The way companies report on sustainability is not sustainable, states Professor of Corporate Reporting Michael Erkens in his inaugural lecture. “We need to work globally towards a unified framework for sustainability reporting, so that we can better compare companies' sustainability performance and efforts.”
The value creation of an organization is no longer solely assessed based on financial results. Over the past two decades, more and more attention has been paid to sustainability reporting, reaching a broad audience. In addition to investors, it also concerns customers, employees, regulators and society. But reporting on sustainability turns out to be complicated and the speed with which laws and regulations are drawn up, leads, according to Erkens, to a non-transparent framework in which companies and stakeholders do not always know where they stand.
There are currently several national and international organizations involved in the development of guidelines and standards with regard to sustainability reporting. Key players are the European Sustainability Reporting Board (SRB), the International Sustainability Standards Board (ISSB), the US Securities and Exchange Commission (SEC) and the international Global Reporting Initiative (GRI). “These bodies often indicate what companies should measure, but they do not explain how to determine whether this applies to their company and how it should be measured. That right there is the first problem. After all, how do you determine whether, for example, biodiversity is important for your company? And how do you measure the impact of your business activities on biodiversity?”
The second problem is caused by the fragmented landscape that has developed over time. “Imagine, you are a Dutch company, that is also listed on the US stock exchange and has stakeholders in other countries. This means that you must comply with Dutch, European and American rules on sustainability reporting. In addition, your stakeholders may also want to receive reports in accordance with supranational regulations, such as those of the ISSB and the GRI. But those guidelines often do not correspond with one another, leaving you with the question of what to do as a company?” If we want to make sustainability reports themselves sustainable, we must work towards a globally uniform framework and measuring system, says Erkens. “That is the only way we can compare companies at both national and international level in a fair and transparent way. It would be a good start if the largest authorities in this field would sit down together to jointly define universal standards.”
According to Erkens, the increasing importance of non-financial reporting also has consequences for the accounting education programs. “The work of most accounting graduates focuses on technical knowledge and knowing and following the rules and regulations related to financial reporting. But I think that that is no longer enough. Accounting is essentially about communicating and analyzing information in order to make decisions based on it. This information is no longer only financially oriented, but also non-financially. The amount of information and data (such as Big Data) requires better analysis techniques based on data analytics and artificial intelligence.” That is why Erkens advocates adjustments in both the bachelor's and master’s degree programs at Nyenrode. “I am a strong supporter of a broad bachelor's degree that, in addition to accounting itself, also focuses on sustainability reporting, Big Data, artificial intelligence and machine learning. As a next step, students can further specialize in the master’s degree program, and be trained to become experts in financial auditing, sustainability reporting, or data analytics. I think that this will make the profession even more attractive to a broader group of students.”
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