Sustainability Reporting and Assurance Practices of Largest Global Companies Continue to Mature

The largest global companies are providing more detail and breadth in their sustainability reporting, and also are obtaining a greater scope of assurance on those disclosures, according to an updated report from the International Federation of Accountants (IFAC) and AICPA & CIMA. “The study, an annual benchmark that now includes 2022 data, also found the use of varying sustainability standards and frameworks continues to make it difficult for investors, lenders and other stakeholders to find consistent and comparable sustainability information.”

The three accounting bodies partnered to understand the environmental, social, and governance (ESG) reporting and assurance practices on a global basis by capturing reports containing ESG information in 22 jurisdictions. Some 1,400 companies were reviewed, 100 from each of the largest six economies.

While progress is being made, the report, The State of Play: Sustainability Disclosure and Assurance 2019-2022, Trends and Analysis, highlights the need for companies worldwide to move toward a global system of sustainability disclosure requirements. “On a positive note, the study found over half of companies use the Sustainability Accounting Standards Board (SASB) Standards and the Task Force on Climate-related Financial Disclosures (TCFD) Framework, which should ease the transition to the International Sustainability Standards Board (ISSB) standards released last year.

“While we’re moving toward commonly accepted global standards, some 87% of companies continued to use a mix of standards and frameworks for reporting,” said David Madon, IFAC’s director of sustainability, policy and regulatory affairs. “That leaves investors and lenders in a bind when it comes to having consistent, comparable and high-quality sustainability information at hand.”

Among the highlights of the study:

  • Almost all companies (98%) report some information on sustainability. That’s an increase from 91% in 2019, when IFAC and AICPA & CIMA first began conducting research in this area.
  • Use of standalone sustainability reports has declined by 27 percentage points in the past three years. Only 30% of companies used a standalone sustainability report in 2022, reflecting the growing inclusion of that information in companies’ annual or integrated reports.
  • 69% of companies obtained assurance on at least some of their sustainability disclosures, up five percentage points from last year and 18 percentage points from 2019. The scope of assurance areas also expanded, yet still remains limited in general.
  • Accounting firms (as opposed to consultants or other service providers) handled 58% of the assurance engagements related to sustainability in 2022, a percentage point better than the previous year. Some markets, notably the United States, fell well below 50%.

“When companies use accounting firms for sustainability assurance, they’re more likely to choose the same firm they use to audit their financial statements,” said Susan Coffey, CPA, CGMA, AICPA & CIMA’s CEO of public accounting. “Because the level of confidence with and reliability on sustainability disclosure should be the same as financial information, we expect more companies will recognize that accounting firms are best suited for this critical work. We think this is a likely driver behind the increase from 16% to 23% for U.S. accounting firms performing this work.”

Get the report at Global benchmarking study – State of Play in Sustainability Assurance | Professional Insights | AICPA & CIMA (aicpa-cima.com).

Canada Leads the World in AI Talent Concentration

A new report by Deloitte Canada on Canada’s national AI ecosystem finds that Canada tops world rankings in talent concentration, with patent growth and per-capita VC investments among the world’s highest.

"Canada has become the springboard to advance AI-fueled enterprises around the globe,” says Anthony Viel, Chief Executive Officer, Deloitte Canada. “Our openness to newcomers, our highly skilled workforce, our banking stability with access to global markets, and our commitment to a standard of living that is second to none has allowed us to translate our ideas and curiosity into tangible solutions that address real-world challenges and opportunities. Our future success depends on embracing an entrepreneurial, inclusive, and responsible culture that generates – and delivers on – these ideas for good.”

As we strive for success, Viel adds, “we must be mindful of the challenges that exist across the AI ecosystem, including responsible and ethical AI deployment, targeted investments to scale AI-fuelled enterprises, talent acquisition and AI fluency. By addressing these hurdles, we can move toward an environment that encourages innovation and provides a platform for AI-driven initiatives to thrive. Our collective efforts today will determine our position on the world stage tomorrow. This is how we shape the future of ethical AI and use of data to make an impact that matters for our communities, our country, and our planet."

The report, published by Deloitte Canada’s AI Institute, outlines the ways in which the federal Pan-Canadian AI Strategy has created significant social and economic benefits for Canada, with our AI sector outperforming that of many G7 peers. The report also details necessary steps that Canadian companies must take to seize on this moment of opportunity with this globally transformative technology.

Among the highlights of Impact and Opportunities: Canada's National AI Ecosystem Report – 2023

  • Canada ranked first in the five-year average year-over-year (YoY) growth rate in AI talent concentration compared to G7 nations.
  • The number of AI patents filed nationally across Canada rose by 27% in 2021-2022 with 158 patents, and 57% in 2022-2023 with 248 patents. This rate of increase puts Canada second among G7 nations in 2022-2023.
  • Canada ranks third among G7 countries in terms of its level of per capita VC investment in AI enablers, developers and users, trailing only the US and UK.
  • Canada leads the world in terms of bringing more women into AI roles, achieving the highest YoY percentage change in female AI talent globally since 2019, including 67% in 2022 alone.
  • Canadian AI researchers produced more AI publications per capita in 2022 than any other G7 nation.

The report also includes findings from a survey conducted in March 2023 of 375 business executives and senior managers operating enterprises across Canada. The survey found significant room for improvement in the area of AI adoption, with just 26% of surveyed organizations having launched one or more AI implementations, compared with 34% globally. Forty-two percent had exploratory AI pilots in place, on par with their global counterparts. Only 36% of surveyed organizations globally felt their data-management and data-governance process maturity was in the mid-to-high range.

According to the research, “these survey results reinforce an argument that Canada must sustain and accelerate Canada’s AI advantage through a multi-pronged approach” that includes:

  • Continuing to attract and grow world-leading talent.
  • Strengthening AI fluency within Canada’s businesses, public sector, and communities.
  • Investing in scalable AI opportunities.
  • Continuing to lead global discussions around AI governance.;
  • Identifying strong AI use cases that drive value.
  • Leveraging CIFAR and Canada’s National AI Institutes to drive responsible AI development and use.

"We know that AI is not a passing trend, says Cam Linke, CEO, Amii. “It is an ever-evolving force that will reshape industries and society, making it essential for individuals and businesses to invest in AI. The barriers to getting started in applied AI have never been lower: Now is the time to act. It is no longer a choice of whether to be involved in AI or not – it’s whether to lead or be led.”

Get the report at Impact and Opportunities | Deloitte Canada.

Higher Salaries, Flexibility, And Office Culture Are Key To Keeping Accountants On The Job

A recent blog on the AccountingPipeline webpage notes that retaining talent is more critical than ever before. A report from the Institute of Management Accountants (IMA) in collaboration with Robert Half indicates that turnover for 18-36-year-old finance and accounting respondents in  the last two years was 39%. Over a quarter of respondents in that age group are also most likely to leave their current employers in the next year, and 8% are considering leaving the profession entirely in the next year. 

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How Data Analytics Is Transforming Due Diligence, by Gundi Jeffrey

An article in the February 7 edition of The Data Administration Newsletter,
by Gundi Jeffrey

Sarah Kaminski, defines “due diligence” as the complex process of assessing a potential investment and ensuring it is a sound one. It involves the gathering, classifying, and analyzing of large volumes of data. Kaminski says that, “given its very nature, it’s the perfect field for data analytics, which can speed processes up and assess the quality and reliability of data.”

She then goes on to explore how data analytics can improve this process.

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Business Sustainability Ambitions Are Hindered by Four Big Obstacles

A February 4, 2024, article in ZD NET, written by Vala Afshar, points out that, according to research, the are several gaps that need to be addressed if businesses hope to meet their sustainability goals.

In a report titled The Gap in Sustainable Value CreationSalesforce presents the findings from sustainability research conducted in partnership with GlobeScan and notes the following key findings: 

  • 93% of senior leaders across IT, finance and ESG say sustainability is important to commercial success.
  • 37% of senior leaders believe sustainability is "very integrated" into the core of their business.
  • 23% of senior management teams allocate significant capital to deliver on sustainability.  
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Can the Metaverse Fix Your Remote Work Problems?

A recent article in Chief Executive, written by Jason Gesing, notes that the pandemic was one of the greatest challenges to management teams, businesses and organizations in modern history. “Most traditional workspaces had no idea how to equip their teams for a hybrid professional environment or how to maintain culture, productivity and engagement or ensure accountability. As a result, some organizations used management tactics that were too heavy-handed, ultimately choking out its oxygen. Employees who once enjoyed their conventional workspaces were left feeling suffocated by leadership teams who clearly didn’t trust them so much after all. In some cases, and in response to being placed under strict supervision, these employees defaulted to doing the bare minimum required in their role while they sought other positions. On the opposite end of this spectrum were leadership teams that were far too lax in regard to employee performance standards.”

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An Investor Protection Call for a Commitment to Professional Skepticism and Audit Quality

In a Statement delivered February 5, 2024, SEC Chief Accountant Paul Munter said “Various external, dynamic conditions may put pressure on the operations and financial health of companies and render financial reporting and auditing more challenging. The result may be new risks, or increases in existing risks, that affect the ability of an issuer’s existing financial reporting infrastructure to ensure that investors receive accurate, transparent and complete disclosures. Likewise, evolving risks may require changes to accounting policies, processes and internal control over financial reporting (“ICFR”) to maintain a financial reporting environment capable of producing reliable financial disclosures. Management should be mindful of these dynamics and ensure they are continuously evaluating and adjusting their systems and processes accordingly. For their part, auditors should challenge management teams to ensure that adequate systems and processes, coupled with a strong compliance culture, are in place to produce reliable, high quality financial statements and disclosures.”

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Generative AI in Business: How to Navigate the Ethics

A February 1, 2024 article in IN THEBLACK newsletter urges that, as the use of generative AI becomes more widespread and normalized, accountants must find the balance between applying professional skepticism and staying open‑minded about the benefits of this emerging technology.

Some accountants are already using generative AI tools to help analyze historical financial data to make predictions about future trends. “AI algorithms can detect irregularities and anomalies in financial transactions, and they can automate the generation of financial reports, such as balance sheets and cash flow statements, the article notes.

AI‑powered tools are also being used to assist in audits by analyzing vast amounts of financial data to identify potential audit risks. They can enhance client service and support by answering common accounting‑related queries.

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Do Names Matter? Risk And the Use Of “Merger” Or “Acquisition”

A recent article, written for the Journal of Accountancy by Nicole Lazarz Graham, Esq., and Stanley D. Sterna, Esq., says that M&A transactions among accounting firms have increased in recent years. “The desire to expand service offerings, the profession’s ongoing pipeline issues, and the increasing costs of technology and other tools have fueled firms’ interest in M&A activity. Every week you can read news of CPA firms ‘merging’ or ‘joining’ or ‘combining.’ Does what you call it really make a difference? It does, especially in determining successor liability.”

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The Future of Business Data Analytics and Accounting Automation

A recent article in the CPA Journal, written by Karina Kasztelnik, PhD, and Stephen Campbell, PhD,  notes that the current technological transformation in accounting and taxation shows that “companies have a large appetite for increasing complex analytics, even when they cannot adequately perform the basics.” The authors add that most companies and governments still spend 80% of their time on data cleansing, which an appropriate machine learning (ML) algorithm can perform in minutes. “Thus, the market faces a challenge: accountants with technical expertise are required to design algorithms capable of reducing the human workload. Traditional accounting and business analytics are insufficient to meet current business needs; modern data analytics offer businesses in-depth insight into their daily operations. For the public accounting profession to continue to create value in the age of ‘big data’ analytics and artificial intelligence (AI), a clear vision for the future of digital accounting, taxation, and business data analytics is essential.”

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CPA Founding Partner

Chartered Professional Accountants of Canada (CPA Canada), one of the largest national accounting organizations in the world, has chosen to become a founding partner of ThinkTwenty20.