This informal CPD article, ‘Carbon reporting - the future of accounting explained’, was provided by Joanna Auburn at Our Trace Pty, an organisation with a mission to help every business reach net zero.
Accountancy’s role in the climate fight
As the climate crisis grows increasingly urgent, every industry has a role to play in driving positive action. Accountancy is no exception and will be instrumental in supporting businesses of all shapes and sizes in their sustainability endeavours through climate reporting.
Companies are increasingly being asked to provide carbon data. According to the UK Business Climate Hub (1) 46% of organisations in the UK and 37% of SMEs have had a request for carbon data in the past 12 months. While SMEs may not yet be caught by upcoming mandatory reporting legislation that is focused on larger organisations, they will be caught by implication of sitting within a corporate supply chain. In the UK, for example, all NHS procurement activities require a Carbon Reduction Plan (CRP) covering Scope 1, 2, and relevant Scope 3 emissions. CRPs are now required for hundreds of thousands of businesses regardless of their size. And in Australia, relatively small SMEs will need to prepare for legislative climate-reporting requirements. Businesses with just 100 staff will be legally required to make climate disclosures by 2027.
Many of these companies will struggle to make sense of their data, or simply don’t have the time and resources needed to collate it in a way that satisfies relevant stakeholders.
Benefits and barriers to offering climate reporting services
Offering climate reporting services represents a rapidly emerging opportunity for accountants, who already have the access to financial data, rigour, professionalism, and advisory skills and relationships needed to manage carbon reporting. And from a client perspective, since financial and non-financial disclosures are closely linked, it’s convenient and cost-effective to work with one advisor for both.
A recent study (2) shows that 96% of accountants believe there are clear benefits to offering these services, including an enhanced reputation, increased revenue, competitive advantage and customer retention.
However, accountants face a number of barriers in launching these much-needed services, with 67% of accountants stating they feel ‘unprepared’ when it comes to discussing climate reporting with their clients. Chief among these challenges is a lack of knowledge and skills – cited by 50% of accountants. While this includes the technical aspects of carbon reporting itself, the greater knowledge gap exists around client needs. The vast majority of accountants – 94% – are unaware of whether their clients are reporting on emissions or climate disclosures, while 30% say they don’t know if their clients will be impacted by mandatory reporting requirements.
