Editors’ Note: The following is an introduction to a new column focusing on sustainability accounting and reporting, as well as integrated reporting; environmental, social, and governance reporting; and related “green” topics of interest to accounting professionals around the globe. Column editor Tracey J. Niemotko of Marist College spent more than a decade in public accounting before entering academia and focusing her teaching and research on sustainability. She has served on the NYSSCPA board of directors, represented the Society on the AICPA Governing Council, and is a member of the International Financial Reporting Standards (IFRS Sustainability Alliance.

It is difficult to recall when the term “sustainability accounting and reporting” (SAR) first came to my attention. I place it around 2014, when I first decided to do an internet search to determine what this “sustainability concept” was all about and, more importantly, what SAR had to do with accounting; the intrigue to me was the potential connection to the accounting profession. I recall finding unsatisfactory search results explaining that SAR meant being sustainable, which did not shed any light at all.

When I landed on the Sustainability Accounting Standards Board (SASB) website, it was impressive to see not only the mission of this entity, but also that it was chaired by Michael Bloomberg, which piqued my interest even more. If someone as successful as Michael Bloomberg was willing to invest his time and resources, this was an endeavor worth learning more about.

Because I have been an accounting professor for several decades, the thought of nonfinancial data influencing the assessment of companies and having the ability to affect stock prices compelled me to learn more, to better serve my students. After all, we systematically teach that financial statements are the most significant tool used to gauge the assessment of a company, and thus stock price. Moving forward, it seemed evident that SAR would also have to be considered because an entity’s sustainability endeavors and outcomes also influenced stakeholders’ decision-making in a significant way. As an accounting professor, I felt compelled to share this bigger picture with students.

After gaining a better perspective of SAR from the SASB website, I researched new course offerings at colleges and universities throughout the United States to see if SAR was being addressed. At that time, no courses that covered sustainability concerns surfaced during my internet search. I decided to introduce SAR topics to my graduate accounting students; we began discussing how the market forces driven by millennials were impacting business operations—namely how, from a millennial perspective, the employee focus shifted from living to work to working to live, and how millennials had made quality of life a priority. We shared our research in the article, “The CPAs of Tomorrow: Graduate Student Perspectives on the Value and Purpose of the Profession” (CPA Journal, August 2016)—a focus on how “nonfinancial” influences may impact businesses.

I began introducing SAR topics in all my accounting classes, and I was still curious to see how academia would embrace sustainability concepts—if at all. I noticed that my alma mater Fordham University began offering a course covering SAR material, which made sense because then–Fordham President Father Joseph McShane worked closely with Michael Bloomberg via Bloomberg Philanthropies and was thus privy to SAR updates. In 2017, I had the opportunity to attend a SAR Conference at Fordham to hear Bloomberg address sustainability topics. Among other things, the influence of SAR on how entities are managed was discussed. Bloomberg made a statement that tied the millennials with the changes impacting businesses and how certain aspects of business were being influenced by the changing expectations of millennials regarding the workplace. For example, he conveyed that during job interviews, it seemed that instead of businesses interviewing millennials, millennial candidates were interviewing the employer.

To this point, millennials want to align with socially responsible companies that are good stewards of the environment and equitable to stake-holders. In past decades, I observed that students consistently took the job opportunity that paid the most upon graduation. Today, students scrutinize a company’s SAR dealings, such as social responsibility, environmental concerns, and the treatment of employees, before agreeing to take a position. Sustainability factors seem to match or even outweigh the pay scale. Thus, it became important to me to continue researching SAR.

I increasingly found the “social” forces that drove sustainability to be very interesting. I wondered where SAR would lead us and how it would impact accounting education and the accounting profession. I was curious as to how sustainability issues pertaining to the environment, social capital, human capital, business models, and management would be reported, as well as which assurance services would be needed to validate this reporting. This SAR movement seemed like an opportunity to expand the services offered by the accounting profession.

Incorporating Sustainability into the Curriculum

Instructors can discuss how stakeholders’ demands to make sustainability concerns a corporate priority have compelled management to embrace sustainability goals and endeavors, making sustainability accounting and reporting a priority. Students generally relate to sustainability goals, which makes them more open to learning about the business, its accounting, and the correlation between SAR and corporate assessment.

A practical way to incorporate SAR into the accounting curriculum is to have students research a publicly traded company of their choice to become familiar with its recent financial reporting as well as its sustainability reporting. Students can analyze financial data and are often initially surprised to learn that companies also report on sustainability. Students can use the SASB’s five dimensions of sustainability (Exhibit) as a “sustainability checklist” to see which dimensions, if any, a company has addressed. Depending upon the level of the accounting course, students could research the answers to some or all the following questions:

  • ▪ As an introduction, discuss why you chose the company and the nature of its operations (which products or services it provides).
  • ▪ Provide corporate stock valuations spanning the last three years. How is the company doing? How did it fare during the pandemic?
  • ▪ After reviewing the financial statements (income statement, equity statement, balance sheet, and cash flows) for the last three years, what is your overall perception of the performance of your company? Can you see a correlation between the financial data and the stock valuations researched in Question 2?
  • ▪ Research and discuss the company’s sustainability endeavors and outcomes. Do they reflect any of the SASB’s five dimensions of sustainability (presented in the Exhibit)? Is its sustainability data reported within its annual report, on its website, or does the company provide a separate sustainability report? What are its sustainability goals for the future? Does its focus on sustainability satisfy its stakeholders; how can you tell? Can you determine if sustainability concerns affect the company’s stock valuation? Can you see a correlation between the sustainability data and the stock valuations researched in Question 2?
  • ▪ What are sustainability metrics? Which metrics (if any) were used to report the company’s sustainability outcomes? Which entities provide sustainability metrics?
  • ▪ Can you determine if the company’s sustainability reporting was audited or reviewed in any way?
  • ▪ What are your thoughts regarding auditing/assurance services for reported sustainability data?
  • ▪ Has the entity’s organizational (management) structure been modified due to its sustainability endeavors?
  • ▪ Which entities have been providing sustainability oversight over the last few years? Explore the evolution of this authority.
  • ▪ Discuss any social media posts or current issues regarding the chosen company and sustainability. Did such events impact the company or its stock price in any way? How has the company responded to this attention? Overall, have stock prices been affected by the reporting of sustainability concerns? Discuss why you think sustainability is important and how you see it impacting businesses.

Exhibit

DIMENSION; GENERAL ISSUE CATEGORY Environment; ▪ GHG Emissions; ▪ Air Quality; ▪ Energy Management; ▪ Water & Wastewater Management; ▪ Waste & Hazardous Materials Management' ▪ Ecological Impacts Social Capital; ▪ Human Rights & Community Relations; ▪ Customer Privacy; ▪ Data Security; ▪ Access & Affordability; ▪ Product Quality and Safety; ▪ Customer Welfare; ▪ Selling Practices and Product Labeling Human Capital; ▪ Labor Practices; ▪ Employee Health & Safety; ▪ Employee Engagement, Diversity & Inclusion Business Model and Innovation; ▪ Product Design and Life Cycle Management; ▪ Business Model Resilience; ▪ Supply Chain Management; ▪ Materials Sourcing and Efficiency; ▪ Physical Impacts of Climate Change Leadership and Governance; ▪ Business Ethics; ▪ Competitive Behavior; ▪ Management of the Legal and Regulatory Environment; ▪ Critical Incident Risk Management; ▪ Systemic Risk Management Source: Reproduced with permission from the Sustainability Accounting Standards Board (SASB)