As leaders in business CPAs need to be adaptive to change and drivers of business strategy. Strategy that increasingly demands a CSR perspective.
With their skills in collecting, analysing and reporting financial information, CPAs can expect to see increasing demand for their services, and prepare to deliver leadership on the imperatives that link CSR and the finance function.
Differences between CSR and the finance function include:
purpose
type of reports legal requirements
uses other than management
measurement and methodology
data management and systems
CSR in business
Business Times reports that CSR is no longer seen as just regulatory compliance or philanthropic effort.
Many managers now regard it as a growth opportunity, with 68 per cent of bosses in a recent survey by IBM saying that they focus on generating revenue through CSR activity.
CSR initiatives are particularly useful in the management of intangible assets such as brand and reputation. Intangible assets require active management if they are to be maintained or increased in value and increasingly business is recognising the value that a integrated CSR strategy can deliver.
Nonfinancial reporting
The demand for non-financial reporting has gathered momentum, particularly amongst customers and investors.
Major benefits of reporting include reputation enhancement, gaining stakeholder confidence, operational and management improvements, improved management of risks and ability to benchmark performance.
Non-financial reporting recognises the tangible and intangible costs and benefits of todays decisions and how they will affect future performance and outcome.
Perhaps the most significant international development influencing the emergence of non financial reporting is the Global Reporting Initiative (GRI) based in the Netherlands.
The GRI was established through the United Nations environment program with the objective of enhancing the quality, rigour and utility of sustainability reporting.
According to the GRI projections in 2002, it was expected that 600 users would exist by the end of 2005. This was exceeded in 2004. There are now 2247 reporters using GRI guidelines.
The attractions of the GRI framework include:
robust reporting principles
grounded in international conventions
provides a common framework for all
has broad international acceptance
Compliance / carbon reporting
An Australian emissions trading scheme (AETS) is proposed for introduction in 2010. The Garnaut climate change review, due for release mid 2008, will be influential in the further development of medium to long term policy options.
The detail of the AETS, which was recommended in May 2007 by the Prime ministerial task group on emissions trading, is currently being developed. The AETS is likely to be based upon the cap and trade model, which is the model adopted in Europe and in other emission trading schemes.
CPA Australia believes that a properly designed emissions trading scheme, that incorporates a well-calibrated cap, will address the market failure by putting a price on the cost of greenhouse gas emissions. Such an approach will only be one part of a comprehensive suite of policies required to effectively reduce emissions.
Assurance
The accuracy and integrity of the CSR information prepared and disclosed by companies impacts on the extent to which users will rely on this information.
The reliability of this information is undoubtedly a critical element to the success of CSR disclosure and take-up in the marketplace. An independent and robust verification of CSR data will help achieve this end.
The GRI as the leading framework for the reporting organisational non-financial performance sees independent assurance as absolutely vital to the reliability and integrity of sustainability reporting and disclosure
CPA Australia believes that as it is important to ensure the reliability of non-financial information by subjecting the information to assurance, it is equally important to ensure that the right individuals conduct these assurance engagements.
The accounting profession has traditionally been looked to as the preferred provider of audit and assurance services for engagements of both financial and non-financial types.
The profession has in place a well established assurance framework and standards which are drawn from international sources.
Members of the profession are also compelled to abide by a code of ethics of which the concept of independence is of utmost importance as well as other standards of professional conduct.
Working with professionals from other fields, for example engineers and scientists, which would be required in the assurance of CSR disclosures, is also a core aspect of a traditional audit engagement.
The strength of the accounting profession as a provider of audit and assurance services is supported by:
A well established, internationally conformed, assurance framework and standards that are set by the independent statutory body, the Auditing and Assurance Standards Board.
A strong culture of independence and other ethical and professional behaviour, underpinned by a code of ethics for professional accountants and other professional standards set by the independent body, Accounting Professional and Ethical Standards Board.
Broad-based formal education and continuous learning requirements.
Other professional requirements such as minimum professional indemnity insurance and periodic quality assurance reviews.
Monitoring of compliance by the accounting bodies and ASIC, which conduct regular inspections of audit firms.
Enforcement of these requirements through the disciplinary processes of the professional accounting bodies and the statutory CALDB.
Monitoring, ethical and enforcement processes of the accounting bodies are subject to public oversight by the statutory body, the Financial Reporting Council.
