Ep. 36: WBCSD & IMA - Enhancing the Quality and Value of Corporate Sustainable Business Information (with Mario Abela and Shari Littan)

WBCSD resources:

• WBCSD COSO Applying Enterprise Risk Management to Environmental, Social and Governance-related Risks
• Guidance on improving the quality of ESG info
• Enhancing the credibility of non-financial information: the investor perspective
• How to respond to assurance needs on non-financial information

IMA resources:

• https://www.imanet.org/insights-and-trends/external-reporting-and-disclosure-management/coso-framework-and-sustainability
• https://www.cpajournal.com/2019/07/29/the-coso-internal-control-framework-and-sustainability-reporting/
• https://www.imanet.org/insights-and-trends/external-reporting-and-disclosure-management/sustainability-cfo-the-cfo-of-the-future
• https://blogs.thomsonreuters.com/sustainability/2018/08/09/executive-perspective-the-reasonable-millennial-investor/

Contact our guests:
Shari Littan - https://www.linkedin.com/in/shari-littan-58bb40114/
Mario Abela - https://www.linkedin.com/in/mario-abela-75a95957/

FULL EPISODE TRANSCRIPT
Adam: (00:00)

Hello again and welcome back to Count Me In, IMA's podcast about all things affecting the accounting and finance world. We have a unique episode for you today as both Mitch and I facilitated a conversation with two guests to provide multiple perspectives on the topic of sustainability. We spoke with Shari Litton, IMA's manager of corporate reporting and technical activities and Mario Abela, a director for redefining value at the world business council for sustainable development. Let's head over to the in depth conversation held about topics relating to sustainability such as ESG and integrated reporting.

Mitch: (00:36)

There have been many articles and publications for guidance on sustainability. So to start things off, what is sustainability and why are organizations so concerned about it?

Mario: (00:53)

Thanks. There are many definitions of sustainability from the very narrow, it's just about the environment through to the inter-generational legacy that we leave for future generations to be able to kind of enjoy the same, lifestyles and the same resources that we've been at today. So the term doesn't really have any fixed meaning and it continues to evolve at the WBCSD when we talk about sustainability, we really looking at the sustainability of the business model. Can the business continue to operate as it's currently doing? Can it sustain those operations into the future?

Shari: (01:47)

No, I just want to recall that for me, when I first became fascinated by what we'll call accounting for sustainability or sustainability or integrated reporting. I always recall my reaction to the first photos that the astronauts sent back. One of the famous photos is called Earthrise and you can actually see the earth rising from the surface of the moon. And many people say that the modern environmental movement started with that photo because all of humanity reflected back on what a small planet that we have. And to me, coming with an accounting background, I think of one of the primary goals of why we have accounting to begin with, which is we have limited resources. And that picture coming back is a stark reminder that limb resources here on earth are limited. So we have to be a little bit broader or maybe evolve what account for how we're using those resources. How are we all allocating our precious resources, what are we doing with them? So for me, that one photo ties back to accounting. And when I am thinking about sustainability and business, for me personally, that's where I come.

Adam: (03:23)

So then what kind of relevant data is available for sustainability and how are businesses reporting this information? In other words, what is the current challenge?

Mario: (03:33)

The problem is that the, the relevant data is a really good so there's been a number of surveys done by the CFA Institute and other investor bodies that have demonstrated that there is actually no shortage of data and to some extent information, but that information is not particularly relevant to the sorts of decisions that investors and other stakeholders need to make. So if a board would ask management about the reliability, a lot of sustainability metrics reported today a lot of CEOs would struggle to really put their hand on their heart and commit to the credibility of the data. And in fact, PWC in its CEO survey looked at what are the sort of key decisions that CEOs, Nate, about their company, what sort of information are they getting and to what extent do I have confidence in that information? And for a number of data points where these things are absolutely critical to the business and its value creation, in fact, they either don't get very data or the data that I get I have very little confidence in and we have to remember that a lot of this data is not subject internal assurance. So often it's not, there are reviews done by internal audit and it's also not subject to external verification either. And, and the other point is that companies now report as you know in many different through many different channels. So the 10K is just one form of reporting that companies report, you know, every minute through social media.and then there are news outlets and others who are also providing information about companies. And we did some work last year where we went around the world and, and spoke to investors about ESG information. And one of the things that I told us was that at the moment, because there's the lack of standards or at least a single standard because there are, many frameworks, many standards of sorts of we've identified at the WBCSD. In fact, we have countered at least 200 frameworks with over 5,000 indicators. The problem for investors is comparability. They've, they've got no idea how to compare one number against another number because the basis upon which those numbers are calculated are often very different. And so what happens in practice is that companies use a mix of measures from existing frameworks and then often adapt them to their own requirements. So we have the entities spe...