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Make digital ESG reporting mandatory, say PwC and Deloitte partners
Climate-related financial disclosures are driving the majority of ESG practitioners to speed up their digital transformations, and these senior professionals say it should be mandatory.
Nick Wilson
Editor’s note: This story originally appeared on Lawyers Weekly’s sister brand, Accounting Times.
Ahead of the coming climate-related financial disclosures regime, 90 per cent of ESG practitioners intend to launch digital transformation projects, according to a Workiva survey.
Eighty-six per cent added that they expect AI to make sustainability reporting more efficient over the next five years.
“It’s time for Australia to accelerate its transition to digital reporting. This will help us keep pace with our trading partners, such as the US, UK, Europe, and Japan,” Deloitte managing partner, audit and assurance, Joanne Gorton, told a recent Workiva event in Sydney.
“They have mandated digital corporate reporting and have already seen the benefits – we can see those same benefits too.”
The need to facilitate a digital reporting transformation was a major takeaway of the event, with support from representatives from academia, industry, and professional services.
Deloitte has previously advocated for mandatory digital reporting, noting that Australia is unique in tolerating non-digital reporting.
“Most of the world’s advanced economies have mandated digital financial reporting to cut red tape, improve efficiency and reduce errors. However, in Australia, businesses are limited in their ability to compete internationally as digital reporting remains voluntary,” its website read.
“Expectations of organisations are growing, and not just to share accurate, transparent and timely financial data – there’s a surging demand for ESG disclosures from consumers and investors, adding pressure to an already strained system.”
According to the firm, mandatory digital reporting for all large businesses would grow the Australian economy by up to $7.7 billion annually.
A mandate would initially increase reporting costs, but productivity returns will quickly help to recoup the added costs, Deloitte said in its Embracing the Power of Digital Reporting report.
“When a digital reporting mandate begins, businesses that must lodge digital reports will face an average cost of around $76,000 to participate. Beyond the first year, the incremental cost to report digitally is expected to be approximately $25,000 per year,” the report said.
“It’s estimated these manual processes make up between 20 and 30 per cent of report preparation, which can take upwards of 845 hours for quarterly reports alone.”
“If the average business has six accountants who spend 50 per cent of their role in report preparation, productivity improvements could see businesses save more than $89,000 per year.”
According to a Workiva survey, 87 per cent of ESG practitioners in Australia are expecting to allocate more budget to technology towards ESG initiatives over the next three years, while 85 per cent believe access to technology and data will play an “important role” in sustainability strategy decision making.
Workiva noted that digital reporting could help companies to better tackle the growing costs of ESG non-compliance.
“Digital reporting may reduce unintentional ‘greenwashing’ by providing a standardised and error-free framework where multiple measurement methodologies can be compared, and the correct measurement can be selected for the relevant and correct protocol,” it said.
PwC sustainability reporting and assurance partner Carolyn Cosgrove told the event that sustainability reporting was getting more sophisticated and so too should reporting processes.
“Organisations are facing increasingly challenging sustainability reporting requirements, which are getting sharper focus from stakeholders and come with expanded liability for company directors,” said Cosgrove.
“Leveraging existing skill sets from finance functions, establishing accountability across the organisation and enabling technology solutions will be integral in delivering credible, accurate, and timely reporting.”
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