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Strategy

The ESG Question You Need to Be Asking


Here are the core ESG lessons leaders should absorb and adopt today.

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FEI Daily spoke with Tim Gearty, National Director and Editor-in-Chief at Becker Professional Education, about the skyrocketing demand for its Continuing Professional Education (CPE) courses on managing the ever-changing environmental, social and corporate governance (ESG) landscape and staying ahead of the curve.

FEI Daily: How have you seen the attention to ESG change over the last 5 years?

Tim Gearty: ESG has become much more important over the past few years. It’s no longer something that’s just in the background; it’s more and more prevalent at the most important organizations to the finance function – the SEC, FASB, etc. It’s driven by a rising sense not only that investors and regulators will increasingly hold companies to account on these issues, but that we need to fundamentally change the way we do business for the good of the world. Younger finance and accounting professionals in particular now arrive with a sense that they should be doing something about these challenges, and are helping to transform their organizations from within while pressure to change mounts from without.

FEI Daily: What is the number one question you get from finance professionals?

Gearty: One of the top questions we get from finance professionals pertains to ESG disclosure – “what standards do we use?” The need to report on sustainability is widely accepted, but there’s not a single accepted standard for doing so. Finance professionals need to navigate different frameworks and understand which ones to use and when. The Sustainability Accounting Standards Board (SASB), for instance, is for reporting on industry-specific information that is financially material to the reporting company, while the Global Reporting Initiative (GRI) addresses the impact of companies, broadly, on the planet and society. There are increasingly efforts to harmonize and integrate these standards, but finance professionals need to play close attention.

FEI Daily: Which component is most concerning for them (the E, S or G)?

Gearty: It varies by industry; people working in energy, for instance, are going to focus primarily on environmental issues. The urgency of climate change is certainly a big factor, so the environment definitely stands out as an area of concern across industries. That’s why so many companies – around 1,500 – have now committed to reaching “net zero” carbon emissions in coming decades, and that’s a goal that is certainly top of mind for accounting professionals who have to help their organizations get there. But as I said, it depends on their industry and firm, and what challenges they’re most likely to face in their roles.

FEI Daily: Which area do you spend the most time on?’

Gearty:Becker’s Continuing Professional Education (CPE) sessions cover a lot of ground, and it’s important to devote time to a host of issues. That said, one issue that has become increasingly paramount is human capital, which would fall under the “social” category. This has been driven in part by new SEC regulations – which apply for the first time this year – that require human capital disclosure. But it’s also just a sense that companies can only thrive if they’re positive places to work and are good at retaining employees, especially people from diverse backgrounds. Companies are rightly paying closer attention than ever before to whether they have organizational cultures that value diversity and inclusion and treat people from underrepresented groups equitably. As the workforce becomes more diverse, this will only rise in importance as companies compete for diverse talent.

FEI Daily: How would you summarize the core lessons of the training?

Gearty: The core lesson is that the world is changing, and the role of accounting and finance professionals has to change with it. There’s no tolerance for inhumane or environmentally destructive behavior on the part of companies, and that goes for investors, regulators and consumers alike. Coming to terms with this often requires a shift in culture and mindset, as well as the ability to keep up with the landscape for reporting and disclosure which is constantly evolving. An organization that falls behind just isn’t going to make it.