Is Climate Accounting Mandatory?

7 November 2022

News

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You may seen this video on our instagram and now you have questions.

Let’s answer them!

If you’re new to climate accounting, we suggest reading this article before you continue. To quickly refresh, climate accounting is managing risk exposure to carbon pricing throughout a company’s operations and supply chain. Although Climate Accounting is fairly new there has been a huge push to get CPAs to adapt this into their practices. If fact, it’s quickly becoming mandatory.  

Carbon Pricing is here to stay, so are Climate Disclosures

We all know there is a price to carbon. We have learned this dollar amount has a huge impact on businesses including the supply chains. Regulations are coming into effect that will require corporate disclosures of environmental information, in the same format as their financial data. Which is why CPA’s must be involved.

For many businesses the responsibility of climate disclosures which, can be defined as information surrounding the environmental risks of a company, has been directed not towards sustainability departments but financial teams to execute. The Task Force on Climate related financial disclosures created a report stating all the responsibilities CFO’s and CPA’s will have for exporting and creating these climate disclosures. You can learn more here (https://www.fsb-tcfd.org/)  

where are these disclosures regulated?

The European Union, Brazil, and Singapore have proposed mandatory disclosures for certain sectors, Canada’s federal government plans to make climate disclosures mandatory by 2024, announcing that Canadian crown corporations with assets of one billion or more are required to adopt the disclosures this year. The U.K have been requiring premium listed companies such as banks, and insurance companies to provide them since October 2021, and their entire financial and non-financial sectors must be reporting by 2025. Lastly, and most recently the U.S S.E.C proposed their rules and regulations for mandatory climate disclosures to be required by all businesses https://www.sec.gov/news/press-release/2022-46  

What you can do

Carbon pricing and climate disclosures are not going anywhere. It is proven that involving financial professionals is key to transparent and accurate accountings of a company’s climate impact. To keep up with the rising prices of carbon and provide the best data for climate disclosures, Climate accounting is needed to help CPAs with this responsibility. Climate accounting can help prevent greenwashing and advise on controls to client’s financial risk. Even if climate disclosures in your region aren’t mandatory, shareholders and clients are starting to request this information.

Learning and adapting this service offering can bring a CPA practice many benefits. Be the first to open this new revenue stream, have early access to Standard Carbon’s climate accounting software, plus be prepared to answer client questions before these regulations come into full force. Ultimately controlling corporate exposure to the financial risks associated with carbon pricing.