By Annie Makoff Climate change How to bring sustainability measures into your practice 9 Feb 2024 As larger businesses start measuring their Scope 3 emissions, small businesses will have to measure their own emissions to help meet regulations. Find out the kind of changes practices are making. The sustainability reporting space is currently saturated with an estimated 600 standards, initiatives and frameworks in an attempt to help organisations reduce emissions. The International Sustainability Standards Board (ISSB) was launched by the IFRS in 2021 to create a standardised universal ESG reporting framework. ISSB includes IFRS S1 and S2. IFRS S1 provides disclosure requirements and guidance for all sustainability-related risks and opportunities an entity may face over the short, medium and long term. IFRS S2 provides disclosure requirements and guidance for all climate-related risks and opportunities an entity may face over the short, medium and long term. S2 in particular builds on previous recommendations by the Taskforce on Climate-related Financial Disclosures (TCFD) and also includes industry-based disclosure requirements from SASB. The TCFD (which ISSB standards are based on) includes six general requirements applied across four distinct pillars of Governance, Strategy, Risk and Impact management and Metrics and targets: approach to materiality scope of disclosures consideration of nature-related issues locations integration with other sustainability issues stakeholder agreement. 2024 marks the official global implementation of ISSB standards along with the EU Corporate Sustainability Reporting Directive. Under the EU directive, EU companies and non-EU companies with subsidiaries in the EU and/or those who are listed on the EU-regulated market are now subject to these mandatory requirements. Companies with a year end of 31 December 2024 are expected to have their sustainability reports due in 2025. In addition to all this, entities are now required to report carbon emissions under the Greenhouse Gas Protocol (GHG), a protocol which is underpinned by Scopes 1, 2 and 3: Scope 1: relates to emissions from sources owned or controlled by the entity e.g. carbon emissions created from office, facility and/or company vehicle usage Scope 2: relates to emissions created indirectly from the entity e.g. electricity, heating or cooling systems Scope 3: relates to emissions created from the entity’s value or supply chain e.g. waste disposal, goods transportation, business travel. That means that if you work with a company measuring its Scope 3 emissions, you will need to report on your own emissions as part of the other business’s reporting. We spoke to three pioneering accountants and bookkeepers about how they’re managing the process, from embarking on ESG goals to transitioning to net zero, and how they’re encouraging their clients and students, too. I’ve launched a programme to educate accountants and bookkeepers Kathryn Frimond, Owner, Your Local Bookkeeper It’s really important to walk the walk not just talk the talk, although I hate that phrase! For example, I think as a society we buy a lot of unnecessary stuff. I always ask myself ‘do I really need this?’ Within my business we: follow a People-Planet-Profit model, as we believe it’s possible to profit while focusing on the planet and environment first recently launched Sustainable Accountancy Professionals Programme, a six-module programme to help accountants get their practice on the road to net zero. recently launched carbon footprint assessment service measure our Scope 1 and 2 carbon emissions, as per the GHG protocol are starting to measure Scope 3 although this is not yet mandatory. The science is very clear on climate change and how we have very little time left. Every business needs to take notice and prepare for sustainability reporting. Why? Because current sustainability regulations will soon filter down to smaller businesses. For example, Tesco will soon need to measure Scope 3 which includes reviewing their supply chains. They’ll be asking farmers, cleaners and so on for their sustainability or carbon reduction plans. All suppliers and contractors who work for the government or NHS will also have to provide sustainability reports soon. Additionally, investors do scrutinise sustainability reports, so companies will need to have them to win deals and tenders. I believe accountants are well-placed to encourage sustainability. We’re business advisors and know client businesses inside out. We can provide a lot of guidance and support around sustainability reporting. Verdict: I’m running education and support programmes to help others with sustainability reporting, while living and working sustainably myself. Don’t get bogged down in definitions, focus on what needs doing Aaron Westgate, Chartered Accountant and Accountancy Teacher As an accountancy training provider, we’re pulling together free guidance and resources around sustainable reporting and gathering data to assess our current emissions and carbon footprints. Within the courses we deliver, sustainability is a key theme and it’s something that’s examined very carefully. We often engage in class discussions about sustainability reports of specific businesses to evaluate what’s good, bad or inadequate. Many students are already reviewing their own clients’ carbon emission reports which is really impressive. The need for scepticism here is really important. I often ask students to look at annual reports and identify what areas they think may be examples of greenwashing. For example, one company we looked at claimed they had reduced carbon emissions by 50% but when we looked in more detail, it was referring to a particular part of the business which only produced 1% of emissions anyway, so they hadn’t actually halved their total carbon emissions at all! All this is important because it’s going sustainability reporting is soon going to be a legal requirement for every company. Large companies are now required to consider Scope 3 which affects suppliers. Accountancy practices that aren’t doing anything around sustainability could get cut out if they don’t meet the emission requirements of bigger companies. And aside from the moral and ethical issue of taking sustainability seriously, there’s a business case too: studies have found that companies that care about sustainability outperform competitors. Overall, I think there’s too much focus on definitions and technical details which can put a lot of people off thinking about sustainability. These details have their place, but it’s better to engage in open discussions with clients around what specifically needs to be done to meet targets rather than getting bogged down in definitions. Verdict: Don’t get bogged down in definitions and technical details – instead focus on what needs to be done to meet targets. Scope 3 measures are going to affect us all. Focus on making little day-to-day sustainable changes Libby Walklett FMAAT, Director, The Ethical Bookkeeper, Chair of the AAT Gloucestershire Branch, elected AAT council board member and member of AAT Audit and Risk Board I’m fairly early on in my sustainability journey but I’m tackling it by focusing on the tiny little changes I can make personally and within the business, rather than getting overwhelmed. My business is predominantly paperless now and client correspondence is done digitally. That in itself isn’t entirely ideal because you can have a digital footprint, but it’s about doing what you can. It’s important to really understand the impact of your decisions. I’ve signed up to the Good Business Charter and won’t work with anyone whose values don’t align with mine. I pay supplier invoices early or on time because I recognise the importance for their cash flow, too. I think it’s also important to question everything and have that degree of scepticism we’re taught as accountants and bookkeepers to ensure the decisions we make are as sustainable as possible. Always ask yourself ‘Could I do better next time?’ Conversations with clients about sustainability should be brought naturally into conversations rather than forcing it – it’s about encouraging businesses to do their bit and think differently. At home, my mantra is reduce, reuse and recycle. My energy provider is Octopus Energy (a green energy provider), I’ve started using Vinted, ‘treeapp’, planted trees with Carma, and I use SMOL for my cleaning products. Verdict: I’m focusing on the little day-to-day sustainable changes otherwise it’s too easy to become overwhelmed with the bigger picture. Useful resources AAT guidance on putting sustainability into practice (includes a checklist) aatcomment.org.uk Accounting for Sustainaibility: www.accountingforsustainability.org/reporting Transition Taskforce: https://transitiontaskforce.net/ Would you like to contribute to future articles like this one? If so, please get in touch with Annie Makoff-Clark at firstname.lastname@example.org. Annie Makoff is a freelance journalist and editor.