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April 30, 2008

Big Four ready to pounce on sustainability opportunities

The accountancy profession is poised to play a more prominent role on sustainability issues, according to Big Four firm leaders.

KPMG Sustainability Services global head Wim Bartels told The Accountant there are three main sustainability areas where the profession can increase its service offering and that growth for sustainability services was well above KPMG’s overall growth.

l“I think that with the results of the readers’ survey [see The Accountant 6054], the accountancy profession needs to act. We have had some other issues in the financial audit world, so we had to focus there, but we need to build on what we already provide [on sustainability] so that for the coming years we will be ready.”

Bartels believes services on sustainability reporting and climate change internal controls are the areas where the profession can take a leadership role. He noted: “We are the ones who know how to audit information. We know how to approach both data and tax issues. That is one area where we need to work on and have a role to play.”

Deloitte Global leader of internal audit services Eric Hespenheide, who recently co-presented a Global Reporting Initiative seminar on SMEs and supply chain reporting, said he agrees both internal and external assurance on sustainability reporting is a growing area for his firm and the profession.

“We have unfortunately found that while [organisations] can say a lot of good things and mean it, there are times when the information isn’t quite as accurate as they might otherwise like it to be or represent it,” Hespenheide said. “So, internal assurance is an important element and we can provide those services as part of our traditional internal audit services. I think we are also beginning to see the emergence of greater demand for external assurance on the broad CSR reporting.”

Both sustainability experts point to carbon emissions trading and the accounting of carbon credits as another potential area of interest. “We are starting to see the merger and the integration of some of these things in the traditional reporting mechanisms that companies have around their financials,” Hespenheide said. “In the case of carbon, it may well result in some debits and credits, assets and liabilities on companies’ balance sheets.”

Bartels said he has observed a demand for the assurance of emissions trading schemes and other carbon-related disclosures. “In my view there will be a demand in the short term to assure that information,” he said. “Companies are now starting to disclose, tell us what they do, but the next question will be: ‘Is this reliable information or not?’ It is coming up already – you see some elements of information being challenged.”

The KPMG sustainability expert believes that financial auditors also can play a key role on setting up internal controls of non-financial information by drawing on their financial experience. As well as more services, the geographical spread of sustainability initiatives, such as sustainability reporting, is also gathering momentum. Bartels said KPMG firms in Brazil, the Netherlands and the UK are receiving great demand for sustainability services. He estimated KPMG’s sustainability services have grown between 20 and 30 percent during the past three years.

Arvind Hickman

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