ESG: soon the accountant will also check for sustainability
This year, due to a set of EU regulations, ESG is high on the corporate agenda. ESG stands for Environmental, Social and Governance and refers to the three central factors by which the sustainability and social impact of an investment can be measured.
New European legislation on ESG (the 'CSRD') will enter into force in 2024/2025. This was previously planned for 2023, but in the current consultation round it was decided to phase it in. However, it is clear that it will have an enormous impact on business operations. Therefore, there is every reason to prepare the organisation for this quickly.
The 'Green Deal'
Robbert Kock, manager Finance & Technology: 'When the word sustainability is mentioned, sooner or later the question arises: who is going to pay for this? The EU, the Dutch government or the business community? Or will the consumers pay for it? Many goals cannot be achieved without public funding from the EU and the Dutch government. It is clear that the government has an important role in this story. For example, in the construction sector you hear that, although the government wants to make things more sustainable, price is also a decisive criterion in tenders'.
'The Green Deal of EU Commissioner Frans Timmermans aims to encourage companies to communicate the extent to which their activities contribute to the European ambition to emit 55% less CO2 by 2030 (compared to 1990) and to be completely energy-neutral by 2050. To this end, a framework has been drawn up, the EU Taxonomy, which indicates per sector which economic activities have an impact on the climate and which measures must be taken in order to qualify as a green investment.'
Motivation for preservation
'Through uniform European standards for reporting on these matters in the annual report, this can be verified by an external auditor in the same way as he checks the financial figures. In this way, an investor knows whether a certain investment is sustainable or not. And that a green investment in a Dutch company meets the same conditions as, say, a Spanish fund. This does not only supply to investors, but also to financiers, employees and consumers. I am limiting myself to the theme of sustainability, but ESG also requires reporting in the field of human rights and governance.'
'Most companies have been working on these themes for a long time. It is therefore not the case that ESG is only experienced as a burden. We noticed from our roundtable meeting that CFOs are intrinsically motivated to make their company (and thus our society) more sustainable. The fact that the EU sets clear frameworks ensures a uniform measurement of performance in the areas of sustainability, social affairs and governance, and thus greater clarity for all stakeholders. But regulation is not an end in itself and it also means that a lot has to change in terms of working methods, targets and internal and external reporting.'
The contribution of the Finance & Technology team
'Our Finance & Technology team helps customers to get their reporting in order. This means that the information systems have to be adapted. All of a sudden, a lot of things need to be registered. The obvious things, such as CO2 emissions or the packaging material used in the production process. But there are also more complex issues, such as suppliers who obtain raw materials from countries where they are mined in a less environmentally friendly way and where the position of workers is under pressure. You have to know what information you need and what data is available. We are working hard to set up this type of information flow correctly, from strategy to reporting, and to ensure that it is recorded reliably so that it can be accounted for at the end of the year.'
'The challenge for the CFO'
'It is clear that the introduction of ESG requires change management. The CFO's dashboard will be extended with parameters on sustainability, social issues and governance. But the real challenge for the CFO is to ensure that people throughout the organisation are motivated and aware that, in addition to financial targets, targets are also set at a climate and social level. And this must be recorded in processes with checks and balances, in such a way that an accountant can ultimately verify this. A lot is changing within accountancy, of course. The accountant's range of duties is being expanded considerably.'
Our areas of expertise
'In our team we have people with a background in accountancy, myself being one of them. So we can help in the field of compliance. We also do a lot in the field of programme management, in this case the design of the information house and its implementation.'
Boer & Croon organised a roundtable meeting on 31 March with twelve CFOs from different sectors to discuss what this means for their organisation and what they are up against.