S3E17: Sustainability reporting – what SMPs need to know - Small Firm, Big Impact

Episode Transcript
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Gillian Bowen, Host (00:08):
Hello, my name is Gillian Bowen, the Public Affairs Manager
at Chartered Accountants, ANZ, or CA ANZ. This is Small Firm,
Big Impact.

Karen McWilliams FCA, CA ANZ Sustainability and Business Reform Leader (00:23):
Sustainability represents a great opportunity for our SMP members to support
their clients and to build their knowledge in this space.
We've got plenty of resources and training out there and
our new micro courses as well. Those smaller entities who
are perhaps leading in this space, are already thinking about how
can they measure and capture information such as their greenhouse

(00:43):
gas emissions. So I think it's starting to evolve.

It's the podcast giving you and your clients the up
to date information you need to do your jobs. Each fortnight,
I share resources, tools and expert advice provided by CA ANZ and
a range of people across our profession. So make sure
you're following the Pod in your favourite podcast app. And
if you've got an idea for the show email podcast@charteredaccountantsanz.com

(01:19):
Today we have Karen McWilliams, Chartered Accountants Australia and New
Zealand Sustainability and Business Reform Leader. The topic Sustainability Reporting
- What SMPs Need to Know. Karen, welcome to Small Firm,
Big Impact.

Great to join you here today, Gill.

Okay, so let's set this up. What is sustainability reporting?

Look, sustainability reporting is basically where organisations are reporting on
their sustainability risks, opportunities and impacts. It's principally used to
inform stakeholders, including investors, so that they can consider these
sustainability matters within their decision making process. So it's typically
external reporting by entities.

So why is it front of mind right now?

The International Sustainability Standards Board has been recently set up
by the IFRS Foundation coming out of London. The board
this new board is a sister board to the International
Accounting Standards Board, which most of our members would be
quite familiar with. And this new board is is basically
creating some sustainability disclosure standards. Now, these, I guess, build

(02:27):
on a lot of work that's been done internationally around
improving disclosures in the market, particularly around climate and building
on the work of the taskforce for climate related financial disclosures.

It sounds like it's evolving as we go. And on
that evolution, we are recording this podcast just as the
International Sustainability Standards Board has released something important when it
comes to standards. What's happened?

So the ISSB, the International Sustainability Standards Board, are releasing
their final version of their first two standards. IFRS S1 ,
which is about general requirements for disclosure of sustainability related
financial information and IFRS S2 on climate related disclosures. And so
those standards are being released basically now and will be

(03:15):
out by the time this podcast is out. And we
will be able to see what those first two standards
look like. Having seen the exposure draft.

So this is an important development and I want to
drill down into what that will mean for our members.
But first, I understand there's different regimes in Australia and
New Zealand. Can you tell me what this means for
Australia first?

So in Australia we're expecting the Australian Treasury to very
soon actually issue a follow up consultation to a consultation
that took place in December last year, and that relates
to their intention to mandate climate related disclosures for large companies,
large listed entities and large financial institutions and possibly others,

(04:01):
but in line with international standards. We also know that
the Australian Accounting Standards Board on the release of these
two standards from the IFRS will release them as exposure
drafts within Australia for comment, in line with their due
process as well with the intention to issue those standards
domestically in some form.

We'll get further into that in a tick. How will
these standards, firstly though interact with current New Zealand rules
and regulations, the current New Zealand framework?

Yep. So in New Zealand we already have climate standards
that are now effective from the beginning of this year
and those standards are aligned with the taskforce for climate
related financial disclosure requirements. So the TCFD and the IFRS S2,
which is on climate disclosures, is also aligned with the TCFD.

(04:52):
So the XRB, so New Zealand's external reporting board, they
will be looking at these final standards from the ISSB
just to provide a comparison between their NZ CS1 New
Zealand climate standard one and the IFRS S2, which is
their climate disclosure standards. So we will look to see
but broadly speaking, they're both based around the same concept,

(05:13):
so we should see quite a bit of alignment and
similarity there.

So many acronyms. I hope that your brains are moving
as fast as we are anticipating they are. How does
it impact an SMP?

Right. So I guess as I've mentioned in New Zealand
and in Australia, these requirements around disclosures will probably initially
affect the larger companies and the larger financial institutions and
probably other entities more broadly. But still at that bigger
end of town. However, these larger entities, particularly when it
comes to climate disclosures, will be actually needing information within

(05:47):
their value chains. So from their suppliers and from their
customers to inform their disclosures. So one of the particular
areas we'll see a focus on this is in relation
to greenhouse gas emissions. And as they report on what's
called their scope three emissions, that comes from those suppliers
and customers. So they'll be wanting that information from smaller

(06:08):
entities who will be actually part of their supply chain
and their value chain.

That's really interesting. Do you think many of our SMP
members have thought about? That that role.

I think it's emerging at the moment. I think it's
at the moment the larger entities are just thinking about
how can they get that information from those smaller entities,
What's the best way of collecting that information? So and
those smaller entities who are perhaps leading in this space,
we're already thinking about how can they measure and capture
information such as their greenhouse gas emissions. So I think

(06:40):
it's starting to evolve. We've certainly got some examples of
our members who are already playing a leading role in
that space, particularly within the S&P space.

Because that then leads me to that idea of our
members really seem to have a role to play in
all of this. Is there anything else you wanted to
articulate to them about their role going forward here?

Look, we certainly see our members playing a key role
in this space, and certainly they can support their clients
to identify, collate and provide sort of this kind of information.
Our SME playbook, which is around sustainability, identifies five key
ways that accountants can support their clients, and those are
to raise awareness about sustainability, to analyze business models, to

(07:22):
advise on how to transform those business models, report on
non-financial indicators and provide assurance of non-financial indicators. And the
playbook actually includes some relevant case studies for both SMEs
and SMPs. And also, I guess our SMPs are also
running a small business themselves. And so they have an
opportunity here to lead by example and embedding sustainability into

(07:43):
their practice as well.

My next question then, and perhaps as well, for members
who are listening along and saying, okay, this now is
impacting me, how are we helping our members with all
of this?

Look, we've been putting together a suite of resources to
support our members across all segments. So these include things
like our Carbon accounting FAQ, so frequently asked questions, the
SME sustainability playbook that I just mentioned, and we also
have a shorter Insight series to accompany that. We've got
a not for profit sustainability playbook as well as we
know that many of our members work in and support

(08:15):
the not for profit sector. We also have an assurance
a sustainability assurance playbook. So for those looking to expand
their assurance, offering to include sustainability disclosures and also I
guess for those who may be assisting or actually within
entities who might be reporting in line with the new
ESG standards. We've actually just released three Getting Started guides

(08:36):
which cover materiality, connection to finance and data and systems.

Okay, so that sounds really helpful. What I will do
is make sure that I put links to where all
of that sits on our website in the show notes
that go with this episode. So that's the description so
that you can go onto your pod app, have a
look at the description, and then click through the hyperlinks
to get to where you need to go on the website.
That to me sounds like step one, two and three

(09:03):
for members who are in small and medium sized firms,
that that is what your recommendation would be.

Oh, look, definitely. I think. Check out the SME Playbook
and Insight series. I think as a first step, climate
is is what we're seeing is is the first topic
of real focus. And now it's very much climate first,
but not climate only. But I think particularly, I would
say because of that, it's worth members really trying to
build their knowledge and understanding in that climate space. And

(09:30):
as I've mentioned, there's quite a few resources guides and
courses as well to support them. And the other piece
I might mention is that the chartered accountants worldwide, who
we are part of, we've we've worked with them to
develop a roadmap for chartered accountants, which actually goes through
step by step and with some really key points around,
I guess, supporting CCAs, who are wanting to build their

(09:51):
knowledge and expertise in sustainability. So we can give you
a link to that one as well.

That'd be brilliant. That was going to be my next question.
What are the risks of not acting?

Look, I think when it comes to to the sustainability
space now, and particularly if we're looking at that, those
smaller organizations, they are going to see larger organizations are
going to ask them for that information. So if they're
not starting to prepare now, they're going to be caught
on the hop and have to suddenly respond very quickly.
So if you get prepared and start preparing that information

(10:21):
and collecting it now, from our members perspective, if they're
not supporting their clients, the clients are going to turn
somewhere else because they're going to need to prepare. This
information is going to come through those value chains. And also,
I guess it's an opportunity as well. We're certainly seeing
that the next generation of accountants are particularly interested in sustainability.
So I think from an SAP perspective as well, starting

(10:43):
to bring those service offerings into the firm could actually help,
I guess, attracting talent in that next generation to the firm.

And look, as this space continues to develop and you
did mention it at the top of the show about
further consultation, I'm thinking going forward, how can our members
help us help CA ANZ ensure that the standards are fit
for purpose?

Look, we're always asking for feedback from members and certainly
do go out and seek it. So we'd certainly encourage
members to tell us what they think in terms of consultations. Look,
the ISSB, they're now consulting on what? Next after these
first two standards. So we'll be responding to that one.
As I've mentioned in Australia, Treasury will be issuing their
second consultation soon around mandatory climate disclosure standards within Australia,

(11:30):
and the AASB will be putting out S1 and S2 for
exposure as well. So we'll be responding to all of
those consultations. So any member feedback on that would be
greatly welcomed, but also on the resources that I've mentioned
as well we would really welcome. Members are saying that's great,
but I want to know X, then let us know
and then we can start to fill those gaps for them.

Okay. Well, I think we're out of time. Is there
anything else that you want members to know about before
we wrap up?

I think just that sustainability represents a great opportunity for
our SMP members to support their clients and to build
their knowledge in this space. We've got plenty of resources
and training out there and our new micro courses as well.
And it was it's climate first, but not climate only.
So have a look at some of the other areas
across sustainability too.

Great. There is a lot of links to put in
the show notes, so make sure that you check that
out so that you're across everything that Karen and I
have discussed today. And of course it will all be
available on the chartered accountants ANZ website. That is all
we have time for. If you're loving the podcast, make
sure you followed it wherever you listen to your podcasts,

(12:36):
like our posts on LinkedIn, share your favourite episodes among
your network. This is about sharing information, useful information. The
podcast has an email, so feel free to get in touch.
Podcast@charteredaccountantsanz.com Let's start a conversation. Thank you Karen McWilliams for
being my sustainability standards expert on Small Firm, Big Impact.

Thank you.

Bye bye.

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S3E17: Sustainability reporting – what SMPs need to know

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