The path to sustainability is rarely black and white. For most businesses, the transition to more sustainable business models will require compromises and accountants will inevitably and increasingly face complex ethical situations along the journey to realising their organisations’ net zero ambitions.

“The textbook-type stories of sustainability where everybody wins aren’t the whole story,” says Richard Spencer, Director, Sustainability, at ICAEW. “Much of it is played out where there are trade-offs where someone or the planet loses. Clean tech requires rare earths. Mining these metals is a dirty process. How do we square the environmental damage with the brighter tomorrow promised by clean tech? It is similar with cobalt, used in batteries for electric vehicles. And what if the materials needed for green and clean technology come from places without the best human and employment rights?”

In short, sustainability often throws up issues requiring accountants to exercise judgments and ethics. And striking an appropriate balance is essential if businesses are to avoid accusations of greenwashing. At the same time, reconciling the demands of shareholders and other stakeholders with this growing focus on sustainability isn’t always an easy circle to square. 

“There’s a lot on the shoulders of our members to make sure they don’t consciously or unconsciously enable greenwashing to happen,” Spencer adds. “When does something tip over from being a good news story into being a lie of omission? It’s in these murky areas that ethics really comes into play. And going beyond that, our members have an important role to play, for example, in helping identify illegal practices such as modern slavery.

As a custodian of trusted data in the business, accountants have a pivotal role to play across an ever-broader scope of information, says Adam Birt, ICAEW’s head of Qualifications, Strategy and Development. “Practically speaking, accountants ensure that all the data and information that is required by an organisation is accurate, true and can be relied upon. If you are a chartered accountant working for an organisation where you’re being asked to deliver information or results around its sustainability programme, but what you’re actually seeing is that it’s only at face value, you have an ethical issue. What do you do?” 

In anticipation of international reporting standards for sustainability, companies have some leeway when it comes to choosing what they report. And that inevitably presents them with some rather uncomfortable truths, not to mention ethical dilemmas. The temptation to err on the side of caution with sustainability disclosures has not gone unnoticed. 

Carbon Tracker’s report, Flying blind: the glaring absence of climate risks in financial reporting, published in September last year, found that more than 70% of some of the world’s biggest emitters failed to disclose the financial effects of climate risk in their 2020 financial statements, and 80% of their auditors showed no evidence of assessing the impacts of climate risk during their audits. Many had made net-zero pledges and face significant financial risk from the climate crisis.

“It’s easy to start constructing a big conspiracy theory about businesses facilitated by auditors deliberately misleading the public,” Spencer says. “We in the sustainerati are very good at saying ‘you should know about this’, but there may be capacity, knowledge and skill gaps that we as a professional body need to help fill.” 

A ramping up of expectations across society of what good practice means has resulted in a much broader range of factors being built into business decision-making. That means a great deal more and different information needing to be sourced and made sense of, “and that’s something that our profession plays a central role in”, Spencer adds. “How do you get this information? How do you make these decisions? You’ve got to take account of so much more.”

At the same time, the interconnected nature of business means that we need to ensure that emerging economies can decarbonise fairly, rather than be the ones that bear the cost of it. “Similarly, how do you make sure that the human cost doesn’t offset the environmental benefit? You do need a good strong code of ethics to help steer your way through that,” Spencer adds.

Sustainability has been embedded within the ICAEW curriculum since the late 2000s, and a growing business focus on ESG over the last three to five years means that the need to guide members through some of the ethical dilemmas they may encounter in the course of their sustainability activities is ramping up.

“From the business perspective, ensuring that sustainability is part of overall business strategy has been part and parcel of the ACA syllabus for some time. The regulatory, reporting and assurance perspectives will be incorporated into the syllabus and exams as the standards are published, starting with the first two sustainability standards this year,” Birt says. 

Birt is overseeing a project to review curriculum content to create a framework that covers all the different aspects of sustainability that could fall under an accountant’s remit. “Sustainability is quite a broad church and different people have different understandings of what it means. To enable us to teach it and also assess it, we've put together this framework, based around the role of chartered accountants in the world of sustainability,” Birt says.

Across areas including assurance of sustainability data reporting (both mandated and voluntary), setting strategy, and understanding the business risks of climate change, ICAEW is working with both the publishers of learning materials and examiners to ramp up the sustainability focus of exam questions. “It is an ongoing process,” Birt explains. “You'll see a more significant focus on it during the course of 2023 and, as the number of standards come through, they will be embedded within the appropriate parts of the syllabus.”

In the meantime, Birt’s rule of thumb on ethical issues is clear: “The generic advice is to go back to the principles of what it is to be a chartered accountant and the principles of the ethical code. It applies equally to whatever situation you find yourself in. There’s nothing specific to sustainability. It’s about applying common sense and the principles of the code.”

Visit ICAEW’s Climate Hub to understand the role of accountants in realising our net zero ambitions