Introduction

This guide provides a comprehensive overview of recent developments in corporate reporting, with a specific emphasis on the evolving trends in sustainability reporting and its financial aspects. Addressing finance professionals involved in various facets of corporate reporting, including preparation, data measurement, compliance, internal and external audit, risk management, governance, strategy, and investor relations, the guide explores how sustainability reporting, driven by increasing demand from investors and stakeholders for environmental, social, and governance (ESG) information, is reshaping the role of accountants and influencing the future of corporate reporting.

Mandatory reporting requirements

Governments, securities regulators, and stock exchanges globally are introducing a growing array of mandatory sustainability reporting requirements, altering the landscape of corporate reporting disclosures. In some jurisdictions, legal obligations for company directors now include considerations for the environmental and social impacts of their companies. Boards of directors and audit committees are compelled to reevaluate their approaches to risk, reporting, and investment strategies. Chief Financial Officers and finance teams face the challenge of meeting the expanding information demands from investors and market regulators.

Reporting standards, frameworks, and recommendations

Various reporting frameworks, standards, and recommendations have emerged to assist accountants in collecting, collating, and disclosing comprehensive sustainability-related information. These frameworks, including those developed by The Global Reporting Initiative (GRI), The Value Reporting Foundation (VRF), and the Task Force on Climate-Related Financial Disclosures (TCFD), aim for unity in sustainability reporting, emphasising the disclosure of qualitative, quantitative, and forward-looking information. Reporting standards, gaining increasing significance, are witnessing convergence efforts. The International Financial Reporting Standards (IFRS) Foundation’s 2020 consultation paper on sustainability report standards is a notable step in this direction.

Key reporting components

Two critical components—assurance and materiality—are central to sustainability reporting. Materiality determinations, involving subjective judgment and consultations with stakeholders, play a pivotal role. In financial reporting, assessing the likelihood and impact of identified ESG factors over short, medium, and long terms is crucial. Recent efforts in integrated and sustainability reporting have introduced dynamic materiality, incorporating evolving sustainability considerations alongside traditional materiality issues.

The accounting profession: Recent reporting developments

The accounting profession is poised to play a more prominent role in sustainability accounting, reporting, assurance, and related functions. Reports indicate that accountants can provide leadership in the development of high-quality global sustainability-related reporting standards. With a growing expectation that the adoption of such standards will continue to rise, the accounting profession is seen as crucial in addressing the urgency of ESG issues and meeting the increasing demand for relevant reporting.

Conclusion

Companies prioritising sustainability reporting stand to benefit stakeholders by enhancing accountability in risk mitigation, transparency, and management decision-making. This guide serves as a valuable resource for finance professionals, enabling them to stay current in the dynamic field of sustainability reporting, expected to evolve continually in the future. As the importance of ESG issues grows, staying informed and adopting best practices in corporate reporting becomes imperative for organisations aiming to thrive in this changing landscape.