Accountants’ Views on Sustainability Reporting: A Generational Divide Free

While sustainability reporting has become more than just a catchy buzzword, there remain many unanswered questions about how this initiative will be globally implemented, who will be involved, and what it will look like. Sustainability reporting serves as a corporate communication tool to inform investors about various risks and opportunities about three interconnected core elements: environment, social, and governance (ESG).¹Kwayke, Welbeck, Owusu, and Anokye (2018) concluded that sustainability reporting is still inadequately conceptualized, failing to have universal consensus on guidance, processes, and reporting. Braam and Peeters (2017) found that confusion abounds as to what sustainability reporting is, and the level to which an independent auditor can (or should) provide assurance is an ambiguous concept.

Professional organizations have asserted that the accounting profession is poised to play an influential role in the creation, adoption, and implementation of a global set of standards (American Institute of Certified Public Accountants (AICPA) and Chartered Institute of Management Accountants (CIMA) 2020). However, it is unclear whether accountants believe the preparation of, and assurance over, sustainability reports is within the scope of traditional financial reporting and assurance, particularly given that engineering and other nonaccounting consulting firms have been quick to assume these roles (Farooq and de Villiers 2017; Perego and Kolk 2012).

There is limited research on the opinions and perceptions of those in the accounting profession, particularly those with “boots on the ground,” who are either already working on sustainability reporting or whose future work may be impacted by developments in the area. The opinions of the profession are especially relevant as Egan and Tweedie (2018) noted that accountants can be “enablers or barriers to sustainability change.” By surveying 173 accountants at public accounting firms, public companies, and private for-profit and not-for-profit organizations in the United States, this study seeks to understand the extent of accountants’ awareness and application of various sustainability frameworks and to capture accountants’ perceptions of the future role of sustainability in the accounting profession.²

Our study is conducted through a generational lens. Although prior research has found mixed support for differences between generational cohorts, even regarding sustainability (Rank and Contreras 2021; Costanza, Badger, Fraser, Severt, and Gade 2012), younger generations have also been found to be more concerned about human rights issues, climate change, and wealth inequality (Ernst & Young (EY) 2021; Deloitte 2021).

We find that 31 percent of our respondents have experience working with sustainability reporting, the majority of which indicate experience with the Sustainability Accounting Standard Board’s (SASB) framework. However, the majority of respondents are also unfamiliar with many of the existing sustainability standards and other frameworks. We also find that respondents under 30 years of age are significantly more likely than those over 30 to agree that reporting on sustainability information falls within the scope of financial reporting, that sustainability information enhances financial statements for users, and that opining on sustainability information falls within the scope of assurance services. The participants’ responses to qualitative and quantitative questions indicate that there is a possible generational divide on the future role of sustainability reporting in the accounting profession.

We sent a request to 1,820 accountants to participate in our survey.³ The requests resulted in 173 completed surveys, representing a 9.5 percent response rate. Table 1 displays the demographic characteristics of the survey respondents, which reflects a diverse and well-balanced group of accountants.

Each participant was provided with AICPA and CIMA definitions of sustainability and was informed that the survey was not intended to distinguish between the three elements of ESG but rather to consider sustainability reporting from a holistic level, incorporating all these elements. The first set of questions focused on gaining an understanding of respondents’ current experience and familiarity with sustainability reporting. While there are a variety of sustainability standard-setting organizations and standards, the survey cited seven specific entities. The entities and overviews of their missions and visions are detailed in  Appendix A. The second set of questions concerned the participants’ perspectives on the future role of the accounting profession in sustainability reporting and assurance.

A summary of the participants’ responses to questions concerning familiarity with sustainability reporting and standard-setting organizations is presented in Table 2. Based on a five-point Likert scale (1 = none, 5 = extensive, midpoint of 3 = some), the average respondent’s knowledge concerning sustainability reporting was 2.082, and the average respondent’s knowledge concerning specific standard-setting organizations ranged from 1.483 (Task Force on Climate-Related Financial Disclosure (TCFD)) to 1.784 (SASB), indicating very little experience. Approximately 31 percent of the participants reported having at least some experience working with sustainability reporting (i.e., score > 1).

Of the participants with sustainability reporting experience, 24 percent are auditors, followed by those who work at publicly traded companies (19 percent) and at private, for-profit companies (15 percent). These same respondents represent a range of age groups: 22 to 29 (36 percent), 30 to 44 (32 percent), 45 to 60 (22 percent), and over 60 (10 percent). Compared to those with no working experience in sustainability, we find respondents with experience reported significantly greater familiarity with all the various sustainability standard-setting organizations (all p < 0.00). Half of participants reporting sustainability experience have worked specifically with SASB, followed by Global Reporting Initiative (GRI; 31 percent).

We also queried participants’ knowledge of initiatives by accounting-led organizations, specifically the Big 4 and the International Financial Reporting Standards (IFRS) Foundation. On average, respondents reported little knowledge of these two new initiatives (mean scores of 1.688 and 1.665, respectively), an interesting result given the level of public support both the AICPA and CIMA provided to the IFRS Foundation’s expansion into sustainability standards (Tho 2021). However, those with experience working in sustainability reported significantly greater familiarity with these initiatives than those without experience (all p < 0.00).

Table 3 presents the participants’ responses by age group.⁴ Although participants in the “over age 30” group reported the same level of knowledge as those in the “under age 30” group (difference = 0.075, p > 0.10), they reported significantly greater knowledge of sustainability reporting frameworks (all p < 0.05). The only exception is the SASB framework for which there is no statistical difference.⁵ In an untabulated analysis, we find no statistical difference in the participants’ responses based on employer (public versus industry), gender, concentration (audit versus tax), or employer size (Big 4 versus non-Big 4). As such, we focus on age as the main demographic characteristic of interest.

Table 4 presents the participants’ responses to questions concerning the future role of the accounting profession in sustainability reporting. Based on a five-point Likert scale (1 = strongly disagree, 5 = extensive, midpoint of 3 = neither agree nor disagree), the average report concerning accountants’ involvement in reporting and assurance was 3.266 and 3.168, respectively. In addition, the participants generally perceive that sustainability information enhances financial statements (mean = 3.690), should be required (mean = 3.257), and reporting standards should be uniform (mean = 3.657).

Table 5 presents the participants’ responses by age group. As depicted, accountants under age 30 are significantly more likely to believe that sustainability reporting falls within the scope of financial reporting (difference = 0.449, p < 0.01), and assurance should be required (difference = 0.404, p < 0.05). Most of the participants also believe that uniform reporting standards should be the responsibility of the Financial Accounting Standards Board (FASB)/Financial Accounting Foundation (FAF) (62 percent), followed by the International Accounting Standards Board (IASB)/IFRS (43 percent).

Commentary provided by the participants is consistent with the generational differences discovered in the quantitative data. For example, an under age 30 accounting assurance service participant said, “As we move toward being more conscientious about the impact businesses have on the social environment, sustainability reporting will become more prevalent. Companies that pride themselves on environmental safety and their impact on society will use sustainability reporting to attract investors and positive public image. This in turn will force larger companies to desire that as well, which will eventually turn into a need for other companies to be on par with their competition.”

A different under age 30 accounting assurance service participant said, “I am excited for the future of sustainability in accounting and holding companies accountable for their practices.”

By contrast, an over age 30 accounting assurance service participant said, “I think it will drive the costs of financial reporting and there will be pushback from entities implementing this.” And two different over age 30 private, for-profit company respondents said, “Sadly, it has become accountants’ jobs to report on everything, including the conflict mineral status of its supply chain. These are items that I do not believe impact an investor or lender’s decision-making process and therefore have no place in a standard set of financial statements”; and “Waste of valuable time and more important priorities.”

The study’s results provide two key contributions to the stream of literature on sustainability reporting. First, we provide empirical evidence that knowledge of and experience with sustainability reporting in the United States is very limited, which likely reflects the current voluntary nature of sustainability reporting. Sustainability accounting also has not yet found its place in collegiate curriculum or professional licensure exams.

Since the SEC is actively considering ESG disclosure mandates (Securities and Exchange Commission (SEC) 2022), questions concerning the accounting profession’s role in reporting and assurance are becoming more important. Our results indicate that accountants are not yet up to the task of sustainability reporting, whether based on knowledge, experience, or ambition. The profession must take steps to prepare for this looming change. For companies and accounting firms, this means providing opportunities for employees to train and gain experience in sustainability reporting. There are growing numbers of certifications related to ESG. For example, SASB currently offers the Fundamentals of Sustainability Accounting (FSA) credential and will continue to do so when it joins the IFRS Foundation’s ISSB, and the GRI offers the GRI Certified Sustainability Professional certification.⁶ Studying for and obtaining certifications is a way that accountants can increase their familiarity with sustainability reporting and frameworks.

For colleges and universities, this means assessing the curriculum to ensure that emerging accountants have the appropriate foundation in sustainability accounting on which to further develop their skills upon entering the profession. The Big 4 firms have been developing webinars and case studies to assist in educating current and emerging practitioners on ESG (Meyer 2021).

Second, our results also show a generational divide among accountants, with those under age 30 being advocates of change in the roles and responsibilities of accountants to embrace the growth of sustainability accounting and reporting, while more senior accountants tend to be more averse to such changes. It may be that older accountants better understand the workload entailed with sustainability reporting and assurance, and they may better understand the growing pains of implementing these types of initiatives, having lived through similar professional environmental changes like SOX. Many of the study’s “older” respondents described issues concerning global implementation, such as structural issues in global adoption, implementation, and enforcement; bureaucracy issues; and funding issues for standard setters and assurance providers.

There is mixed evidence that a generational divide on environmental concerns exists (Gray, Raimi, Wilson, and Arvai 2019). Much of the research exploring attitudes and perspectives on environmental concerns found stronger relationships to political or value orientation than to age or generational cohorts (Gray et al. 2019). However, a study by the National Bureau of Economic Research found that there were significant differences between generations in their “willingness to pay” for environmental initiatives, with older generations significantly less likely to pay than younger generations (Hersch and Viscusi 2005). The authors explain these results by hypothesizing that older individuals are less likely to benefit from climate change policy and are thereby less likely to incur economic consequences (Hersch and Viscusi 2005). In this regard, the “older” generation in this study may perceive implementation of sustainability reporting to have a greater cost than the benefit they may receive.

Recent research has also shown that younger generations (i.e., millennials and generation Z) tend to value opportunities for learning and career growth more than older generations (i.e., baby boomers) (Fogarty, Reinstein, and Heath 2017; Deloitte 2021). The opportunity to be at the forefront of a burgeoning new area of the profession would align with these values. Younger generations’ excitement and interest in seeking out opportunities to gain exposure in areas like sustainability may drive these changes. Future research could examine whether leaders intend to position their organizations for this potential market change, given their capabilities, current staff, and recruiting trends. Research exploring a deeper understanding of the drivers of both excitement and hesitation relative to these generational groups could help organizations develop appropriate strategies to satisfy their diverse workforces.

In 2011, the SASB was founded as a nonprofit organization with the purpose to develop a “common language” relative to the financial impact of corporate sustainability activities (SASB 2021). The SASB develops, issues, and maintains the SASB Standards, which guide corporations in disclosing financially material sustainability information (i.e., reasonably likely to affect corporate financial performance) to their stakeholders (SASB 2021). Initially published in 2018, the SASB Standards are industry specific (currently available for 77 industries) with the intent to address the environmental, social, and governance (ESG) issues relevant to each industry (SASB 2021). The SASB uses both a conceptual framework and rules of procedure to develop standards that are both cost effective and decision useful for both companies and their stakeholders (SASB 2021). The SASB Standards provide companies with a minimal set of financially material sustainability topics and their related metrics specific to their industry (SASB 2021). Additionally, the SASB provides companies with an Implementation Guide and investors with an Engagement Guide for assistance in implementing and understanding the SASB Standards (SASB 2021).

In June 2021, the SASB merged with the IIRC to form The Value Reporting Foundation (The Value Reporting Foundation 2021). This global nonprofit organization provides a comprehensive suite of resources with the intent to improve enterprise value and simplify and clarify the complex sustainability reporting landscape for both businesses and investors (The Value Reporting Foundation 2021). Its resources, which can be used either separately or together, include the Integrated Thinking Principles, which guide board and management planning and decision-making, the IR Framework, which provides principles-based, multicapital guidance for corporate reporting, and the SASB Standards (The Value Reporting Foundation 2021). This merger allows for synergy among the aforementioned resources and shows the progress toward a “globally accepted corporate reporting system” (The Value Reporting Foundation 2021).

To assist stakeholders to better understand, assess, and price corporate exposure to climate-related risks influencing financial performance, the Financial Stability Board (FSB) established the TCFD in 2015 to develop a single, accessible framework for climate-related financial disclosure (Task Force on Climate Related Financial Disclosures (TCFD) 2021b). The TCFD, which consists of 32 members from across the globe, identified several categories of climate-related risks and opportunities, including their potential financial impact (TCFD 2021a).

In 2017, based on member expertise, stakeholder engagement, and existing climate-related disclosure bodies, the TCFD released its climate-related financial disclosure recommendations to assist companies in providing better information to stakeholders in making capital allocation decisions (TCFD 2021b). These recommendations are suitable for all organizations, focus on risks and opportunities related to the transition to a lower-carbon economy, and solicit decision-useful, forward-looking, financially material information (TCFD 2021a). The TCFD disclosure recommendations are categorized around four core elements: governance, strategy, risk management, and metrics/targets (TCFD 2021a). The TCFD also provides general and sector- specific implementation guidance and a technical supplement for companies including scenario analysis in their disclosures (TCFD 2021a).

In October 2020, the TCFD released its most recent status report. Since the release of its initial 2017 report, the support for the TCFD has grown globally to well over 1,500 organizations as well as over 110 regulators and governmental entities (TCFD 2020). Many of these organizations have begun to implement the TCFD recommendations or have taken action to continue to refine and improve climate-related disclosures (TCFD 2020). Additionally, approximately 60 percent of the world’s 100 largest public companies support the TCFD, report in accordance with its recommendations, or both (TCFD 2020).

The International Integrated Reporting Council (IIRC) was formed in 2010 by a collaborative effort between the Prince of Wales’ Accounting for Sustainability Project, the GRI, and the International Federation of Accountants (IIRC 2021). The intent was to create a coalition of global business participants (i.e., regulators, investors, standard setters, organizations, etc.) to develop integrated reporting (IR) standards into a globally accepted framework and provide improved business reporting (IIRC 2021).

Publishing the first iteration of the framework in December 2013 (revised in January 2021), the framework provides guiding principles and fundamental concepts related to IR, specifically seeking to provide a mechanism in which organizations can report how value is created, preserved, and eroded (International Accounting Standards (IAS) Plus 2021a). This value extends beyond traditional financial capital to include manufactured, intellectual, human, social, and natural capitals (IAS Plus 2021a).

While the IIRC was born from a group whose interest strongly supports sustainability reporting, the objective of the IIRC was not intended for the development of a sustainability framework. Rather, its initiatives lay the groundwork for a global, standardized method of communication on IR, an important antecedent for sustainability reporting.

The CDP is a global nonprofit entity managing a voluntary disclosure reporting system. Founded in 2000, its mission is to provide information on environmental data as a means to prevent climate change and environmental destruction, linking “environmental integrity and fiduciary duty” (CDP 2021). With the belief that what gets measured gets managed, CDP aimed to collect data and leverage reporting accountability to instigate action from participants, regulators, and governments. Currently, more than 10,000 organizations and cities across the globe provide disclosure reporting through the CDP (CDP 2021).

In addition to making these disclosures publicly accessible, CDP provides rankings, benchmarking, and detailed reporting to improve transparency around an organization’s environmental impact. Collectively, the system provides important data regarding the global impact of organizational decision-making on environmental sustainability. The data collected by CDP is derived from the promulgations of the TCFD. Currently, CDP purports itself as “the largest, most comprehensive dataset on environmental action” (CDP 2021).

The CDSB has also set forth a reporting framework to disclose environmental impact information (CDSB 2021). Founded in 2007 at the World Economic Forum (WEF 2020), this consortium’s vision is to “change the world’s accounting systems to benefit the environment in the long-term by implementing their set of standards and working toward making sustainability reporting mainstream” (CDSB 2021). This framework is intended to be adopted and included within current financial reporting standards. The CDSB also provides tools and guidance for implementation to support harmonizing environmental reporting with current financial reporting (CDSB 2021).

The CDSB is composed of three bodies: the Board, an Advisory Committee, and Technical Work Groups. An Advisory Committee, represented by industry and nongovernment organizations, provides guidance to the Board. Currently, three technical work groups (Climate Accounting Standards, Land Use and Biodiversity, and Water Related Disclosures) are composed of industry specialists, accounting firms, professional accounting bodies, and academics. Other industry professionals are tasked with the development and enhancement of the CDSB framework (IAS Plus 2021b).

Founded in 1997 with the first guidelines published in 2000, the GRI provides the oldest set of corporate sustainability standards. Additionally, the KPMG Survey of Corporate Responsibility Reporting (KPMG 2017) reports that the GRI is the most widely used set of sustainability standards throughout the world. The primary goal of the standards is to create global uniformity among both public and private companies regarding how they report their sustainability initiatives to a wide variety of internal and external stakeholders rather than just a narrow focus on investors (as some of the other standards do).

The most recent 2020 standards include the universal standards followed by the topic- specific standards, including economic, environmental, and social. The standards themselves include an analysis of each company’s positive and negative contributions to sustainable initiatives and developments. Organizations are required to discuss their understanding of sustainability as well as provide a benchmark of their sustainability initiatives using various global, regional, and local comparisons (GRI 2021).

In 2015, the United Nations created the 2030 Agenda for Sustainable Development, which “provides a shared blueprint for peace and prosperity for people and the planet, now and into the future” (United Nations 2021a). The agenda includes 17 Sustainable Development Goals (UNSDG), including Sustainable Cities and Communities, Responsible Consumption and Production, Climate Action, and Affordable and Clean Energy. While these are not specific standards, these goals certainly fall under the purview of sustainability reporting. Each goal contains an overview that describes why it is classified as critical to sustainable development.

UN publications related to each goal are also shared as well as events and news. For example, Goal 13 is Climate Action for which the overview discusses how global temperatures are still above what is called for in The Paris Agreement, that climate financing is increasing, and that 125 of 154 developing nations are focusing on sustainability efforts (United Nations 2021b).

In July 2020, the United Nations Economic and Social Council held a meeting to discuss the SDG, progress made on the goals thus far, the impact of coronavirus disease 2019 (COVID-19) on the goals, and benchmarks for the future. While it was determined that 2030 was no longer a realistic date to have each of the goals fully implemented, especially given the pandemic, the Council continued to staunchly support the goals and called for international cooperation (United Nations Economics and Social Council 2020).

It should also be noted that after the creation and distribution of this survey to participants, in November 2021, the IFRS Foundation was in the final stages of amending its Constitution to have more of an emphasis on sustainability reporting, particularly with the creation of the International Sustainability Standards Board (ISSB) (IFRS 2021a). The ISSB’s ultimate goal is to create a global set of sustainability reporting standards through the development of the IFRS Sustainability Disclosure Standards (IFRS 2021b). Additionally, with respect to assurance provided over sustainability reporting, in January 2022, The International Auditing and Assurance Standards Board (IAASB) included ESG assurance as a key piece of its Strategy for 2020 to 2023, with a similar goal of creating global uniformity in assuring sustainability reports (International Auditing and Assurance Standards Board (IAASB) 2022). These indicate that sustainability reporting and assurance are coming more to the forefront and will drive substantial change in the profession.