WEBVTT - Sustainability reporting – what SMPs need to know 0:00:08.030 --> 0:00:11.480 Hello, my name is Gillian Bowen, the Public Affairs Manager 0:00:11.480 --> 0:00:17.000 at Chartered Accountants, ANZ, or CA ANZ. This is Small Firm, 0:00:17.000 --> 0:00:18.020 Big Impact. 0:00:23.270 --> 0:00:28.910 Sustainability represents a great opportunity for our SMP members to support 0:00:28.910 --> 0:00:31.250 their clients and to build their knowledge in this space. 0:00:31.520 --> 0:00:34.520 We've got plenty of resources and training out there and 0:00:34.520 --> 0:00:37.820 our new micro courses as well. Those smaller entities who 0:00:37.820 --> 0:00:39.830 are perhaps leading in this space, are already thinking about how 0:00:39.830 --> 0:00:43.730 can they measure and capture information such as their greenhouse 0:00:43.729 --> 0:00:46.370 gas emissions. So I think it's starting to evolve. 0:00:51.250 --> 0:00:54.130 It's the podcast giving you and your clients the up 0:00:54.130 --> 0:00:57.580 to date information you need to do your jobs. Each fortnight, 0:00:57.730 --> 0:01:02.500 I share resources, tools and expert advice provided by CA ANZ and 0:01:02.500 --> 0:01:05.470 a range of people across our profession. So make sure 0:01:05.470 --> 0:01:08.860 you're following the Pod in your favourite podcast app. And 0:01:08.860 --> 0:01:11.950 if you've got an idea for the show email podcast@charteredaccountantsanz.com 0:01:19.670 --> 0:01:22.940 Today we have Karen McWilliams, Chartered Accountants Australia and New 0:01:22.940 --> 0:01:28.550 Zealand Sustainability and Business Reform Leader. The topic Sustainability Reporting 0:01:28.550 --> 0:01:33.050 - What SMPs Need to Know. Karen, welcome to Small Firm, 0:01:33.050 --> 0:01:34.100 Big Impact. 0:01:34.100 --> 0:01:35.780 Great to join you here today, Gill. 0:01:35.810 --> 0:01:40.670 Okay, so let's set this up. What is sustainability reporting? 0:01:41.090 --> 0:01:45.830 Look, sustainability reporting is basically where organisations are reporting on 0:01:46.069 --> 0:01:50.840 their sustainability risks, opportunities and impacts. It's principally used to 0:01:50.840 --> 0:01:55.220 inform stakeholders, including investors, so that they can consider these 0:01:55.220 --> 0:01:59.570 sustainability matters within their decision making process. So it's typically 0:01:59.570 --> 0:02:01.610 external reporting by entities. 0:02:02.030 --> 0:02:04.220 So why is it front of mind right now? 0:02:04.520 --> 0:02:08.570 The International Sustainability Standards Board has been recently set up 0:02:08.570 --> 0:02:12.680 by the IFRS Foundation coming out of London. The board 0:02:12.680 --> 0:02:15.500 this new board is a sister board to the International 0:02:15.500 --> 0:02:18.110 Accounting Standards Board, which most of our members would be 0:02:18.110 --> 0:02:22.250 quite familiar with. And this new board is is basically 0:02:22.250 --> 0:02:27.410 creating some sustainability disclosure standards. Now, these, I guess, build 0:02:27.410 --> 0:02:30.380 on a lot of work that's been done internationally around 0:02:30.380 --> 0:02:35.510 improving disclosures in the market, particularly around climate and building 0:02:35.510 --> 0:02:39.170 on the work of the taskforce for climate related financial disclosures. 0:02:39.250 --> 0:02:42.110 It sounds like it's evolving as we go. And on 0:02:42.139 --> 0:02:45.590 that evolution, we are recording this podcast just as the 0:02:45.590 --> 0:02:50.690 International Sustainability Standards Board has released something important when it 0:02:50.690 --> 0:02:53.359 comes to standards. What's happened? 0:02:53.600 --> 0:02:58.190 So the ISSB, the International Sustainability Standards Board, are releasing 0:02:58.190 --> 0:03:02.780 their final version of their first two standards. IFRS S1 , 0:03:02.780 --> 0:03:07.010 which is about general requirements for disclosure of sustainability related 0:03:07.010 --> 0:03:12.320 financial information and IFRS S2 on climate related disclosures. And so 0:03:12.320 --> 0:03:15.890 those standards are being released basically now and will be 0:03:15.889 --> 0:03:17.810 out by the time this podcast is out. And we 0:03:17.810 --> 0:03:20.239 will be able to see what those first two standards 0:03:20.240 --> 0:03:22.550 look like. Having seen the exposure draft. 0:03:22.700 --> 0:03:27.350 So this is an important development and I want to 0:03:27.350 --> 0:03:29.779 drill down into what that will mean for our members. 0:03:29.780 --> 0:03:33.050 But first, I understand there's different regimes in Australia and 0:03:33.050 --> 0:03:36.590 New Zealand. Can you tell me what this means for 0:03:36.590 --> 0:03:37.880 Australia first? 0:03:38.330 --> 0:03:42.890 So in Australia we're expecting the Australian Treasury to very 0:03:42.890 --> 0:03:47.210 soon actually issue a follow up consultation to a consultation 0:03:47.210 --> 0:03:51.260 that took place in December last year, and that relates 0:03:51.260 --> 0:03:57.260 to their intention to mandate climate related disclosures for large companies, 0:03:57.260 --> 0:04:01.070 large listed entities and large financial institutions and possibly others, 0:04:01.850 --> 0:04:05.210 but in line with international standards. We also know that 0:04:05.210 --> 0:04:08.060 the Australian Accounting Standards Board on the release of these 0:04:08.060 --> 0:04:11.630 two standards from the IFRS will release them as exposure 0:04:11.630 --> 0:04:16.250 drafts within Australia for comment, in line with their due 0:04:16.250 --> 0:04:18.980 process as well with the intention to issue those standards 0:04:18.980 --> 0:04:20.420 domestically in some form. 0:04:21.290 --> 0:04:24.200 We'll get further into that in a tick. How will 0:04:24.200 --> 0:04:28.610 these standards, firstly though interact with current New Zealand rules 0:04:28.610 --> 0:04:31.310 and regulations, the current New Zealand framework? 0:04:31.580 --> 0:04:35.150 Yep. So in New Zealand we already have climate standards 0:04:35.150 --> 0:04:38.090 that are now effective from the beginning of this year 0:04:38.089 --> 0:04:42.830 and those standards are aligned with the taskforce for climate 0:04:42.830 --> 0:04:48.680 related financial disclosure requirements. So the TCFD and the IFRS S2, 0:04:48.710 --> 0:04:52.610 which is on climate disclosures, is also aligned with the TCFD. 0:04:52.760 --> 0:04:56.990 So the XRB, so New Zealand's external reporting board, they 0:04:56.990 --> 0:04:59.480 will be looking at these final standards from the ISSB 0:04:59.480 --> 0:05:03.380 just to provide a comparison between their NZ CS1 New 0:05:03.380 --> 0:05:07.250 Zealand climate standard one and the IFRS S2, which is 0:05:07.250 --> 0:05:10.220 their climate disclosure standards. So we will look to see 0:05:10.220 --> 0:05:13.070 but broadly speaking, they're both based around the same concept, 0:05:13.070 --> 0:05:14.780 so we should see quite a bit of alignment and 0:05:14.779 --> 0:05:15.650 similarity there. 0:05:16.040 --> 0:05:19.250 So many acronyms. I hope that your brains are moving 0:05:19.250 --> 0:05:22.969 as fast as we are anticipating they are. How does 0:05:22.970 --> 0:05:25.220 it impact an SMP? 0:05:26.000 --> 0:05:28.219 Right. So I guess as I've mentioned in New Zealand 0:05:28.220 --> 0:05:31.640 and in Australia, these requirements around disclosures will probably initially 0:05:32.029 --> 0:05:36.530 affect the larger companies and the larger financial institutions and 0:05:36.529 --> 0:05:39.890 probably other entities more broadly. But still at that bigger 0:05:39.890 --> 0:05:43.099 end of town. However, these larger entities, particularly when it 0:05:43.100 --> 0:05:47.870 comes to climate disclosures, will be actually needing information within 0:05:47.870 --> 0:05:50.780 their value chains. So from their suppliers and from their 0:05:50.779 --> 0:05:54.980 customers to inform their disclosures. So one of the particular 0:05:54.980 --> 0:05:56.960 areas we'll see a focus on this is in relation 0:05:56.960 --> 0:06:01.070 to greenhouse gas emissions. And as they report on what's 0:06:01.070 --> 0:06:04.640 called their scope three emissions, that comes from those suppliers 0:06:04.640 --> 0:06:08.720 and customers. So they'll be wanting that information from smaller 0:06:08.720 --> 0:06:12.109 entities who will be actually part of their supply chain 0:06:12.110 --> 0:06:13.099 and their value chain. 0:06:13.400 --> 0:06:16.909 That's really interesting. Do you think many of our SMP 0:06:16.910 --> 0:06:19.580 members have thought about? That that role. 0:06:19.880 --> 0:06:23.390 I think it's emerging at the moment. I think it's 0:06:23.390 --> 0:06:25.580 at the moment the larger entities are just thinking about 0:06:25.580 --> 0:06:28.660 how can they get that information from those smaller entities, 0:06:28.670 --> 0:06:32.330 What's the best way of collecting that information? So and 0:06:32.330 --> 0:06:34.729 those smaller entities who are perhaps leading in this space, 0:06:34.730 --> 0:06:37.160 we're already thinking about how can they measure and capture 0:06:37.820 --> 0:06:40.970 information such as their greenhouse gas emissions. So I think 0:06:40.970 --> 0:06:43.489 it's starting to evolve. We've certainly got some examples of 0:06:43.490 --> 0:06:45.260 our members who are already playing a leading role in 0:06:45.260 --> 0:06:48.320 that space, particularly within the S&P space. 0:06:48.589 --> 0:06:51.469 Because that then leads me to that idea of our 0:06:51.470 --> 0:06:54.890 members really seem to have a role to play in 0:06:54.890 --> 0:06:57.230 all of this. Is there anything else you wanted to 0:06:57.230 --> 0:07:00.560 articulate to them about their role going forward here? 0:07:00.890 --> 0:07:03.410 Look, we certainly see our members playing a key role 0:07:03.410 --> 0:07:06.650 in this space, and certainly they can support their clients 0:07:06.920 --> 0:07:11.030 to identify, collate and provide sort of this kind of information. 0:07:11.030 --> 0:07:15.320 Our SME playbook, which is around sustainability, identifies five key 0:07:15.320 --> 0:07:18.110 ways that accountants can support their clients, and those are 0:07:18.110 --> 0:07:22.190 to raise awareness about sustainability, to analyze business models, to 0:07:22.190 --> 0:07:25.520 advise on how to transform those business models, report on 0:07:25.520 --> 0:07:29.840 non-financial indicators and provide assurance of non-financial indicators. And the 0:07:29.840 --> 0:07:33.020 playbook actually includes some relevant case studies for both SMEs 0:07:33.020 --> 0:07:37.400 and SMPs. And also, I guess our SMPs are also 0:07:37.400 --> 0:07:40.250 running a small business themselves. And so they have an 0:07:40.250 --> 0:07:43.760 opportunity here to lead by example and embedding sustainability into 0:07:43.760 --> 0:07:45.140 their practice as well. 0:07:45.230 --> 0:07:48.410 My next question then, and perhaps as well, for members 0:07:48.410 --> 0:07:50.630 who are listening along and saying, okay, this now is 0:07:50.630 --> 0:07:53.780 impacting me, how are we helping our members with all 0:07:53.780 --> 0:07:54.530 of this? 0:07:54.860 --> 0:07:57.740 Look, we've been putting together a suite of resources to 0:07:57.740 --> 0:08:01.310 support our members across all segments. So these include things 0:08:01.310 --> 0:08:04.730 like our Carbon accounting FAQ, so frequently asked questions, the 0:08:04.760 --> 0:08:07.700 SME sustainability playbook that I just mentioned, and we also 0:08:07.700 --> 0:08:11.000 have a shorter Insight series to accompany that. We've got 0:08:11.000 --> 0:08:13.220 a not for profit sustainability playbook as well as we 0:08:13.220 --> 0:08:15.470 know that many of our members work in and support 0:08:15.470 --> 0:08:19.100 the not for profit sector. We also have an assurance 0:08:19.100 --> 0:08:22.040 a sustainability assurance playbook. So for those looking to expand 0:08:22.040 --> 0:08:25.790 their assurance, offering to include sustainability disclosures and also I 0:08:25.790 --> 0:08:29.900 guess for those who may be assisting or actually within 0:08:29.900 --> 0:08:33.110 entities who might be reporting in line with the new 0:08:33.110 --> 0:08:36.380 ESG standards. We've actually just released three Getting Started guides 0:08:36.380 --> 0:08:40.370 which cover materiality, connection to finance and data and systems. 0:08:40.520 --> 0:08:44.030 Okay, so that sounds really helpful. What I will do 0:08:44.030 --> 0:08:47.060 is make sure that I put links to where all 0:08:47.059 --> 0:08:50.240 of that sits on our website in the show notes 0:08:50.240 --> 0:08:52.880 that go with this episode. So that's the description so 0:08:52.880 --> 0:08:55.160 that you can go onto your pod app, have a 0:08:55.160 --> 0:08:57.469 look at the description, and then click through the hyperlinks 0:08:57.470 --> 0:09:00.370 to get to where you need to go on the website. 0:09:00.380 --> 0:09:03.770 That to me sounds like step one, two and three 0:09:03.770 --> 0:09:06.920 for members who are in small and medium sized firms, 0:09:06.920 --> 0:09:09.920 that that is what your recommendation would be. 0:09:10.250 --> 0:09:12.979 Oh, look, definitely. I think. Check out the SME Playbook 0:09:12.980 --> 0:09:16.280 and Insight series. I think as a first step, climate 0:09:16.280 --> 0:09:18.949 is is what we're seeing is is the first topic 0:09:18.950 --> 0:09:21.920 of real focus. And now it's very much climate first, 0:09:21.920 --> 0:09:24.199 but not climate only. But I think particularly, I would 0:09:24.200 --> 0:09:27.380 say because of that, it's worth members really trying to 0:09:27.380 --> 0:09:30.860 build their knowledge and understanding in that climate space. And 0:09:30.860 --> 0:09:33.920 as I've mentioned, there's quite a few resources guides and 0:09:33.920 --> 0:09:36.469 courses as well to support them. And the other piece 0:09:36.470 --> 0:09:39.829 I might mention is that the chartered accountants worldwide, who 0:09:39.830 --> 0:09:42.290 we are part of, we've we've worked with them to 0:09:42.290 --> 0:09:45.890 develop a roadmap for chartered accountants, which actually goes through 0:09:45.890 --> 0:09:48.650 step by step and with some really key points around, 0:09:48.830 --> 0:09:51.439 I guess, supporting CCAs, who are wanting to build their 0:09:51.440 --> 0:09:54.020 knowledge and expertise in sustainability. So we can give you 0:09:54.020 --> 0:09:55.070 a link to that one as well. 0:09:55.070 --> 0:09:57.470 That'd be brilliant. That was going to be my next question. 0:09:58.190 --> 0:10:00.380 What are the risks of not acting? 0:10:01.130 --> 0:10:03.950 Look, I think when it comes to to the sustainability 0:10:03.950 --> 0:10:06.080 space now, and particularly if we're looking at that, those 0:10:06.080 --> 0:10:09.800 smaller organizations, they are going to see larger organizations are 0:10:09.800 --> 0:10:12.530 going to ask them for that information. So if they're 0:10:12.530 --> 0:10:15.500 not starting to prepare now, they're going to be caught 0:10:15.500 --> 0:10:18.800 on the hop and have to suddenly respond very quickly. 0:10:18.800 --> 0:10:21.560 So if you get prepared and start preparing that information 0:10:21.559 --> 0:10:24.860 and collecting it now, from our members perspective, if they're 0:10:24.860 --> 0:10:28.429 not supporting their clients, the clients are going to turn 0:10:28.429 --> 0:10:30.530 somewhere else because they're going to need to prepare. This 0:10:30.530 --> 0:10:34.790 information is going to come through those value chains. And also, 0:10:34.790 --> 0:10:36.890 I guess it's an opportunity as well. We're certainly seeing 0:10:36.890 --> 0:10:41.090 that the next generation of accountants are particularly interested in sustainability. 0:10:41.090 --> 0:10:43.940 So I think from an SAP perspective as well, starting 0:10:43.940 --> 0:10:47.750 to bring those service offerings into the firm could actually help, 0:10:47.750 --> 0:10:51.290 I guess, attracting talent in that next generation to the firm. 0:10:51.860 --> 0:10:54.949 And look, as this space continues to develop and you 0:10:54.950 --> 0:10:57.170 did mention it at the top of the show about 0:10:57.350 --> 0:11:01.610 further consultation, I'm thinking going forward, how can our members 0:11:01.610 --> 0:11:05.420 help us help CA ANZ ensure that the standards are fit 0:11:05.420 --> 0:11:06.530 for purpose? 0:11:06.920 --> 0:11:09.710 Look, we're always asking for feedback from members and certainly 0:11:09.710 --> 0:11:12.050 do go out and seek it. So we'd certainly encourage 0:11:12.290 --> 0:11:15.920 members to tell us what they think in terms of consultations. Look, 0:11:15.920 --> 0:11:20.000 the ISSB, they're now consulting on what? Next after these 0:11:20.000 --> 0:11:22.790 first two standards. So we'll be responding to that one. 0:11:22.790 --> 0:11:26.180 As I've mentioned in Australia, Treasury will be issuing their 0:11:26.179 --> 0:11:30.290 second consultation soon around mandatory climate disclosure standards within Australia, 0:11:30.290 --> 0:11:33.979 and the AASB will be putting out S1 and S2 for 0:11:34.429 --> 0:11:36.950 exposure as well. So we'll be responding to all of 0:11:36.950 --> 0:11:40.100 those consultations. So any member feedback on that would be 0:11:40.100 --> 0:11:42.890 greatly welcomed, but also on the resources that I've mentioned 0:11:42.890 --> 0:11:46.040 as well we would really welcome. Members are saying that's great, 0:11:46.040 --> 0:11:48.319 but I want to know X, then let us know 0:11:48.320 --> 0:11:50.360 and then we can start to fill those gaps for them. 0:11:50.900 --> 0:11:52.550 Okay. Well, I think we're out of time. Is there 0:11:52.550 --> 0:11:54.590 anything else that you want members to know about before 0:11:54.590 --> 0:11:55.250 we wrap up? 0:11:55.490 --> 0:12:00.380 I think just that sustainability represents a great opportunity for 0:12:00.380 --> 0:12:03.469 our SMP members to support their clients and to build 0:12:03.470 --> 0:12:06.860 their knowledge in this space. We've got plenty of resources 0:12:06.860 --> 0:12:09.620 and training out there and our new micro courses as well. 0:12:09.740 --> 0:12:12.830 And it was it's climate first, but not climate only. 0:12:12.830 --> 0:12:14.569 So have a look at some of the other areas 0:12:14.570 --> 0:12:15.980 across sustainability too. 0:12:16.250 --> 0:12:19.580 Great. There is a lot of links to put in 0:12:19.580 --> 0:12:21.949 the show notes, so make sure that you check that 0:12:21.950 --> 0:12:24.710 out so that you're across everything that Karen and I 0:12:24.740 --> 0:12:27.679 have discussed today. And of course it will all be 0:12:27.679 --> 0:12:30.800 available on the chartered accountants ANZ website. That is all 0:12:30.800 --> 0:12:33.350 we have time for. If you're loving the podcast, make 0:12:33.350 --> 0:12:36.500 sure you followed it wherever you listen to your podcasts, 0:12:36.500 --> 0:12:39.800 like our posts on LinkedIn, share your favourite episodes among 0:12:39.800 --> 0:12:44.210 your network. This is about sharing information, useful information. The 0:12:44.210 --> 0:12:47.030 podcast has an email, so feel free to get in touch. 0:12:47.030 --> 0:12:53.330 Podcast@charteredaccountantsanz.com Let's start a conversation. Thank you Karen McWilliams for 0:12:53.330 --> 0:12:57.680 being my sustainability standards expert on Small Firm, Big Impact. 0:12:57.860 --> 0:12:58.400 Thank you. 0:12:58.490 --> 0:12:59.120 Bye bye.