Question

“The IFRS Foundation was established to develop a single set of globally accepted accounting standards. It is the organisation behind IFRS Standards—financial reporting standards required for use by more than 140 jurisdictions. The Trustees are responsible for the strategic direction and governance of the Foundation as well as for oversight of the International Accounting Standards Board, which sets IFRS Standards. Amid heightened focus on environmental, social and governance (ESG) matters, developments in sustainability reporting and increased calls for standardisation of such reporting, the [IFRS Foundation] Trustees are now seeking stakeholder input on the need for global sustainability standards and gauging support for the Foundation to play a role in the development of such standards.” IFRS Foundation website, October 2020 Answer the following questions related to the proposal that the IFRS Foundation establish a Sustainability Standards Board alongside the International Accounting Standards Board (IASB): a) Critically analyse the strengths and weaknesses of one of the current frameworks or set of standards designed to increase transparency on sustainability issues. (Upper limit 1,000 words excluding references pertaining to each question.) 10 marks b) Discuss the role that accountants can play in helping organisations incorporate climate change and other sustainability issues into decision making. (Upper limit 1,000 words excluding references pertaining to each question.) 10 marks Total 20 marks

Answer 1

a)The concept of sustainable developmentbegan to enjoy great popularity almost three decades ago, specifically in 1987, when it was used within the Brundtland report “Our common future” of the World Commission for the Environment, where it is defined as the satisfaction of current needs without compromising those of the future.

“Satisfy the needs of the present without compromising the ability of future generations to meet theirs,” reads the document. All a declaration of commendable principles with which it is tremendously easy to agree, although the truth is that it has not been possible to put into practice. But, why is it so difficult to achieve it? There are many vested interests that impede it, from those of the big companies to the same production schemes that characterize the world economy.

Advantages of sustainable development.

A review of the advantages and disadvantages of sustainable development allows us to better answer this question, while helping us to understand the different dimensions of the concept, beyond its simple and idyllic definition, incomplete in reality.

Among the pros of sustainable development , obviously its objective, perhaps utopian, but at the same time necessary to save the planet from a major crisis , must be cited . To do this, it proposes a feasibility solution by harmonizing the economic, social and environmental aspects.

Consider any of these issues separately will lead us to a dead end sooner or later. On the other hand, taking care of the environment, its resources, without renouncing social and economic progress is synonymous with sustainability and avoids a disastrous outcome.

The proliferation of sustainable products and services has the advantage of creating a better world for all , not only more sustainable but more ethical. In an environment that tends to sustainability , governments must be responsible and citizens are more aware and ask important questions in their role as consumers.

Lower environmental impact

The main pillar on which all this is sustained and where ideas take shape to develop the economy without compromising nature. As it involves reducing the emissions of gases that create phenomena such as acid rain or global warming, it directly causes the search for alternative, clean and equally effective forms of energy.

In the same way, as a large part of human activities are responsible for the deterioration of the environment, adopting this ideology entails doing something to reduce pollution, which can bring positive results such as better air quality, more green areas, the preservation of biodiversity of the planet, the subsistence of more species, etc.

Guarantee of a better future.

With the current situation of the delicate environment, the fact that actions are taken to reduce the effect of the warming of the land or other events such as the melting of the poles or changes in such an abnormal climate, guarantees that the Next generations of people can have an adequate life in the future.

This also means ensuring that the planet’s natural resources are not exhausted and there is enough to be renewed or, if not, that they last for a good number of years, as in the case of oil or gas. natural.

Disadvantages of sustainable development

One of the main obstacles that the application of sustainable policies finds itself in is the duality that exists between the need for solutions and strategies that transcend borders , since it is a cooperation that today is not being produced, much less there are visos of a hopeful future.

Currently, unfortunately, global patterns of production and consumption go in the opposite direction to that required by a sustainability policy. However, everything that glitters is not gold, and there are also numerous negative elements in sustainable policies.

Governance itself has to face a constant uncertainty , because there are many aspects that must be married to achieve a result that achieves that desired sustainability.

And, in the same way, even the tools considered more sustainable, such as organic farming or renewable energy sources have a host of drawbacks that need to be tackled intelligently in order to really help that sustainability.

Thus, although sustainable development can help to end poverty in the world and adjust social inequalities, addressing human needs in a fairer way and reorienting technology to respect the planet and ensure its long-term viability, there are also negative consequences.

Among others, that change of mentality that is demanded would hurt the big capitals, which means that a radical transformation of society would be necessary so great that it is difficult to trust that it will happen.

Do not abuse nature, the human being or turn the economy into an instrument that enriches only a few is the goal of sustainable theory, a paradigm that today invites you to dream and, of course, also to fight to do so reality. A better world is possible.

Costs

Although intentions are good, carrying them out costs work because it is about reducing or completely dispensing with energy that already supplies part of the population with a new one, changing infrastructure, consumption habits and this whole transition can be very expensive

In this sense, the perspective also influences from the point of view, because the countries of the first world would not have much difficulty in adopting new forms of energy, but in the developing nations, it would not be possible to assume these expenses.

Unemployment in some areas.

Changes to preserve and care for ecosystems and biodiversity can cause several industries to reduce their activities or, in the last case, stop them altogether. This can bring unemployment for many people who have dedicated their whole lives to work in a single sector, such as the coal industry.

Although in sustainability a better quality of life is contemplated in the future, it does not take into account the collateral effects for the population in the present.

Fragile commitment.

As the transition to a more environmentally friendly industry is more costly and difficult to meet because of the points mentioned above, there is a risk that the commitment made with society is not so serious. This inconvenience would occur because the results obtained are generally long-term, but in places that are just developing, it may not be possible to wait so long.

More requirements.

The companies, plants, factories and others responsible for affecting the environment would have more requirements to function, such as reducing their carbon dioxide emissions or correct treatment of their waste, and although they seem necessary and common sense, not everyone could meet them without compromising their efficiency and their work, in addition to the entry requirements would be very high for small companies.

b)

1. Provide better corporate information

Accountants can help improve how a company communicates with its stakeholders by innovating how it reports, for example by using the integrated reporting <IR> framework. Reporting should disclose relevant financial and non-financial information (such as on environmental, social and governance matters (ESG)), Accountancy Europe has explored the future of corporate reporting and promotes presenting corporate information via a Core & More approach. This involves focusing on what really matters and linking financial and non-financial information in corporate reports.

2. Provide independent assurance

Independent assurance is key to ensure if information is trustworthy – and thus to prevent greenwashing. Accountants have the skills to audit companies independently and provide assurance on their sustainability processes. Accountants report on the organisation’s material weaknesses and offer insights on long-term business implications. They enhance the organisation’s internal decision-making process and hence its ability to achieve sustainability objectives.

3. Assign costs to negative impacts on the environment and society

Accountants can help assessing the real cost that corporate activities generate. For example, smartphones can be extremely polluting, and fast fashion can result in human rights violations in the production process: these impacts come at a cost to society and need to be transparent.

4. Encourage ESG goals

Accountants can help businesses embed sustainability throughout, from formulating strategy to improving processes and measuring performance. And accountants need to comply with international standards for their ethical behaviour, including integrity, objectivity, and professional competence and due care.

5. Help businesses implement ESG regulations

Accountants can help comply with existing laws and prepare for upcoming legislation. The EU and national legislators require businesses to consider ESG factors more. Accountants offer strategic advice on these obligations and provide roadmaps to help companies, especially SMEs, adapt.

6. Perform on-the-ground monitoring and measuring

Accountants can support the company with improve business processes and ensure that companies take a long-term view with the business choices that they make. This includes evaluating or auditing processes and ensuring that companies avoid short termism.

7. Identify ways to reward sustainable policies

Accountants can ensure that a company gains benefits from its sustainable practices by enhancing employee retention, customer satisfaction, aligning remuneration on sustainability targets or applying for funding and subsidies that help companies become more sustainable.