Sustainability standards provide a vital symmetry between ESG commitments and enduring corporate success. The API took part in the PAFA multistakeholder meeting on sustainability, reporting and assurance on the 26th of January 2023. The engagement attracted a wide range of stakeholders from academia, professional accountancy bodies (PAOs), standards setters, supreme audit institutions (SAIs), accountants general and other key influencers.
Emeritus Prof Mervyn King, the renowned value reporting expert made a presentation on value creation and integrated reporting. He is a senior counsel and former Judge of the supreme court of South Africa. He is the brainchild of the King Code of Governance.
He recognised the ongoing global value reporting revolution. He took the participants through the history and importance of value reporting while underscoring the role and significance of sustainability reporting standards. The value reporting foundation has since been integrated within the IFRS Foundation.
Prof. Mervyn observed that value is what the employers, banks, governments, investors and citizens are interested in and therefore the modern professional accountant and auditor should equip themselves to be chief value creators. Organisations should create cultures of value creation. Focus should be placed on sustainability reporting about value creation and communication of the sustainability / ESG interventions using sustainability reports. The Boards should take responsibility for integrated thinking approach to both value creation and sustainability reporting. Organisations that embrace a sustainable approach to doing business will realise success and lasting endurance.
The engagement kicked-off with introduction and remarks from the PAFA CEO, Alta Prinsloo. She reiterated the critical importance of Environmental Social Governance (ESG) and the need for the profession to stay future ready. Notably, accountants and auditors are ranked 4 out of 20 in the most recent ranking of jobs that will decline or disappear in the face of a fast changing and disruptive work ecosystem.
The IFRS foundation representative Dr Suresh Kana and Dr Ndidi Nnoli-Edozien provided an overview of the objectives and governance arrangements of the IFRS Foundation with a detailed articulation of the role of the International Sustainability Standards Board (ISSB). Participants were briefed on the benefits of the International Sustainability Standards (ISS) as well as the plans and milestones achieved in the on-going work of the ISSB. Adoption of the standards in Africa will attract investment and boost socio economic development (See API’s take below).
The discussions considered actions necessary to realise the successful adoption and implementation of the sustainability standards. Among the proposals from breakout sessions were the need for training on the sustainability standards and the communication to standards users and investors about the value propositions from a business case/ benefits perspective. It was also noted that the Africa Integrated Reporting Council, The King Committee in South Africa, PAOs across Africa, Academic Institutions and tuition providers, Supreme Audit Institutions, Accountants General and other entities will be critical in driving public education and awareness on sustainability. It was also recognised that having in-country champions for the sustainability agenda will be essential for the successful adoption of the sustainability standards.
PAFA members and associates represent more than 123,000 professional accountants on the African continent. Drawing on studies conducted by PAFA and key collaborators, the outcomes of the 2022 PAFA PAO Leadership Forum, and publications of the African Professionalisation Initiative (API) and IFAC, PAFA highlights five areas of focus that professional accountancy organisations should consider in developing their strategies for 2023 and beyond to support the development of future-fit professional accountants for Africa:
- Sustainability reporting and assurance
- Governance, transparency and accountability in the public sector
- The quality of accountancy services
- The Africa Continental Free Trade Area (AfCFTA) Agreement
- Anti- corruption and the fight against economic crime
We laud PAFA’s focused leadership and call on the accountancy profession and all partners and stakeholders to support delivery of value for citizens along these key value pillars: people, planet, and prosperity.
The API’s staff believe that the integrated thinking approach and interpretation of the above 3 value pillars / elements will propel Africa’s and global progress as below:
People – People are the most important resource and people also bear sole responsibility for prudent choices on our only home – the planet. People are social beings and society is a product of choices that are harmonious with societal (Social) progress. People are represented by the S in ESG (Environmental Social Governance). Social investments and transparent accountability and compliant reporting for these investments will eliminate opaqueness in tracing the causal relationships between budget investments and value created. Social investments for people/society will realise broad access to: Quality health care; Quality housing; Quality Education; Equitable justice and rule of law; Security and peace; Quality infrastructure including transport, internet access, energy infrastructure etc.
Planet – The current API Newsletter headlines net-zero obligations for your organisation. The planet is represented by the E in ESG (and ultimately there’s a lot to be concerned about on the environmental impact drawing from human / people’s actions). All governing bodies should set their net-zero targets and account for budget spending in realising those targets (including environmental restoration and emissions reduction) using the sustainability standards and where applicable IPSAS, IFRS and other applicable accountability and information reporting disclosure frameworks and country laws. Examples of potential actions are plentily available.
Prosperity – The call in the UN SDGs to “leave no one behind” places responsibility upon all policy leaders to ensure prosperity for all by delivering on the people and planet targets thereby realising success on the sustainability development goals. For Africa, accountability for spending will be possible through working with the accountancy and auditing professions. This in turn assures or demonstrates whether governments will earn a return (none, low, medium or high) on the spending in the continuing quest to realise the seven aspirations of the African Union (AU) Agenda 2063 that includes achieving the Africa Continental Free Trade Area (ACFTA) objectives.
ESG is a core driver for sustainability coupled with accountable, prudent and strategic investments by private sector and governments. To ensure smooth, comparable, efficient, clear and consistent planning, measurement, reporting and disclosure of information to stakeholders on ESG investments, the International Sustainability Standards being developed by the International Sustainability Standards Board at the IFRS foundation and the IPSASB (Public sector) at IFAC will play a key value adding role.
We therefore believe that ESG planning, measurement and reporting success will be anchored upon and enabled through development, global adoption and implementation of the high-quality sustainability reporting standards.
The hidden E (Profits/ Economy) in ESG (EESG) would significantly be successful if organisations could do good for people and the environment as they pursue their service, income, profit or other business missions. A study in 2022 found that investing in ESG has positive and highly significant relationship with the firm value growth.
Boards and public policy leaders are encouraged to set annual and medium term ESG performance targets including approval of policy guidance on ESG. Institutions are encouraged to use the International Sustainability Standards to anchor their planning, measurement, reporting and disclosure of information on ESG and sustainability. Above all, having sustainability as a standing agenda item at periodic meetings will advance realisation of the desired outcomes.
For detailed guidance and further reading, please read the current API Newsletter and visit the PAFA website and learn about PAFA’s initiatives aimed at delivering value in 3 key areas – people, planet and prosperity.