Clear statements on CO2 emissions, working conditions and responsible corporate governance
Audit firms are tasked not only to scrutinise financial figures, but also increasingly to examine the performance of organisations related to climate protection, working conditions and corporate governance. Marcel Meyer, Head of Sustainability Services at Deloitte Switzerland discusses the rapidly growing attention on non-financial disclosures and why common international standards are paramount
This text is based on an interview with the newspaper Le Temps from December 2021.
More and more organisations want to have their green transition efforts certified. How is this market developing and how is Deloitte positioned when it comes to auditing the green transition of companies?
The market is growing quickly. The need for accurate, comparable, and robust reporting on environmental, social or governance-related (ESG) indicators is more critical than ever. The audited information has undergone regular additions and clarifications since the middle of the last century; in my view, the growing transparency around sustainability is the most comprehensive and significant change since then.
As experienced independent auditors, Deloitte Switzerland is well-positioned to assist clients with their ESG reporting and provide assurance services resulting in high-quality, relevant, and reliable non-financial disclosures. We are helping organisations and their stakeholders to have confidence that the non-financial elements they are disclosing are correct and accurate.
Deloitte is not only helping clients in their transition to a more sustainable future, but also actively contributing to associations, commissions and initiatives to shape the necessary frameworks and help develop the standards that companies need to comply with, including the new International Sustainability Standards Board (ISSB) and the Task Force on Climate-related Financial Disclosures (TCFD) from the G20. Experts of Deloitte Switzerland are also – together with EXPERTsuisse, Economiesuisse and SwissHoldings – providing their expertise and experience to the authorities and evaluating the propositions for the implementation of the counterproposal to the “Responsible Business Initiative” (KVI).
We are helping organisations and their stakeholders to have confidence that the non-financial elements they are disclosing are correct and accurate.
Marcel Meyer, Sustainability Services Lead Deloitte Switzerland
Does this rapidly evolving business require investment in new skills? Are your audit experts undergoing specific training?
Globally, Deloitte has put together an action plan on how our Audit & Assurance colleagues can become ESG auditors. Internally, it begins with enablement and training. We have numerous e-learnings available with many more to come. For example, in August 2021, we rolled out a new training programme developed in partnership with the World Wildlife Fund (WWF) for our 345,000 staff worldwide.
The basic idea behind the increased training is clear: To address climate change, we first must understand it. A first-of-its-kind among major global organisations, the programme aimed to inform, challenge, and inspire Deloitte colleagues to learn about the impacts of climate change. It should also empower them to confidently advise clients and also navigate their own contribution to mitigating climate change.
But this isn’t only about us, it is also about our clients and understanding their challenges. Therefore, we are engaging with our clients, particularly those in management and in charge of governance, to understand how they see the effects on their company and industry, and the related risks and opportunities. Once we fully understand to what extent a particular client is affected, we can consider how to move forward and decide what audit procedures are needed to address the risks identified.
How does this auditing business from your traditional financial accounting business?
Growing public and investor demands for ESG accountability are forcing organisations to pay closer attention to sustainability risks, opportunities, and relevant disclosure obligations. This growing demand for transparency also includes the expectation that a company's non-financial disclosures are quality, relevant, reliable, and consistent with its financial information. This is where the role of an auditor becomes key. Because without proper disclosures, markets cannot price risk and stakeholders cannot make informed decisions.
The role of the auditor will change in the sense that they are required to assess the impact of ESG. This includes more forward-looking assumptions than is the case in audits now. ESG auditors will need to have a thorough understanding of ESG regulations and developments to be able to assess the inherent risks companies may be exposed to.
Many companies have been publishing a sustainability report for years detailing their performance and objectives regarding the environment, society and their employees. This will soon become an integral part of the disclosures of larger companies: The indirect counter-proposal to the Responsible Business Initiative and the implementing ordinance expected in the spring 2022 stipulate that from the 2023 financial year onward, the highest body of an organisation must approve the non-financial reporting.
Deloitte has put together an action plan on how our Audit & Assurance colleagues can become ESG auditors.
Marcel Meyer, Sustainability Services Lead Deloitte Switzerland
Is a framework, say 'green accounting', emerging?
The fundamentals are clear: You can't manage what you can't measure. In this regard, Deloitte released together with the World Economic Forum (WEF) and our professional service counterparts (other Big4), a set of universal ESG metrics and disclosures, including 21 core metrics and 34 extended metrics that companies can report on regardless of their industry or region. Centred around four pillars – principles of governance, planet, people and prosperity – this common set of disclosures can lead us towards a consistent and comprehensive global corporate reporting system.
The newly established International Sustainability Standards Board (ISSB) by the International Financial Reporting Standards Foundation (IFRSF) will form the basis for a green accounting standard. It will form an essential part of a system change that will be required to create a global baseline of sustainability information addressing the needs of global capital markets. Worldwide adoption of the ISSB standards is needed to achieve true harmonisation and to replace the alphabet soup of voluntary standards and frameworks with a robust set of green accounting standards.
To move toward a more sustainable future, a consistent standard will help move our individual efforts and ambitions into collective measurable action.
Governments around the world are setting increasingly ambitious carbon reduction targets. This, combined with increasing pressure from investors, regulators, governments, consumers and internal stakeholders, has made acting on issues of climate and sustainability an imperative for every organisation.