The ICAEW Virtual Live 2020 event ‘Green and Fair – what does the recovery look like for the profession?’ explored how the accountancy profession has a fundamental role to play in turning the vision of a sustainable recovery into reality. This article summarises the points discussed and provides some information on sustainability in business.
Risk in recovery
Climate risk is innately intertwined with business risk, and sustainability in business is key to long term survival. The recovery from COVID-19 could cause widespread pollution and increased emissions due to businesses opting for the easiest and cheapest energy alternatives, with crisis management taking priority over sustainability. Although this is a large risk in the recovery, there is also the opportunity to rebuild the economy more sustainably and for businesses to work towards building a green future.
Climate disclosures and the role of SMEs
The accountancy profession has an ability to encourage sustainability through the information that is reported to its users. The integration of climate change-related information into mainstream financial reporting, which the Climate Disclosure Standards Board works to promote, allows investors to be more informed which supports a transition to a net zero/low-carbon economy. Listed companies have had to disclose greenhouse gas emissions since April 2013 (ISAE 3410) and it was discussed whether these disclosures should become obligatory for all companies because many small and medium-sized enterprises (SMEs) will follow only the compulsory requirements. There were 5.9 million SMEs in the UK as of 2019, which accounts for over 99% of all businesses.
It has become apparent during the pandemic that change can be brought about very quickly when it is necessary. The shift to working-from-home for many businesses had to be planned and executed over a matter of weeks. A positive outcome of this is that it has been realised that large-scale change does not always have to be an extensive process which takes years of planning to implement. If this way of thinking is applied to climate change, then it may encourage businesses to take more immediate steps to reduce their environmental impact.
It was discussed whether a company’s sustainability and climate data should be considered when deciding if a company is a going concern. If a company cannot adhere to the guidelines for greenhouse gas emissions, and future laws change or regulations become stricter, then this may affect the going concern of the business. Since going concern is on a relatively short term basis, climate change may be avoided by labelling it as a future issue. However, climate change has become an increasingly current issue that requires immediate action to prevent long-term disruption and, therefore, it was suggested that it is a very relevant factor when considering going concern.
Andrew Ratcliffe, past ICAEW President
Roc Sandford, Extinction Rebellion
Jessica Bingham, Assistant Auditor at the National Audit Office.
Charmian Love, Social Entrepreneur
Article by Nikki Stephenson
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