ICIF) to Internal Control over Sustainability Reporting (ICSR). This makes it much easier for accountants and auditors to draw upon existing skillsets on Internal Control over Financial Reporting (ICFR) to ICSR.

COSO also said that “…applying ICIF-2013 as a systematic, consistent framework to the achievement of an effective system of internal control over sustainable business activities and reporting can result in a variety of benefits, including:

• Alignment of an organization’s employees, partners, and stakeholders with its commitment to purpose and articulated objectives.
• Enhanced data quality, utility, comparability, and reliability.
• Strengthened ability to support operations and compliance objectives.
• Better-informed decision making by internal management, external investors, and other stakeholders.
• Enhanced understanding of risks and the ability to mitigate them.
• Greater overall market efficiency.
• Increased access to and lowered cost of capital.

These benefits are most likely to accrue to organizations that have aligned their sustainable business objectives with their business strategies and focused on the issues most likely to contribute to performance and value preservation and creation.”

As anyone who has done internal controls work knows, ramping up on internal controls is no simple task. It takes both a good foundation in risk assessment and knowledge of internal controls, but also a lot of practical experience and exposure to real-life situations to design effective controls. ESG brings in the additional challenge of designing internal controls for areas not within the normal financial context, so might put accountants and auditors a bit outside their comfort zone. However, these are the exact reasons why you shouldn’t delay ramping up on ESG. Start learning now and finding projects to start building experience and your firm’s expertise.

If your firm already has an established industry vertical or niche market, you are even better poised to add ESG to the services that you provide for that sector because you already have the exposure to the operational aspects and deeper sector knowledge needed to address non-financial areas.

The inaugural ESG workshop will be hosted at the Naperville/Chicago office of member firm Sikich. This dynamic event begins with a Networking Dinner on July 31, 2023, followed by a full day of training on August 1, 2023. Attendees will participate in engaging sessions focused on ESG roles and functions in the firm, offering sustainability services, commercializing ESG services, and other topics critical to your success. Don't miss this incredible opportunity to expand your knowledge and gain valuable insights into the ESG landscape. Register now to secure your spot! Register here.