Business leaders split on idea of unleashing 'warrior accountants' on ESG issues

Canada is lagging behind several other countries when it comes to reporting on environmental, social, and governance issues, says CPA

Author of the article:Barbara Shecter

A report produced by CPA Ontario says there is “a groundswell of support” for the accounting profession to track and analyze the impact of environmental, social and governance issues on company performance and future returns. PHOTO BY GETTY IMAGES

Business leaders in Canada’s most populous province are still debating the question of whether the accountants who scrutinize their books should take on a proactive “warrior” role when it comes to itemizing and measuring a company’s environmental and social impacts.

A report produced by Chartered Professional Accountants (Ontario) says there is “a groundswell of support” for the accounting profession to track and analyze the impact of environmental, social and governance issues on company performance and future returns. However, “pockets of skepticism” remain among business leaders, according to the report, a copy of which was viewed by the Financial Post.

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The idea of “warrior accountants” — a term coined by a Financial Times columnist that picked up steam at last January’s World Economic Forum in Davos, Switzerland — means that auditors would get actively involved in determining materiality, developing metrics, setting targets and establishing controls to help businesses manage their environmental and social impacts and the risks they face from social change.

Article content This would signal a change in stance from a defensive position, where ESG helps to guard against reputational risk, to an offensive posture that puts the determinants of performance in the public domain, something a growing number of institutional investors are demanding.

“The role CPAs can play as ‘warrior accountants’ is in providing more solid forms of measurement to help bridge the gap between finance and sustainability,” said Carol Wilding, chief executive of CPA Ontario.

“In this fast-moving space no one has all the answers. But, our profession can help move ESG measurement and impact forward.”

Her organization compiled the report on domestic sentiment from more than 40 interviews at companies and organizations including Brookfield Asset Management Inc., TMX Group Ltd., Maple Leaf Foods Inc., Toronto-Dominion Bank, the Ontario Teachers Pension Plan Board, and Nutrien Ltd.

Wilding said the idea of the warrior accountant has gained traction among business leaders such as Brookfield’s vice-chair, Brian Lawson, who told CPA Ontario he believes accountants should “absolutely” play a key role as investors demand action an accountability on environmental and social impact. Last year, Brookfield hired former Bank of England and Bank of Canada governor Mark Carney specifically to steer the company’s ESG investment strategy.

In the report, Lawson is quoted as saying that financial reporting teams within companies are “best equipped to measure ESG” because they are already trained to measure performance and have deep experience in understanding and assessing performance against standards and principles.

But the report also revealed practical concerns, such as new training that would be required for accountants to take this more active role, and the time and resource management to fit new responsibilities into the finance and auditing functions.

There are also concerns about a lack of consensus about which metrics to measure, particularly when it comes to reliable indicators for social risks and impact, and whether there will be increases in “impact-washing” — similar to “green-washing” where organizations or companies overstate or mislead about their impact on the environment — suggesting the apparent drive to increase positive social impacts or reduce negative ones may simply be the latest corporate fad.

“Impact-washing has been a longstanding challenge in this space, and … more rigorous and consistent measurement and reporting of social risks and impacts is an important part of the solution,” Wilding said, adding that accountants could help by pushing for greater disclosure and transparency at the board and committee level, and supporting convergence of ESG standards in the broader community.

The CPA Ontario report says technology, such as artificial intelligence, is poised to take over more repetitive functions of bookkeeping, which will leave more time for accountants “to develop a broader range of skills and competencies.”

Wilding said The BlackNorth Initiative, which was formed last year to press companies to stamp out anti-Black racism in corporate Canada, is an “excellent” example of a social impact measure.

“As a signatory to it ourselves, we know that the only way for it to succeed at any speed is through careful, deliberate reporting and measurement,” she said. “As we’ve seen when it comes to gender diversity on boards, the act of merely publishing data can help accelerate progress, because it can bring to bear public awareness and pressure.”

The CPA Ontario report lays out some real-word examples of the role accountants can play in the evolving ESG landscape, such as the creation of a new position — the manager of finance and sustainability — at meat processor Maple Leaf Foods, to “bridge the gap” between the two functions within the company.

Pooja Patel, who holds that job, told the report’s authors that her responsibility is to integrate Maple Leaf’s sustainability data and reporting into the company’s financial reporting and control analysis.

She also helped incorporate an internal price on carbon in the company’s capital purchases approval process, according to the report.

Despite this and other examples of steps taken by Canadian corporations — such as TD Bank tracking the number of home mortgages extended to low-income people and surveying company-wide progress on retrofitting ATMs to improve access for people with disabilities — Canada is lagging behind several other geographies when it comes to reporting on environmental, social, and governance issues, according to the CPA Ontario report. Among those leading the pack are Europe, the United Kingdom, and Australia.

“The United States is something of a laggard, and Canada falls in between,” the report says.

• Email: bshecter@postmedia.com | Twitter: BatPost

Link: https://financialpost.com/news/fp-street/business-leaders-split-on-idea-of-unleashing-warrior-accountants-on-esg-issues?fbclid=IwAR0iuLBjdSkXLvmTWg7o5Kwi-Ig17Z5FYT3L8ubS05wsubPeW-tsJEoFkfE