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Accountants eye sustainable business management

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Accountants are increasingly being asked to deal with sustainability issues as more businesses are called upon by investors to report on how they are dealing with issues like climate change and carbon emissions.

This week, amid the United Nations COP29 climate change conference in Azerbaijan, business leaders have been playing a larger role, including fossil fuel companies, prompting an open letter on Friday from environmental groups calling for reforms in the COP process. 

ESG standard-setters have also been playing a role at COP, with groups like the Global Reporting Initiative and the Carbon Disclosure Project signing a memorandum of understanding to deepen their collaboration on making their standards interoperable as the International Sustainability Standards Board reported progress on growing acceptance of its standards by 30 jurisdictions around the world.

Last month, the Institute of Management Accountants released a report on why business sustainability depends on the competencies of management accountants. The report discusses the critical areas in which management accountants are crucial to ensuring sustainability within their organizations, along with how existing accounting capabilities support sustainable business.

Institute of Management Accountants headquarters in Montvale, N.J.

“The main focus and the main attention right now in the ESG field is going to compliance, to the reporting parts,” said Brigitte de Graaff, who chaired the IMA committee that authored the report. “There are a lot of rules and regulations out there.” 

For right now, those rules and regulations are mostly voluntary in the U.S., especially with the Securities and Exchange Commission’s climate disclosure rule on hold. But in the European Union, where de Graaff is based in Amsterdam, companies have to comply with the Corporate Sustainability Reporting Directive. 

“In Europe, of course, there is not a lot of voluntary reporting for the larger companies anymore, but it’s all mandatory with a huge amount of data points and aspects that they need to report, so there’s a lot of focus right now on how to comply with these rules and regulations,” said de Graaff. “However, there’s also a lot of discussion going on about whether it should be about compliance. What’s the reason for reporting all these aspects? For us what was really important was that there is a lot of opportunity for management accountants to work with this kind of information.”

She sees value beyond purely disclosing ESG information. “If you use this information, and you integrate this in your organization, there’s much more value that you can get out of it, and it’s also much more part of what kind of value you are creating as an organization, and it’s much more aligned with what you were doing,” said de Graaff. 

The report discusses the benefits of the information, and how management accountants can play an important role. “You can use and integrate this in your FP&A and your planning processes,” said de Graaff. “You can integrate this kind of information in your strategy, something that management accountants are very well equipped for, but also to track performance and see how you’re actually achieving your goals, not only on financial aspects, but also on these nonfinancial aspects that are much broader than the E, S and G factors.”

The report discusses how to go beyond the generic environmental, social and governance parts of ESG to understand how they relate to a business’s core operations and make it more sustainable.

Management accountants can even get involved in areas such as biodiversity. “Even though, as a management accountant, you might not be an expert on marine biology and what the impact of your organization is underwater, you are able to tell what are the checks that have been performed on this,” said de Graaf. “Is this a common standard? Is this information that is consistently being monitored throughout the organization? Or is it different and what are the benchmarks? What are the other standards? These kinds of processes are something that management accountants are well aware of, and how they can check the quality of this information without being a subject matter expert on every broad aspect that may entail in this ESG journey that an organization is on.”

ESG can become part of the other work that management accountants are already involved in performing for their organizations.

“Ultimately there are a lot of competencies that management accountants were already doing in their organization, and ESG might sometimes seem unrelated, but it basically ties in into the competencies that we already know,” said de Graaff. “I hope that with this report, we can also show that the competencies that we are so familiar with, that we’ve been dealing with other strands of financial information, that you can basically also use these competencies in the ESG arena. Even though there’s a lot that seems very new, if you are aware of how you can tie that in, you can use the skills that you already have, the skill set that you have as a management accountant, to really improve your risk management processes, your business acumen, your operational decision making, etc. I hope that with this publication, we can also take away a little bit of the big fear that might be around a huge topic, as ESG is now. This is actually just a very interesting and exciting way to look at this kind of information, and we are very well equipped to help organizations navigating through this changing ESG regulation world.”

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Accounting

IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Accounting

Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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Accounting

At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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