CPAs have a new responsibility to their clients and the planet. With a strong push from shareholders, customers, and the government, businesses must disclose their carbon footprint and all environmental impact data with the same level of rigor as their financial statements. This task is not one for the ESG department but rather for all accounting firms.
Not everyone reading this has heard of the term “Climate Accounting”, but it’s meant to address the lack of transparency within climate disclosures. Let’s get into it.
What is climate accounting? Well, you might think it has something to do with the environmental side of ESG or carbon footprint reporting, and you’re wrong.
Now you’re confused. “It has the word climate in it. How is it not related to ESG? “
ESG remains important for all businesses to implement and it represents a measure of a corporation’s positive impact on society at large. Climate accounting is more than just counting carbon for the sustainability department, it’s a tool for corporate financial teams to manage and control the risk exposure to carbon pricing across operations and its supply chain. Simply put carbon has a price, CPAs need to be involved and Climate accounting makes that possible. While ESG focuses on reactive measures to a company’s environmental impact, climate accounting is the proactive action of managing a company’s relationship to its supply chain and exposing risks to the rising prices of carbon.
What CPAs Need to know: With the incoming S.E.C climate disclosure, how a firm treats its exposure to carbon pricing has changed. Carbon emissions are no longer something we estimate and create vague reports about. It’s crucial that CPAs are aware of the price of carbon to help their clients avoid greenwashing and misspent investments. Climate Accounting gives finance teams the ability to manage the supply chain and its environmental impact. CPAs using climate accounting will provide more accurate and valuable consulting services. Guesswork and estimations are not sufficient for regulated climate disclosures. Lastly, CPAs have to keep a close eye on the assurance of these disclosures. There is an expectation that climate disclosures will have assurance practices applied in full.
Climate accounting is accessible to all levels of an accounting firm as you don’t need specialized environmental knowledge to use the tools. SCOP3 is the world’s best climate accounting software. It has been developed in coordination with AICPA and CPA.com to make it accessible and compliant with current accounting practices.
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