There is more to environmental, social and governance (ESG) reporting than some companies are aware of. For some, it refers to another mandatory report to issue every year about their contribution to the environment and society. But for others, it’s a valuable attribute to not only integrate into the organization, but a way to run a sustainable and successful business. But when it comes to making those landmark changes, many organizations don’t know where to begin.
Some companies form sustainability teams to do all the work, and though these individuals may have the relevant knowledge in ESG and sustainable business practices, they may lack the financial knowledge to meaningfully connect those practices to the company’s finances and operations to effectively initiate change.
This is where accountants who specialize in ESG can come in. They have the financial know-how, business acumen and knowledge in sustainability reporting frameworks and best practices to help companies get a head start in meeting and even going beyond their sustainability goals. They can help companies set the right ESG targets, advise on what reporting frameworks to use for preparing ESG reports, provide independent assurance of such reports and provide ongoing advisory to bring businesses towards their vision.
This special report speaks to experts within the ESG specialization – preparers of ESG reports and assurance providers – to find out how they work with businesses, how their role is key to companies issuing an accurate ESG report, the growing need for better ESG reporting and assurance in Hong Kong, and how professionals can equip themselves with the necessary skills to succeed in the field.
What is ESG?
Within the last five years, ESG has seen considerable growth in Asia, especially in Hong Kong, as companies understand that their success is not only contingent upon their financial performance but also their relationship with society and the planet. Investors are also expressing more interest in socially-responsible companies, and using their ESG reporting in their investment decision-making.
A 2019 study conducted by corporate and investment bank Natixis, Looking for the Best of Both Worlds, found that seven in 10 investors believe it is important to make a positive social impact through their investments. It also found that more than half of investors surveyed would avoid investments that conflict with their personal values. Growing concerns about climate change risk have bolstered responsible investment, with socially conscious investments increasing globally by 34 percent to US$40.5 trillion in 2020, up by 27.5 percent compared to 2019.
Data from the United States Global Change Research Programme indicates that global surface temperatures have risen by 0.9 degrees Celsius within the last 100 years, while the United Nations Intergovernmental Panel on Climate Change warned back in 2018 that the planet only has a decade to prevent the worst impact of climate change.
The Paris Agreement, an agreement signed in December 2015, aims to strengthen the global response to the threat of climate change by keeping a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius. All of this has piled pressure on companies to do their part and focus on ESG reporting.
An ESG report is an assessment issued by companies every year detailing their ESG performance. In general, the environmental aspect of ESG looks at a company’s energy emissions, waste management systems or resource consumption, for example. The social facet examines how a company manages its relationships with employers, suppliers, customers and the community, while the element of governance deals with a company’s leadership, executive pay, audits, internal controls and shareholder rights.
There is no one-way-fits-all approach to reporting ESG. It is up to companies to review their operations and industry to decide which of the many reporting frameworks available to use in disclosing their ESG performance.
Setting the right targets
Helping a company to put together their first-ever ESG report was no small task for Kitty Fung when she was chief financial officer of Vitasoy. It was 2016 and the Hong Kong Stock Exchange (HKEX) had just issued new ESG reporting guidelines, along with a reporting framework for listed companies to make ESG disclosures. “I had to do it from scratch. All listed companies had to, especially after the requirements were announced,” says Fung, now the CFO of the West Kowloon Cultural District Authority, and a member of the Hong Kong Institute of CPAs. Working with a consultant, she familiarized herself with the framework issued by the Global Reporting Initiative (GRI) – her previous company’s reporting framework of choice – and began leading her team. “We employed an ESG consultant to guide us with the ESG reporting and in understanding GRI requirements,” she says. “When it comes to ESG reporting, one needs to set targets first. The right key performance indicators (KPIs) help to present our actuals against targets and detail what we have done to save energy.”
By setting precise, feasible and meaningful sustainability goals that articulate the company’s vision and strategy, organizations are able to work towards a goal, while garnering more interest and trust from existing and potential customers, investors and stakeholders.
Fung made sure KPIs were put in place to track all three aspects of ESG. As a beverage company, KPIs to measure Vitasoy’s carbon footprint were especially important, she notes. “Vitasoy is a manufacturer and bottler, so we began tracking how we recycled plastic bottles, conserved water and reduced energy usage, to name a few, and set goals for each,” she says. KPIs were also set to measure hours of staff training, staff composition, board diversity and the company’s corporate social responsibility, such as how it helped the community and underprivileged through volunteer work and donations. “We wanted to ensure that we have a safe working environment and diversity in our workforce. So in deciding what KPIs to track, I had to make sure they were meaningful and relevant to the company,” adds Fung. “My role was to initiate these changes and bring the board to a consensus. We all went through the parameters to measure and track, and determined that they were vital to the strategy of the company.”
“We began tracking how we recycled plastic bottles, conserved water and reduced energy usage, to name a few, and set goals for each.”
Eddie Ng, Partner, Business Reporting and Sustainability, KPMG China and an Institute member, says KPIs provide companies with direction. “It’s very important for companies to set a vision. A vision is like the goal – where the company wants to go,” she says. “KPIs measure how a company is performing against the journey to achieving the vision, whether the strategy works and whether they need to adjust their strategy.”
ESG goals vary from company to company. Many of these goals require time and effort to reach, prompting companies to set goals years or even decades into the future. For example, Unilever and Apple both pledged to reach net-zero carbon emissions in their manufacturing of goods by 2030. United Kingdom-headquartered groceries and merchandise retailer Tesco committed to using 100 percent renewable electricity within the next decade.
Companies that aren’t sure what KPIs to set could conduct materiality assessments. “This process helps to identify which ESG issues are most important to the company,” says Herbert Yung, Director, Risk and ESG Advisory at Deloitte and an Institute member. This is first achieved by gathering insights, usually through surveys, from within and outside the company. “Companies need to engage with stakeholders to understand their expectations, concerns and collect their opinions,” he says. Once a company receives feedback, Yung adds, they will have a better understanding of which ESG factors are most important and relevant to the company, and the areas in which resources must be allocated and prioritized. Companies will also have a clearer idea of what will eventually be reported.
Another way for companies to set KPIs, Ng adds, is to look at their competitors within the industry. “Companies can look at other industry players’ KPIs as benchmarks to help them set their own KPIs and compare their performance with their peers. However, the KPIs others use may not be entirely suitable as they may be pursuing different business directions. What is more important is for a company to determine its vision and set benchmarks to measure its relevant performance,” she says.
As Gigi Lee, a former senior manager of sustainability at a listed property developer and an Institute member, notes, it’s important for companies to understand which KPIs to set – and to set them with purpose. “Property developers would set energy reduction targets as buildings consume a lot of electricity during their operations. In contrast, companies operating, say, e-commerce platforms would better focus more cybersecurity and data privacy,” says Lee. Following materiality assessments, Lee’s previous company set a group-wide energy and carbon target. “We set these goals for 2030,” she says. “So, this required us to translate these long-term targets into annual targets.” In doing so, her company brought in a consultant to put forth recommendations. Lee says the next step involved using those recommendations to garner supporting from management and also different departments within the company.
The right internal controls must be put in place to track KPIs, says Brian Ho, Partner, Climate Change and Sustainability Services, EY and a member of the Institute’s Sustainability Committee. “ESG is a cross-departmental issue. You can’t rely on only one department,” he says. If a company wants to set up reduction targets for their greenhouse gas emissions, which often come from different sources, each department must be trained on how to track and monitor performance, he says. “Stakeholders require or expect management targets for these KPIs, so the roles and responsibilities of those managing them is essential.”
Ng says that companies should set realistic KPIs, as setting the bar too low might bring more harm than good. “One way that companies ‘greenwash’ their reports is by setting KPIs that are easy to achieve to show that they are ‘achieving’ something to boost their image. This isn’t meaningful in any way,” she says. Greenwashing refers to the practice of companies marketing themselves or their products as more environmentally friendly than in reality. “So I always encourage companies to be honest with themselves, not only for the sake of meeting disclosure requirements, but to do it properly and meaningfully to understand how their company is performing”
ESG-related tasks and ESG reporting is usually taken on by a company secretary, investor relations or even a sustainability department. However, as Yung notes, the finance department now plays a role in helping companies with their ESG-related tasks. “Setting KPIs involves a lot of data collection and analysis,” he says. “Accountants can help companies develop accounting policies for KPIs, such as setting a proper formula for a company’s energy intensity or staff turnover rate. We could also help determine with the board whether the correct internal controls are put in place to measure all this data.”
Yung, who helps clients to set ESG goals and develop their ESG strategies, notes that some companies may at first opt to only disclose KPIs that look the best on paper. “We see this quite a bit, so it’s our job to advise them on this,” he says. “I tell them: ‘ultimately, the level of your company’s ESG performance isn’t quite as important as the level of your transparency. It’s always better to disclose bad news first, before the media or a non-governmental organization publicly criticizes you for non-disclosure.’” This, he adds, is even more important when it concerns listed companies, as a tarnished company image could deteriorate the trust of investors and stakeholders. To prevent this, clear lines of communications must be in place, notes Yung. “A more robust reporting system and regular communication needs to be established between a company’s operations and management regarding ESG issues. This will help management to be aware of red flags and issues that the company as a whole needs to respond to and report,” he says. “Incorporating ESG into a company’s risk management system will ensure that all risks, processes and controls will be properly monitored at corporate level.”
More meaningful reports
On 18 December 2019, the HKEX announced enhanced ESG reporting requirements, which apply to financial years commencing on or after 1 July 2020. They require a company’s board to disclose its oversight of ESG issues, its ESG management approach and strategy, and how it reviews progress on ESG related issues. The board must have a formal ESG governance structure, sufficient knowledge and expertise in ESG, internal risk management processes that connect to ESG risk management, an overall ESG strategy with clear goals and targets. The new requirements also have a shortened reporting deadline of five months for the end of listed companies’ financial years.
The revised requirements are a step in the right direction, notes Sammie Leung, Climate & Sustainability Leader PwC Mainland China and Hong Kong. “The revision of the ESG disclosures have made waves in the market and led to many positive changes in the last couples of months,” she says. “Many C-suites have taken the changes seriously and the board of directors are now more aware of their expected responsibilities in ESG and climate-related topics. A number of my clients have renewed their governance structure, redefined their mandates of ESG, risks, corporate governance and added clarity to how each person would play a role in supporting the board of directors to oversee ESG matters for the listed company.”
Before the HKEX updated its ESG reporting requirements, companies had been following its “comply or explain” requirements, which made it compulsory for listed companies to disclose their ESG policies and plans, and if not, explain why they are not able to.
Prior to the release of the HKEX’s ESG Reporting Guide, most listed companies in Hong Kong chose to disclose their ESG policies using the GRI reporting framework. As of February this year, 75 percent of the world’s largest 250 corporations use GRI Standards to report on their sustainability performance. While it is the most widely used reporting framework globally, there are other frameworks companies can use to disclose ESG-related information (see sidebar below). Organizations also have the choice of disclosing using reporting frameworks by the Task Force on Climate-related Financial Disclosures (TCFD), the Sustainability Accounting Standards Board (SASB) and the Carbon Disclosure Project (CDP) and the International Integrated Reporting Council (IIRC).
But the long list of reporting frameworks initially dissuaded companies, Leung notes, prompting the HKEX to release its ESG Reporting Guide in 2015. “In a way, the HKEX did the homework for companies to make everything more digestible and easy to understand,” she says. “By understanding the needs of international investors, looking through international frameworks and many market consultations over several years, they came up with a shorter list for Hong Kong-listed companies.”
Though the list of ESG reporting requirements is shorter than that for other stock exchanges, Yung believes it was a step in the right direction for the progression of ESG in Hong Kong. “ESG is still relatively new in Hong Kong,” Yung says. He notes that following the launch of the HKEX’s reporting guide in 2015, the number of ESG reports and the quality of those reports increased in Hong Kong. “There were more strategic and action plans put in place, and companies also became more transparent about their ESG disclosures.” The obligatory nature of the ESG reporting requirements stipulated by the HKEX also served as a wake up call for company management. “More company board members started taking it more seriously – it wasn’t something they would do just for public relations purposes anymore,” he says.
“In a way, the HKEX did the homework for companies to make everything more digestible and easy to understand.”
The role of accountants
Accountants play a key role in helping companies with their ESG reporting and can help a company improve its ESG performance in the long run. From the start, they can advise companies that aren’t familiar with the HKEX’s ESG Reporting Guide, what materiality assessments to conduct, what specific KPIs and goals to get and how to bring businesses closer towards those goals. Accountants can also advise the board on mitigating any ESG-related risks before they happen.
“To be honest, many companies are still in the starting stage in terms of their ESG journey,” notes Ng at KPMG. “They don’t expect to tackle something sophisticated at the beginning and don’t know what they need.” As some companies may already have dedicated departments to work on ESG matters and reporting, they may require only consulting at the beginning. Other companies may need advisory for their ESG report annually.
Accountants like Ng help as consultants getting businesses up to speed. “First, we need to speak with companies to understand their expectations and vision – what they want to achieve,” she says. For the first few years, she adds, businesses simply want to meet the HKEX’s ESG requirements, though other more competitive companies may aim higher to attain better score from rating agencies.
Ng says it’s crucial for consultants to speak with management, key stakeholders or those already tasked with sustainability initiatives or reporting within the company, as well as analyse existing reports, in order to identify any gaps the organization may have in terms of their ESG performance. “Depending on how many gaps we identify, we might suggest or provide a timeline for the company, like a three-year-plan, for example,” she says. The company, she adds, must be made aware of the HKEX’s “comply or explain” requirements.
Therefore, Ng says it’s important for management to be as transparent as possible with consultants who come in and also manage the expectations of other employees before consultants come in. “ESG matters are wide-ranging and don’t require just one department. When we require information, we need to speak with different departments within the company. Some departments might not have a clue what ESG is and why we might ask for so many details,” she says. “We need to get everybody’s buy-in. When we walk in, we let other departments know why and how ESG is relevant to them and their responsibilities. To further encourage that, management must manage the expectations of all departments before we walk in.”
Luna Fong, Head of Investor Relations at Link REIT and an Institute member, says accountants have an important role to play in dealing with investors. “ESG isn’t just a hot topic – it’s raising more concerns across the investment community,” Fong says. “As accountants, we have the ability to communicate the numbers and the value of ESG to investors. It’s important that they see this connection.”
In getting this message across, she has been helping her company, a real estate investment trust company, report its sustainability practices through integrated reports using the IIRC’s Integrated Reporting (<IR>) Framework. “I’ve been working with the sustainability team to build our integrated reports since 2015. We’re one of the first companies to issue integrated reports in Hong Kong,” she adds. After educating investors on the importance and value that an integrated report brings, Fong’s first challenge was deciding which of the <IR> Framework’s six capitals would apply to her company. The capitals identified by the IIRC include financial, manufactured, intellectual, human, social and relationship, and natural capital, which together represent stores of value that are the basis of an organization’s value creation. “The challenge was bridging the gap between integrated reporting, our organization and what stakeholders value,” explains Fong. “By looking at these six capitals, I developed the integrated reporting and value creation model to make sure the capitals meet KPIs that help our investors measure value.”
In addition to climate risks, investors are also looking at how a company structures its management, adds Fong. “There’s a misconception that ESG is simply about how many trees you can plant. It’s not just about that,” Fong says. “It has to be a top-down approach, and that starts with good governance. Good governance helps companies grow.”
The skills needed
As the adoption of ESG picks up in Hong Kong, accountants will be increasingly relied on to help companies with their ESG reporting and to better integrate ESG into their business strategies. “Accountants should know how to connect the dots between financial and non-financial information,” says Lee. “This would help them to provide better advisory during the preparation of an ESG report in order to link a company’s ESG performance with its financial performance.” She adds that accountants can also build a business case to garner support from senior management to invest in ESG issues. “Some people still think ESG is merely an expenditure and only benefits the environment, while in fact, it saves on cost and helps a company’s brand and reputation. Reducing energy consumption equates to cost savings and this would benefit both the company and environment,” she says.
Yung at Deloitte agrees, noting how knowledge in ESG will help accountants to add value to businesses. “ESG will become more integrated with a company’s business and financial performance,” he says. “Knowledge in ESG can help accountants to better evaluate a company’s performance from beyond only a financial perspective. We would be able to identify trends, reduce risks and also seize opportunities in ESG and apply this knowledge in producing annual reports and helping to make business decisions. It also helps us to advise companies on the consequences of not doing well in this area, and how that could affect their reputation. Accountants must know how to articulate this to companies.”
This will require accountants to equip themselves with the relevant knowledge and know-how in order to provide advice. “We need to be very familiar with the ESG taxonomy – carbon emissions, climate change, diversity and inclusion and responsible investing, to name a few. These terms aren’t common in the accounting world yet – but they will be.”
This also means that the accountants will be required to be familiar with the HKEX guidelines. “A firm understanding of the HKEX’s ESG requirements is essential,” notes Lee. “Though there are still gaps in the HKEX’s requirements compared to international ones, it’ll still take a few years for companies in Hong Kong to familiarize themselves with them.”
Beyond knowledge in ESG is the need for strong communication and people skills. “We need to know how to translate this information so companies can understand the implications of ESG and the impact on business strategy and operations,” says Ng at KPMG. “In terms of a financial statement audit, the key contact is a finance individual. But since the scope of ESG is so wide, we definitely need accountants who have great interpersonal skills in order to communicate with a wide range of people within a company who may or may not have knowledge in finance.” Lee agrees: “When we talk about ESG integration, all departments within a company are involved as they all have a role to play. Therefore, accountants must know how to communicate ESG information with anybody.”
By knowing how to communicate ESG issue in layman terms, accountants will be able to help all departments to understand how and why ESG is important to the company. “You have to know how to get people’s buy-in, especially for something as new as ESG.”
“Accountants should know how to connect the dots between financial and non-financial information.”
Ho at EY notes that despite ESG assurance still in its infancy, there is indeed growing sentiment among both companies and investors that it is becoming more important. “From an investor’s perspective, if companies seek assurance, there’s much more value in their reports. It also provides the board of directors with more confidence in their ESG data,” he says. “Because it’s only a ‘recommended’ requirement by the HKEX, most companies don’t deem it to be a mandatory. But companies that have had that ESG reports assured by a third party assurer have higher ratings. So from a capital market perspective, I believe that assurance is something very desirable and will likely become mandatory in the future.”
Leung at PwC agrees: “Investors as well as rating agencies are all looking for more reliable data,” she says. “But the HKEX knows that it’s still too soon to require all listed companies to have their ESG reports audited. It will create pushback.”
Since ESG assurance isn’t compulsory, it is usually used by larger companies, according to Yung at Deloitte. “Companies seeking independent assurance already have rather mature ESG reporting practices,” he says. “They have good systems in place and are more confident when it comes to letting accountants review their data.”
Companies may also engage third-party accountants to help improve their internal controls or data quality collection processes prior to having assurance. In attaining credibility, companies might request accountants to look into certain KPIs to make sure they have been reported correctly, adds Yung. “They might select a few KPIs they believe to be high-risk to ensure they have been presented accurately – this could be carbon emissions, energy and water usage or even their injury rate, for example,” he says.
Assurers then have to gain a full understanding of how KPIs were collected, calculated, consolidated and reported. This takes place through interviews with staff members, where accountants identify the company’s internal control procedures to ensure data had been accurately tracked during the reporting process and whether there were any gaps in policies. This may also require the collection of data samples to perform substantive testing. “We obtain breakdowns of their KPIs, for example, a company’s electricity consumption,” says Yung. “Say a company has 10 different offices in different locations and each office has monthly electricity bills. Among the pool of bills, we’ll conduct sample tests by picking a few of them to inspect whether they match with their internal records. This lets us know whether their data is presented in a valid manner. It’s similar to a vouching exercise.”
Because there are similarities between auditing a company’s ESG report and auditing its financial statements, Ng at KPMG says accountants are well-suited to provide expert ESG assurance. “The Institute has auditing and assurance standards, which we follow,” says Ng. “In a financial statement audit, we use a risk-based approach to identify key areas and then ask for supporting information from a company such as how they came up with certain figures. We can’t simply accept everything the company says. We have to also seek external information.” Members may refer to the Institute’s non-authoritative guidance Technical Bulletin AATB 5 Environmental, Social and Governance (ESG) Assurance Reporting recently released as an Exposure Draft, which should be finalized in December, and International Standard of Assurance Engagements ISAE 3000 (Revised) Assurance Engagements Other than Audits or Reviews of Historical Financial Information, International Framework for Assurance Engagements and Related Conforming Amendments issued by the International Auditing and Assurance Standards Board in 2013. Both can assist practitioners in performing assurance engagements on ESG information.
Similarly, when Ng reviews ESG reports, she says the role requires an analytical and questioning mind. “During a sustainability assurance engagement, we look at the company’s ESG report and identify information we consider to have a high risk of misstatement,” she says. “We need to make sure they are telling us the whole truth as well. If necessary, we ask them to explain how they came up with some figures and provide supporting evidence. We can verify their energy usage through invoices.”
Assurers should be able to identify when a company is deliberately concealing information and encourage them to report their KPIs transparently. “Companies that refuse to disclose important KPIs such as their turnover or rate of injury may indicate that they aren’t doing quite as well,” adds Yung. This is through benchmarking, he adds, which makes it easier for assurers to compare ESG reports within the industry and identify companies with the most and least comprehensive disclosures.
Yung says the notion of independence is vital in providing ESG assurance. “We must follow the Code of Ethics for Professional Accountants set by the Institute,” he says. “We need to avoid coming into a conflict of interest. For example, we can’t help a company with its ESG report and offer our opinion on their ESG report the same year. Accountants must keep this in mind.”
Assurers report their findings in an assurance report based on the results of the procedure. “Our findings are usually documented in a company’s ESG report. This way, investors and the general public will be able to see our opinion,” Yung highlights. “We need to be able to tell the company what their future might look like.”
The market for ESG assurance may be small now but is poised to grow over time, notes Leung at PwC. “Investors, regulators, rating agencies and even bankers all want more detailed assurance. They’re part of the picture,” she says. The “comply or explain” requirements will push companies to seek help, especially from accountants, who will be highly sought after by more businesses that need guidance. “Companies need to disclose their estimates and calculations to provide transparency to readers, which will actually increase the demand for accountants who do ESG assurance and reporting as they have the qualities and skills to bridge this gap. Right now, there’s a shortage of accountants who have these skills.”
“We can’t simply accept everything the company says. We have to also seek external information.”
A multitude of frameworks
The multiple non-financial reporting frameworks that are currently available can make it challenging for companies to decide which one to use for disclosing their environmental, social and governance performance. As no two companies are the same, it is crucial for organizations to choose a framework that reflects their industry, accurately discloses the nature of their operations and also meets the requirements of regulators, investors, stakeholders and customers.
The Global Reporting Initiative (GRI) Standards is the most widely used ESG framework globally – it is used by more than 5,000 organizations worldwide. The first version of what was then the GRI Guidelines was published in 2000, providing the first global framework for sustainability reporting. It discloses a range of impacts, including climate change, human rights, governance and social well-being. It is used by companies in almost every sector and is favoured for its broader scope and specific disclosure guidelines.
The Task Force on Climate-related Financial Disclosures (TCFD) was established by the Financial Stability Board in December 2015 to develop a set of voluntary, consistent disclosure recommendations for use by companies in providing information to investors, lenders and insurance underwriters about their climate-related financial risks. The framework primarily focuses on a company’s impact on climate change and discloses how organizations identify, assess, and manage their climate-related risks. Over 1,500 organizations disclose using TCFD recommendations.
The Carbon Disclosures Project (CDP) has a global disclosure system for measuring and managing environmental impacts and the world’s largest database of primary corporate climate change information. Its disclosures cover climate change, supply chains, water usage and forestry management.
The Sustainability Accounting Standards Board (SASB) was founded in 2011. In November 2018, it published 77 industry-specific reporting standards for companies to disclose material environmental risks. To date, over 100 companies disclose their ESG performance using SASB guidelines across industries such as consumer goods, finance, food and beverage, healthcare and infrastructure. SASB guidelines are mainly used by companies to communicate with their investors.
The International Integrated Reporting Council (IIRC) first released its Integrated Reporting <IR> Framework in 2013. Integrated reporting focuses on the value companies can create beyond its financials – something critical to long-term success. This includes building strong relationships with stakeholders, building a loyal customer base, developing intellectual capital and managing environmental risks. Instead of a detailed disclosure and measurement standard, it is a principles-based framework enabling companies to set out their own report instead of adopting a checklist approach.
On 25 November, SASB and the IIRC announced that they would merge to become the Value Reporting Foundation in mid-2021 in a move to push for the harmonization of existing ESG reporting frameworks.
An increasing number of observers are calling out for an alignment of the slew of frameworks to move away from the current fragmented approach. Recent developments signify a strong drive towards achieving this. For example in September, the International Federation of Accountants published Enhancing Corporate Reporting: The Way Forward, a roadmap for the creation of an international sustainability standards board alongside the International Accounting Standards Board.
A day in the life
Communication skills are vital, as an average day for a professional working in ESG can involve meetings and training session with different individuals across a wide variety of topics. “A typical day sees me communicating and engaging with different stakeholders all the way from the board level to the operations level to raise their awareness and garner support on ESG topics,” says Gigi Lee, a former senior manager of sustainability at a listed property developer and an Institute member. “We’re also busy collecting and analysing data for ESG reporting purposes, especially during ESG rating season and reporting season.”
For Herbert Yung, Director, Risk and ESG Advisory at Deloitte and an Institute member, the enthusiasm that surrounds ESG sees his schedule filled with meetings, presentations and also interviews. “Because ESG is such a new and hot topic, I’m invited to speak at seminars and to write pieces on ESG for newspapers and publications,” he says. “My day isn’t only spent at the office or at the client’s site. I could be in meetings with standard setting bodies and stakeholders for the purpose of sharing insights on ESG and to speak about its potential and value to the market. So I’d say we aren’t only serving our clients, but the wider community on the subject matter of ESG.”
The role may also involve training other staff members, says Eddie Ng, Partner, Partner, Business Reporting and Sustainability, KPMG China and an Institute member. “In addition to ESG engagements, I provide technical support to our ESG staff and our auditors,” she says. “So a regular day consists of training or coaching different teams on various topics. In the morning, I might meet with one engagement team to discuss stock exchange requirements and later I’ll have to discuss with another team about financial statement audits.”
Working in ESG is rewarding, and those in the field are grateful for the opportunity to not only lend their experience to making a difference, especially if they are passionate about the environment. “By working in ESG, I enjoy seeing our initiatives benefitting the company, local community and the planet,” Lee says. “It’s even more rewarding to see changes in people’s mindsets and behaviour when we promote different ESG initiatives among employees. Every small step taken by everyone contributes to a bigger goal.”
Kitty Fung, Chief Financial Officer at the West Kowloon Cultural District Authority and an Institute member, says it is most satisfying to play a key role in bringing an ESG report together. “Putting together an ESG report is a daunting task – there are a lot of numbers to track and analyses to be done,” Fung says. “But when you look at the report and know that your company is doing good for the environment and community, it’s rewarding. It feels great to know you were part of this change.” Sammie Leung, Climate & Sustainability Leader at PwC Mainland China & Hong Kong, and an Institute member, agrees. “An ESG report isn’t just some data in a report. It shows a company goals in reducing their greenhouse gas emissions. That, to me, is pretty cool.”
Yung says it’s fulfilling to provide advice to management on the ESG performance. “Through my work, I’m able to influence the actions of management and that could influence the hundreds or thousands of employees of that company,” he explains. “This enables them to become more environmentally and socially friendly, and this, in turn, makes the world a better place and could improve the lives of even more people. It’s very meaningful to me.”