How to get your SME’s finance function ready for Sustainability Reporting

Kristen Haines

14 December 2023

As sustainability reporting gains traction, more often than not, responsibility for it is falling to the finance function, especially in SMEs who don’t have the resources for a separate sustainability team. Whilst the business might see it as just another corporate reporting obligation, which is why it is often passed to the finance team, for those accountants and others sitting in the finance team, it can seem like a daunting prospect, well removed from the traditional accounting that they are used to. To help make the process easier, we have outlined our suggested 5 steps to set your finance function up for success with sustainability reporting.

1. Understand the requirements

As a first step, it is important that you get yourself up to speed with the reporting requirements. Sustainability reporting can seem overwhelming because it is new and the requirements are outside our comfort zone. The unfortunate news is that the regulations in Australia have yet to be finalised, however there is enough direction out there on what it will look like to get started now.

What we know so far is that Treasury is proposing that it will be a climate first approach, that is, initially we are only concerned about reporting on climate change rather than broader sustainability issues, and that the Australian sustainability reporting standards are going to be based on the International Sustainability Standard Board (ISSB) standards. The expectation is that the legislation and standards will all be in place such that reporting will start for the largest companies for years beginning 1 July 2024, with smaller companies to follow.

The Australian Accounting Standards Board (AASB) has just released the Exposure Draft of the Australian Sustainability standards, with some minor amendments from the ISSB Standards.

In addition to the Australian reporting regime, if you operate in overseas jurisdictions, or are part of a larger group with operations overseas, you may have other reporting regimes that you need to consider as well. For instance if you are the subsidiary of a European parent, or part of a group that has turnover in Europe of more than EUR150m you are likely to be in scope of the European Sustainability Reporting rules as well.
As this is a rapidly evolving area, it is important that you don’t just understand what the requirements are currently but ensure that you stay on top of the evolving regulatory landscape.

2. Identify your skill gaps

We firmly believe that accountants do have the required skill sets to collect, analysis, report and interpret the information in sustainability reports. The approach that will be required to be taken will not be that dissimilar to what you currently undertake for financial reporting. It’s just that those skills need to be applied to a new data set.

However, it is clear that it will also be important to upskill on the sustainability elements and get a good understanding of the various requirements in the Standards. Therefore, it is important to understand the existing knowledge in your finance team and where you may have gaps.

If you do need some more sustainability knowledge in your finance functions, there are a plethora of training options out there. In addition to the many free webinars that are available, there are more detailed paid courses as well. For instance, Chartered Accountants Australia and New Zealand offer a series of Sustainability reporting micro courses available to both members and the general public, to help build your knowledge; or the Sustainability Accounting Standards Board (SASB) which is now part of the ISSB, offers a two level Fundamentals of Sustainability Accounting (FSA) if you want a deeper dive into the world of sustainability reporting.

3. Consider your data needs

As your knowledge on sustainability grows, it will become evident that the data that you will need to prepare a sustainability report, is non-monetary information beyond that which will currently be captured by your accounting systems. Therefore, start considering how additional information may be collected by either making adjustments to your existing systems or acquiring additional software packages to assist in that data gathering. There are a number of plug-ins available for Xero and other similar accounting systems that can assist you to capture greenhouse gas emissions data which you may wish to start exploring.

4. Find your ESG champions in the business

The further you delve into sustainability reporting, the more you will realise it is more than just a reporting exercise and it is a process through which reporting on sustainability issues, will result in changes in the underlying operations to address these issues. Find those people in your organisation who are passionate about climate and the environment and bring them into a cross function team to address sustainability reporting. Their understanding of the operations, and their passion for the environment, often means that they will be well placed to help you identify the risks and opportunities for your organisation associated with climate change. Being part of the operations of the business, these champions may also have practical suggestions on how relevant data can be collected from operations as well.

5. Educate your Directors

Whilst the first step is getting your finance team up to speed, it is also important that you also bring your Directors and senior management along on the journey as well. The Directors will ultimately have to sign off on the sustainability report as part of the annual reporting suite, so they will need to understand what is going into its development. In addition, a lot of the disclosures required are around risk management and strategy decisions, the responsibility for which will ultimately sit with the Board. Therefore, it is important that early in the process you explain to Directors the input that you require from them and make sure that they are placed to participate in the process as required.

Next Steps

Following these five steps should assist you in getting your finance team well set up to implement sustainability reporting. It is clear that sustainability reporting is coming and that it is coming quickly, and it is important that you get your finance team started on the journey now.

Whilst you must take ownership of your own organisations sustainability reporting journey, at Moore Australia our ESG Experts are here to support you along the way. We are committed to keeping you up to date with the latest developments through our articles and webinars. Please reach out to your local Moore Australia contact if you want assistance with tailored education for you or your directors or need assistance in implementing the standard.

5 Steps to get ready for Sustainability Reporting