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INSIGHTS

Demand Mounts for ESG Attestations

October 22nd, 2021/Advisory

Interest in environmental, social and governance (ESG) matters has grown significantly during the COVID-19 pandemic. And that momentum may continue under the Biden administration. Currently, about 90% of large public companies voluntarily publish so-called “sustainability reports” that communicate performance on ESG matters, according to a recent report published by the Center for Audit Quality and the American Institute of Certified Public Accountants.

However, the information that sustainability reports provide isn’t based on U.S. Generally Accepted Accounting Principles (GAAP). And there aren’t currently any mandatory attestation requirements for sustainability reporting. An external audit can help ensure transparency and reliability when reporting on ESG matters.

Covering all the bases

The term “sustainability” encompasses a broad range of nonfinancial issues that may affect a company’s financial condition and performance. Media attention on ESG matters has increased public awareness and prompted concerns about how sustainability issues could impact value or increase a company’s risk of litigation.

A sustainability report communicates the company’s sustainability goals and how the company plans to meet them. It focuses on the following three areas:

1. Environmental. This component address how the company manages risks related to climate, natural resource scarcity, pollution and waste. For example, a company may discuss the size of its carbon footprint, efforts to replace fossil fuels with renewable energy sources and overall use of natural resources.

2. Social. This section covers such issues as workplace, health and safety, and consumer product safety risks. Over the last year, interest in human capital issues — such as diversity and inclusion policies — has grown dramatically.

3. Governance. This includes information on boardroom diversity, executive compensation, critical event responsiveness and corporate resiliency. It also may address policies and practices on lobbying, political contributions, bribery and corruption.

During the pandemic, stakeholders may have specific concerns about how your company is handling such issues as public health and safety, supply chain disruptions, strategic resilience, and human resources. Stakeholders want assurance that companies are engaged in responsible corporate governance in their COVID-19 responses. Sustainability reports can showcase good corporate citizenship during these challenging times.

Assuring stakeholders

Without independent, external oversight, stakeholders may view sustainability reports with a significant degree of skepticism. That’s where audits come into play.

Many organizations — such as the Global Reporting Initiative, the Sustainability Accounting Standards Board and the Task Force on Climate-related Financial Disclosures — have developed standardized sustainability frameworks. External auditors can verify whether sustainability reports meet the appropriate standards. If not, they can adjust them accordingly.

We can help

ESG factors can affect risk and return. Most companies agree that sustainability information is an important part of their communications with lenders and investors. In some cases, financial statement disclosures that are required under GAAP might not provide enough information to satisfy stakeholder concerns. Contact us , we can help expand your current disclosures or issue a separate audited sustainability report to position your organization as a leader in ESG matters.

© 2021

TAGS: Advisory

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Insights

IRS suspends processing of ERTC claims

September 21, 2023/in Tax/by KKB CPAs

With fraudulent Employee Retention Tax Credit claims on the rise, the IRS has suspended claim processing through year end. Continue Reading IRS suspends processing of ERTC claims

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It’s important to understand how taxes factor into M&A transactions

September 19, 2023/in Tax/by KKB CPAs

Buying or selling a business? It may be the most important transaction you ever make. So it’s important to seek professional tax advice as you negotiate. Don’t wait until a deal is done! Continue Reading It’s important to understand how taxes factor into M&A transactions

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Plan now for year-end gifts with the gift tax annual exclusion

September 7, 2023/in Tax/by KKB CPAs

The estate and gift tax exemption amount is scheduled to be cut drastically in 2026 when the related Tax Cuts and Jobs Act provisions expire (unless Congress acts to extend them). Making tax-free gifts before then can cut the size of your taxable estate and may be one way to address this potential threat. Continue Reading Plan now for year-end gifts with the gift tax annual exclusion

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It’s important to understand how taxes factor into M&A transactions

September 19, 2023/in Tax/by KKB CPAs
Read more
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Plan now for year-end gifts with the gift tax annual exclusion

September 7, 2023/in Tax/by KKB CPAs
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Financial statements at a glance

September 5, 2023/in Accounting/by KKB CPAs
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