Lingering fallout from Covid-19, mounting evidence that climate change is firmly impacting us and the establishment of an International Sustainability Standards Board (ISSB) will be key drivers for Canada’s professional accountants in 2022, writes Gord Beal, vice-president – research, guidance and support at CPA Canada


 

Of particular importance in 2022 will be helping those hit hardest by the pandemic.

With a long history of championing good, ethical, responsible business, chartered professional accountants can play a leading role in helping Canada establish economic and social resilience. This includes making sure that under-represented communities have equal access to a prosperous future.

The harsh realities of climate change are being hammered home here in Canada, whether it be floods, fires, extreme heat or drought. Both mitigation – finding ways to grow a greener economy – and adaptation – adjusting to a changing climate – require attention.

Canadian CPAs are keenly aware of the enormous costs of these disasters, and many are now actively involved in addressing the crucial underlying issues that must be addressed to prevent the climate-change crisis from escalating uncontrollably in the future.

When the average citizen thinks about who the leaders will be who can guide us to a safer, net-zero emissions world, they likely think of politicians and scientists first. But professional accountants are well positioned to infuse the process with a key element: trust. We need to have trust in information, trust in commitments being made and trust in the leaders who are making them.

Currently, the leaders of many corporations and governments are delivering heartening net-zero pledges. But how can we reliably know what they are measuring? How they are doing it and how does it compare to what their peers are doing?

Up until recently, the snag has been that companies have reported based on a host of differing voluntary standards that have made it difficult to compare from one organisation to the next and sometimes a challenge to understand. In addition, in some cases, there has been “greenwashing”, a public relations spin to convince people that an organisation is environmentally friendly when it actually may not be.

This past year, the IFRS Foundation took the proverbial bull by the horns and announced that they were going to create the International Sustainability Standards Board. The board is charged with creating a common playing field globally, offering comprehensive sustainability standards that provide comparability and transparency.

Significant achievement

The selection of Montreal as a centre responsible for key functions of the ISSB is a significant achievement for Canada and testament to this country’s leadership when it comes to standard setting. Canada is being trusted to help the new board establish a global footprint.

History is in the making and Canada will be at the forefront as the new global sustainability standards board takes shape and our role evolves.

Consistency around environmental, social and governance (ESG) disclosure is especially important as these international standards will provide better information to evaluate these net-zero pledges and determine if progress is indeed being made.

Accountability with what is being reported is important to prevent greenwashing and to reduce the risk for misinformation. Without accountability, trust cannot be achieved.

For effective standards to emerge, it is also important to take a holistic viewpoint. Canada’s diversified economy, spanning resource extraction, manufacturing, finance, high-tech industries and more, means both sustainability and standard-setting experts in this country can relate to the needs of the full range of international markets, because each need is reflected in our own economy.

The initial focus of the sustainability standards globally will concentrate on the environmental aspects of ESG. However, we must also ensure that the focus on that ‘E’ is accompanied by the incorporation of the ‘S’ as those social considerations are essential for a just transition to net-zero economies.

In Canada, the focus on standards doesn’t end there. The Independent Review Committee on Standard Setting in Canada is working to review the governance and structure for Canadian accounting, auditing, and assurance standards and to identify what may be needed in the future – including sustainability standards. This includes a recommendation to establish a Canadian Sustainability Standards Board that could become the domestic ‘mirror’ to the ISSB.

It will be interesting to see how these developments unfold, domestically and internationally. But one thing is certain: increased global focus on climate change and sustainable business will provoke new thinking. Let’s embrace the opportunities and responsibilities that lie ahead.