ESG and sustainability are now critical to the success of modern enterprises, and environmental issues now permeate all aspects of a business’s operations. This holds all the more true for a company’s financial reporting. But what is sustainable accounting, and what benefits can it confer upon your business?
In this article, we’ll discuss the importance of sustainable accounting standards and show how they can enhance your brand image, risk management capabilities, and company’s financial performance. Read on to learn more.
What is green accounting?
In general, green accounting or sustainable accounting functions much the same as traditional accountancy practices. However, its imperatives are somewhat different. Rather than purely analysing the financial goals and objectives of the company, as well as all relevant assets, liabilities, income, expense, equities, and profits, green accounting seeks to ascertain the environmental impact a company has on the world, and its ongoing efforts to reduce harm.
Thus, some sustainable accounting standards might include a company’s carbon footprint, investment in alternative energy, use of renewable vs non-renewable resources, waste management, etc.
Benefits of sustainable accounting standards
Many companies labour under the misconception that adopting sustainable policies and technologies will impact their bottom line. But, in fact, the reverse is often more true, and sustainable accounting is no different in this regard. Here are just some of the advantages of sustainable accounting practices.
Brand image
A commitment to reporting on your company’s sustainability is a good way of advertising your ESG efforts to the public and can help you score significant PR points. Indeed, a joint study by McKinsey and NielsenIQ has learned that 78% of American consumers believe that maintaining a sustainable lifestyle is important to them. In reporting your sustainability initiatives, you’ll be able to show them how well your company is currently performing, and how you plan to improve down the line.
Employee retention
Companies with robust and sincere ESG policies aren’t just more attractive to consumers; they’re also more appealing to employees and potential applicants. Indeed, according to a report by IBM, 70% of employees and job seekers claim that a sustainability program makes an employer more appealing. Sustainable accounting standards are a fine way for your company to advertise its genuine commitment to ESG goals, which can help you to attract the best talent to your organisation and help you retain those valuable workers.
Risk management
Green accounting also offers businesses the opportunity to forecast potential environmental issues or weaknesses in their operations and redress them in advance. It also helps companies stay up-to-date with the latest regulatory changes and be aware of upcoming compliance challenges that could affect them in the future.
Financial performance
Finally, sustainable accounting practices can actually have a positive impact on your company’s finances. By objectively assessing your use of resources, processes, and overhead, you’ll potentially uncover inefficiencies and needless expenditures and increase efficiency with new technology or materials—saving money in the long run.
Access Ongoing Accounting Education with INAA
With sustainability metrics becoming increasingly important to businesses, accountants will have an even bigger role to play in presenting ESG success stories to the public, as well as shaping company policy in this space.
Here at INAA, we aim to help professional accounting firms achieve all their relevant goals, including their efforts to promote company sustainability.
If you’re interested in learning more about achieving green accounting, visit our website to learn more about what INAA can do for you and apply for your membership today.