New guidance champions collaboration and shares best practices and real-life scenarios for organizations of all sizes
MUMBAI: The latest installment of ACCA’s sustainability reporting series is Sustainability Reporting: Risk and Materiality, which takes a practical approach to helping businesses determine material information for sustainability reporting.
Author Aaron Saw, head of corporate reporting insights – financial, at ACCA said: “Many organizations have siloed management and reporting of financial and sustainability-related matters. As a result, they don’t realize they already have access to insights they need for reporting. To streamline cost and effort and to produce connected information, it makes sense to leverage existing risk-management processes to identify and manage sustainability-related risks and opportunities.”
The article sets out three steps to determine the material information to be disclosed:
- Identify the organization’s sustainability-related risks and opportunities (SRROs)
- Assess whether SRROs could affect the organization’s prospects
- Determine material information for disclosure
Each step is supplemented with illustrative, anonymized real-life examples to inspire our community of accountants, finance, and business professionals to learn, adapt, and improve their approaches to identifying and communicating risks and opportunities.
Given the severe operational disruptions that weather-related events are causing many businesses, the examples featured are biased toward climate-related risk. Small and medium-sized entities (SMEs) also feature in the examples to demonstrate how smaller organizations approach reporting.
The article emphasizes the importance for organizations to take a holistic approach in creating and communicating material information about their SRROs and recommends all organizations to:
- Allocate resources to start identifying SRROs arising from the resources and relationships in the value chains on which they depend and those that their activities would affect.
- Provide the most relevant sustainability-related information they can and continue to improve the reporting process over future reporting cycles.
- Use knowledge and expertise gained in determining material information in one reporting cycle to improve the communication of material information in the following cycle.
Aaron Saw concludes: ‘We encourage everyone to work collaboratively with peers in the same industry, or within the same value chain. In this way, we can further refine the approach to identifying SRROs, manage the risks or realize identified opportunities, measure the relevant metrics, and provide better information to support decision-making.’
