ACCA: Beware ethical dilemmas and greenwashing in sustainability reporting

The latest research from ACCA examines the ethical dilemmas regularly faced by accountants and other professionals involved in implementing sustainability reporting.

At a time when the regulatory requirements for sustainability reporting are growing, the guide provides real-world scenarios, written in partnership with academics from Warwick Business School, for accountants and non-accountants to equip them to manage dilemmas often presented by:

  • Risks of greenwashing 

  • Weak processes 

  • Lack of technical knowledge 

  • Compromises in objectivity and independence.

Further practical support is provided through a checklist of questions to drive better application of the principles of The International Code of Ethics for Professional Accountants (the Code), set out by the International Ethics Standards Board for Accountants, including professional scepticism and curiosity. The guide aims to help users avoid consequences such as poor-quality reporting, including ‘greenwashing’, a loss of trust and faulty decision-making.

ACCA head of sustainable business and report co-author Sharon Machado said: “We have a collective obligation to future generations to operate in a sustainable manner, both individually and as organisations, and it’s great to see more and more businesses embracing sustainability reporting. But we need to be alert to the risks and ensure quality and consistency. For professional accountants, this is an opportunity to provide strong leadership and insight, in turn helping to drive ethical and sustainability-focused decision making. This guide will help accountants and other professionals to create balanced reports that are a fair reflection of organisations’ performance and impacts.”

Report co-authors Lisa Weaver and Darren Sparkes concluded: “The scenarios contained in this report provide opportunities for individuals and teams to explore some of the ethical tensions that can arise in the complex arena of sustainability reporting. As professionals, we have a moral duty to uphold the ethical code and to champion good practice, within our profession and with professionals from diverse backgrounds, working together to enhance credibility in sustainability reporting.”

4 in 5 UK SMEs participating in ESG reporting

Data published by Rimm Sustainability reveals that an impressive number of UK SMEs (80%) are reporting on their sustainability progress.

The report, “Leading the Charge on Sustainability: Moving from Awareness to Action” canvasses the views of 500 C-suite executives from SMEs from a range of industries across the UK. It reveals that the top driver for businesses taking part in ESG reporting is wanting to communicate the firm’s commitment to sustainability (30%).

Other key drivers include the desire to facilitate greater transparency (29%), to comply with regulatory requirements (27%), to qualify for sustainability award programmes (25%), and to attract investors (25%).

The findings also highlight that when it comes to ESG reporting, more than half of SMEs are focussing on four key areas: sustainability targets (70%), carbon footprint (54%), compliance with international standards (51%), and impact tracking (50%).

When it comes to communicating their sustainability commitments, the report found that the most popular channel is internally to employees (69%). This is closely followed by annual reports (56%), publishing on websites and social media channels (56%), and internally with shareholders (56%).

However, some challenges remain. Among UK SMEs that do not participate in ESG reporting, cost was identified as the top reason (31%), along with not having enough staff to manage the process (30%). Over a quarter of SMEs (26%) said that they do not take part in ESG reporting as they would find it hard to commit to the standards.  

Rimm Sustainability CEO Ravi Chidambaram said: “It is inspiring to see that despite today’s challenging landscape, UK SMEs are holding themselves to account for the impact they are having on their environment and are setting themselves clear and measurable goals.

“Looking ahead, more needs to be done to ensure that all UK businesses can report on their sustainability progress, and it would be in the government’s best interest to do so. The ability of companies to effectively track and measure their emissions, while simultaneously undertaking steps to reduce their carbon footprint will be a key determinant of the success of the UK’s net zero trajectory by 2050. As such, SMEs could hold the key to unlocking a carbon free future for the UK.” 

Moore Global: ESG focus leads to revenue boost

Medium-to-large-sized companies that embrace Environmental, Social and Governance (ESG) principles and practices enjoyed a 10% revenue boost over four years, according to the latest research by Moore Global and The Centre for Economics and Business research (CEBR).

Moore Global, one of the world’s leading accountancy and advisory networks, asked leaders from 1,800 businesses that employ at least 250 people in 12 key economies how embracing ESG principals impacted the bottom line.

CEBR calculated that businesses placing greater emphasis on ESG enjoyed a 10% revenue increase over the four years from 2019 to 2023 – more than twice the rate of less committed businesses.

Further Key findings from our survey included:

  • 84% of companies said ESG principles had grown in importance from 2019 to 2023.

  • 79% of businesses where the importance of ESG principles had increased in recent years reported that customer retention had improved. This compares to only 47% for other organisations.

  • Among businesses indicating progress in ESG practices, 81% also reported an improvement in their brand image compared to only 49% of other businesses. 

Commenting on this, Moore Global CEO, Anton Colella, said: “Businesses that serve the greater good of helping society, protecting the environment and conducting themselves appropriately with good governance have a clear advantage over competitors who do not. We hope the research we have undertaken with CEBR proves a powerful motivation for all companies to follow suit.”

PwC: Climate tech investment falls 40% amid economic uncertainty

Climate tech investments from venture-capital and private equity fell 40% in 2023 as economic uncertainty and geopolitical conflict dent investor confidence, according to PwC’s 2023 State of Climate Tech report. 

This year’s report analysed over 8,000 climate tech start-ups and over 32,000 deals worth more than US$490bn (£402bn). The underlying dataset, PwC’s Climate Tech Investment Index, has been significantly expanded this year, with nearly double the number of start-ups tracked and a broader range of deal types examined compared to last year. It found that the fall in climate tech investment was significantly smaller than the VC and PE average fall of 50% across sectors. As a result, the share of VC and PE funding going into climate tech continued to rise, accounting for more than 10% of private market start-up investments in 2023, up from 7% in 2018.

There are also signs that climate tech investment is becoming more mainstream, with seasoned climate investors (who have invested in five or more climate tech deals) taking up a smaller share of the total number engaging in climate tech, as the share of first-timers increases. Meanwhile, for the first time, more deals are happening at the mid-stage than at the early stage. 

Commenting on this, PwC UK global climate leader, Emma Cox, said: “The development and scale-up of climate technology is an essential part of meeting the climate challenge. So, while it is not surprising that absolute levels of investment in climate tech have fallen along with the market, it is concerning. 

“The good news is that the sector has performed well in relative terms, with investment falling less than in other areas. It is also encouraging to see a shift in the balance of investments towards technologies that can cut emissions the most. Now we need to see that shift continue, coupled with an increase in the absolute levels of investment in all technologies with the potential to cut emissions.”