The June 2016 debate between Edward Weinstein and Stanley Goldstein about the role of the CPAs in sustainability accounting (“Sustainability—Not GAAP Measurement,” http://bit.ly/2fyI9Pj) presented two views; in my opinion, neither was about sustainability. They were about the role of accountants in new areas.
Sustainability accounting is a new area and might need independent measurement services, objectivity, and attestation by someone. Goldstein says this someone should be CPAs; Weinstein says that it should not. I say that if it is something that involves skills CPAs have, then we should investigate whether we should get involved. It is not sensible to dismiss something out of hand because it might not be applicable; it should be looked at in case it might be applicable.
When I read the elaborate corporate responsibility reports of some very large companies (e.g., GE, Pepsico, Tiffany) and see ads from equally large companies mentioning their environmentally friendly activities, it draws my attention to how CPAs can become involved. Citing some previous failures as the reason for noninvolvement is not the way to think, especially when there are many more successes of CPAs’ involvement in inchoate areas, such as computers and technology, human resources, employee benefits, transfer pricing, tax planning, and myriad other types of consulting.
Sustainability accounting is a new area. It should be explored, and, if sustainability accounting is for us, we should be jumping on it, not dismissing it out of hand. I completely agree with Goldstein.
The Author Responds
While I disagree with Ed Mendlowitz’s assertion that our article was “about the role of accountants in new areas,” he certainly may infer that as one of the concerns I expressed. More importantly, my concerns were about the assertion that “standards” published by the Sustainability Accounting Standards Board (SASB) were to any degree the equal of GAAP and that they should be accepted by those preparing, auditing, and using financial statements. At the time, the SASB was agitating for its standards to be used by preparers in much the same manner as GAAP, and for regulatory authorities (namely the SEC) to both accept these standards and require preparers and auditors to adhere to them. My comments were intended to defer consideration of such a requirement, and to point out that a too-rapid extension of service to encompass these standards would endanger the CPA brand and increase CPAs’ liability, and, possibly, litigation.
It was also my intent to inject caution into this attempt to move the profession too quickly, because of the obvious business aspects, into an area that continues to be ill-defined. I agree with Mendlowitz that CPAs should be exploring new service opportunities. It is my understanding that many firms, including one of which I was a partner, are consulting on sustainability presentations now routinely included in annual reports of large public corporations. It is, however, one thing to consult on the preparation and presentation of SASB material voluntarily presented and separate from financial statements, and quite another to include such materials in financial statements and thereby extend the CPA auditor’s assurance umbrella to these materials.
In addition, I also expressed concern about the audience to which these disclosures (presumably containing the auditor imprimatur) would be directed, namely the so-called stakeholders. This extension of the contractual arrangement between auditor and client would also potentially expand auditor liability.
I am not sure why Mendlowitz feels that CPAs need to become involved with environmentally friendly activities of clients, nor do I feel that CPAs should be jumping on this potential service area. The profession, having put a proverbial foot in this water, should carefully consider whether further immersion meets the risk/reward test.