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Conference Speaker Advocates Integrating ESG Values into Financial Reporting

S.J. Steinhardt
Published Date:
Nov 3, 2022


Vania Borgerth, a board member of the International Ethics Standards Board for Accountants (IESBA), spoke about the importance and evolution of environmental, social and governance (ESG) values in financial reporting at Part 2 of the Foundation for Accounting Education’s Auditing Standards Conference Webcast on Nov. 3.

Borgerth covered much ground, beginning by asking a rhetorical question, “Why should we accountants be mindful of sustainability?” before emphasizing why reporting in general is important for both stakeholders and reportees.

“Those who do business with our companies have the right to know to [how] make proper decisions,” she said. “Reporting is not just good for external stakeholders; it is good for the company, too. It reduces information asymmetry and provides the foundation for rational decision making for the stakeholder." She added that financial reporting  "requires self-knowledge, market knowledge [and] transparency [which results in more stable markets]." It also "creates long-term value ... for the reportee.”

“When the market is more transparent, it is more stable,” she said. “It is not enough to feed the market with personal information.”

After that review, Borgerth asserted that good reporting must expand to include sustainability.

“Good corporate reporting is no longer equal to good financial reporting; it must expand [beyond] financial reporting,” she said, displaying a graphic that equated financial, environmental, social and governance reporting with trust.

Sustainability reporting lags behind financial reporting in ethics, standards and assurance, she pointed out. “Nowadays, we make decisions using much more than profitability,” she said, launching into an overview of integrated reporting, which would combine financials and ESG.

“It’s not enough that the company is profitable,” she said. “We now want total transparency.”

“If you are to wait until sustainability experts provide us with the same accuracy as accountants, it would take centuries,” she said. “The planet cannot wait for that.”

Invoking the United Nations’ 17 Sustainable Development Goals (SDGs), Borgerth maintained that sustainability is a business opportunity. As such, she said, “We need to have a single set of standards to deal with sustainability,” with integrated reporting as a tool for following the implementation of the SDGs.

“There is much to be done,” she said. “We cannot say that we have perfect standards for accounting. We need a standard for sustainability.”

Tracing the evolution of integrated reporting, Borgerth prominently cited the creation of the International Sustainability Standards Board (ISSB) by the International Financial Reporting Standards (IFRS) Foundation one year ago. This independent standard-setting body proposed two IFRS Sustainability Disclosure Standards earlier this year: one on General Requirements for Disclosure of Sustainability-related Financial Information and one on Climate-related Disclosures.

The ISSB makes sense because its process “is already known by regulations everywhere,” she said.

“Sustainability and ESG … are good for business without destroying the environment [and] reducing employees to slaves, and [they provide] good governance,” she said in conclusion.

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