Connect with us

Accounting

Deloitte audits nature-related risks on Earth Day

Published

2 years ago

on

Deloitte auditors have been turning their attention to climate risks affecting clients who need to deal with a growing array of regulations and laws around the world as the pace of climate change accelerates.

With Monday, April 22, marking the 54th anniversary of Earth Day, the accounting profession is playing a greater role in sustainability reporting and assurance for many organizations that are trying to comply with the European Union’s Corporate Sustainability Reporting Directive, the International Sustainability Standards Board’s S1 and S2 standards for sustainability and climate-related disclosures, and the Securities and Exchange Commission’s recently issued rule on climate-related disclosures, which is current on hold due to lawsuits.

Big Four firms like Deloitte have been doing more work in the sustainability space to help clients account for their impact on nature in response to these types of requirements, as well as demand from investors and the public. “The world is evolving to account for nature, and that means there’s different guidance and frameworks looking into value in nature, and who better to do this than accountants?” said Stephanie Cardenas, an audit and assurance senior manager at Deloitte. “It has to do with how accountants have evolved in the profession.”

galapagos.jpg

Her own career has progressed from working in the Galapagos Islands studying the impact of tourism on the global ecosystem to a career at Deloitte, while working in between with different environmental groups.

“I’m a Deloitte ‘boomerang’ which means I was once at Deloitte Ecuador, and then I moved to New York, and then went back to Deloitte,” she explained. “How everything started was I saw what tourism was doing to the natural environment during my days in the hospitality industry and then I wanted to become part of the solution. I worked with some companies in the Galapagos Islands on tourism and focused with different NGOs — local and also from the U.S. — around what can be done within the Galapagos Islands on different projects.”

She worked on conservation projects to preserve the endemic species of trees in the Galapagos and the larger ecosystem. Then she studied for a master’s degree in sustainability to focus her career on this area. She has worked with the Galapagos Conservancy as well as the World Wildlife Fund Ecuador. And now that she’s at Deloitte, she’s working with her fellow auditors at CPAs.

“Here at Deloitte, I think there’s that magic sauce,” she said. “I work with CPAs and people that have done audit and assurance for a longer period of time. My background is much more technical. Pairing those two really helps our clients in this space meet those regulatory requirements with the process, controls and assurance in mind.”

She sees more of a demand for sustainability reporting and assurance from clients to comply with the various rules. frameworks and standards. In addition to the EU and SEC rules and the ISSB standards, the Global Reporting Initiative has developed sustainability and biodiversity standards and the Taskforce on Nature-related Financial Disclosures offers a set of disclosure recommendations and guidance.

“I have been working on the voluntary side and helping clients work on the more regulatory lens,” said Cardenas. “I did a secondment thanks to Deloitte on TNFD, the Taskforce for Nature-related Financial Disclosures. That was a fantastic experience seeing groups come together and really think through with that science lens what’s practical to really look into nature-related risks.”

The TNFD has been partnering with the European Financial Reporting Advisory Group and the ISSB, she noted. The EU has promulgated not only the CSRD but also the Regulation on Deforestation Free Products, which deals with seven categories of forest risk commodities: timber, cattle, soy, palm oil, cocoa, coffee and rubber. Under the EU Deforestation Regulation, those types of products will no longer be sold in the EU if they come from areas affected by deforestation or forest degradation practices.

“If you’re importing or exporting from the EU, and this is part of your materials you used in your products, you will have to look into a due diligence process, ensuring that these products are not coming from deforested land,” said Cardenas.

In the U.S., such guidelines are still mostly voluntary, but as states like California promulgate their own climate-related disclosures, U.S. companies may be forced to abide by such rules as well. 

“I think it’s very important for companies to think about this,” said Cardenas. “You can see specifically there’s an evolution of the market, and that’s what we’re seeing with our clients as well. Probably everything started on that voluntary lens, then going more into a must have and it’s mandatory. All the supply chain disruptions are forcing companies to rethink in the short term and the long term about where those materials are coming from. Are they coming from clear cutting? Is it deforested land? Is it land degradation? How are you impacting IPLC, a term for Indigenous People in Local Communities? Thinking of this as more of a systems problem, that’s where we help our clients put the pieces together and not see nature and climate as separate, but bringing it together as one topic. To be strategic about it, you need to approach it with that lens.”

Auditors will also need to be sure that companies are properly reporting the impacts on the climate, vetting the claims, in some cases by visiting these places to see whether they’re really fulfilling what they say they’re doing, although in the Galapagos and other remote areas, they may need to rely on technology such as satellite imaging.

“Nature tech is one of the highest-rising areas in this space,” said Cardenas. “There’s still a lot of development that needs to happen. But there are various technologies where you could actually measure the state of nature: how an ecosystem is performing, many tools that are out there, including geospatial technology that we use at Deloitte for clients to measure the state of nature. And pairing this with the regulatory requirements, specifically for EUDR [EU Deforestation Regulation] where the regulation does require you to go look at the flood level, like where has this commodity been produced?”

The satellite imagery can help produce different data sets for land and water-related risks. “Nature risk is very localized, but then this enters that supply chain lens,” said Cardenas. “If any deforestation is happening in a country like Brazil or Indonesia, and these products enter the different markets, that’s how it all goes back to companies that work with these products or raw materials.” 

Despite the backlash against ESG in some parts of the U.S., other parts of the world like the EU are requiring companies to do more to mitigate their environmental impact.

“Because of the regulatory requirements from CSRD, we have seen an uptick in the market,” said Cardenas. 

Even in the U.S., she has seen more demand for reporting and assurance services on nature-related risks.

“Nature specifically is a topic that is more tangible,” said Cardenas. “You know that there’s no water because you can see it. You can feel it. You don’t know if there’s more emissions or not if you just go outside. You know if it’s raining or if it’s not raining, if it’s sunny, if it’s too hot. With emissions, it’s a little bit less tangible. We can measure them. We can know their impact. That’s also why I think there’s that acceptance toward what does nature mean, especially to our business? Many examples are happening right now. The price of cacao is being raised in the market because of a huge drought in Africa, and also rain. It’s like all the other markets. That nature-related risk is impacting supply chains directly.”

For accountants who want to enter the field, particularly young people who are concerned about climate change, she has some advice.

“First of all, identify what your transferable skills are,” said Cardenas. “How can you use what you’ve learned to apply it to something else? There are frameworks like natural capital accounting. It is something that accountants would be doing, but now with that nature lens. It might not be only accountants. I’m dreaming of an accountant wanting to become an ecologist or biologist and pairing both things. Keep up with the market knowledge. Read a lot to stay informed. Be open to a fast-paced changing environment that’s full of opportunities. And really think through how you get better data. This is one of the key things that accountants are really good at is getting that data. The data processes, controls and completeness of that data will help you make the right decisions. It goes back to the impact that you could have with those magic skills.”

The urgency of the need for nature accounting can’t be dismissed due to the quickening pace of climate change. “They know climate change is happening,” said Cardenas. “They know biodiversity loss is happening. But all this is happening not in the timeframe that was supposed to happen, but faster, at unprecedented rates. I think that urgency is a good motivation for all of us to think about nature, what we have and really shift those mindsets and relate that business to nature to make sure that we have thriving economies, societies and businesses.”

Related Topics:
Continue Reading

Accounting

SEC’s Semiannual Reporting Proposal Faces Investor Pushback: What CFOs Need to Know

Published

1 week ago

on

August 25, 2026

By

U.S. Securities and Exchange Commission (SEC)

A proposal from the U.S. Securities and Exchange Commission to potentially shift some public companies away from quarterly financial reporting toward a semiannual model is drawing significant pushback from investors, even as it continues moving through the regulatory process. The debate has direct implications for corporate finance teams, auditors, and the broader transparency of U.S. capital markets.

What the SEC Proposed

According to a summary published by accounting advisory firm Cohen & Co., the SEC issued a proposed rule on May 19, 2026, aimed at simplifying financial reporting requirements for many U.S. public companies. The proposal would potentially reduce the frequency of certain mandatory disclosures from quarterly to semiannual, a structural change that has not been made to core U.S. reporting requirements in decades.

The proposal follows an extended debate within U.S. policy circles, with proponents arguing that reduced reporting frequency could lower compliance costs and free up management time for longer-term strategic planning rather than quarter-to-quarter results management.

Why Investors Are Pushing Back

Comment letters submitted in response to the proposal have been extensive, and according to Cohen & Co.’s review of the public record, investors “appear to be largely opposed” to the shift, viewing frequent interim reporting as a core benefit of U.S. capital markets relative to other jurisdictions.

Accounting and law firms have taken a more measured position, generally urging any changes to remain aligned with the Financial Accounting Standards Board (FASB), whose existing disclosure requirements and guidance are built around a quarterly reporting cadence. A shift to semiannual reporting without corresponding changes to FASB guidance could create friction between SEC filing requirements and GAAP-based disclosure expectations.

Lessons From the U.K. Experience

The debate is not without precedent. The United Kingdom moved away from mandatory quarterly reporting for listed companies in 2014, returning to a semiannual disclosure requirement. According to Cohen & Co.’s analysis, that experience offers a cautionary data point: there was no measurable increase in capital expenditure or R&D investment following the change, while analyst coverage of affected companies declined as reliable interim information became less available — a particular risk for smaller and newly public companies that rely on analyst coverage to maintain investor visibility.

Practical Implications for Finance Teams

Beyond the debate over disclosure philosophy, the proposal carries practical complications. Many companies have debt covenants and credit agreements structured around quarterly financial delivery; a shift to semiannual reporting could require renegotiating those terms. Reduced reporting frequency would also extend the “window of market silence” between disclosures, a factor that governance and investor-relations teams would need to manage carefully to avoid information asymmetry.

Separately, and unrelated to the reporting-frequency debate, the SEC and FASB have continued finalizing more routine updates this year. New Accounting Standards Updates are taking effect for December 31, 2026, fiscal year-ends covering income tax disclosures, credit loss measurement, induced debt conversions, and stock compensation, according to Eide Bailly’s review of 2026 ASU activity. Additional guidance on paid-in-kind dividends and environmental credits is also on the near-term horizon.

What to Watch Next

The semiannual reporting proposal remains in the comment and review phase, and no final rule has been adopted as of this writing. Finance leaders should monitor the SEC’s regulatory agenda for further movement, while treating the current quarterly reporting requirement as the operative standard until any final rule is issued and an effective date is set.

Given the extent of investor opposition documented in the comment file, a full shift to mandatory semiannual reporting appears more likely to result in either a scaled-back compromise or continued study rather than swift adoption — though the SEC’s ultimate direction remains uncertain.

 

Continue Reading

Accounting

AI-Driven Automation and Continuous Accounting Frameworks

Published

3 weeks ago

on

August 15, 2026

By

The accounting profession is undergoing a fundamental structural transition as enterprise finance departments shift from periodic month-end closes toward automated continuous accounting models. By integrating specialized machine learning algorithms directly into enterprise resource planning (ERP) platforms, chief accounting officers are transforming financial reporting from a retrospective exercise into a real-time operational asset.

The Shift from Periodic Close to Continuous Financial Reporting
Traditional accounting workflows heavily relied on manual data reconciliation, spreadsheet calculations, and multi-week closing cycles at the end of each fiscal period. In contrast, continuous accounting frameworks utilize automated software agents to process, validate, and post transactional data in real time as business activities occur.

Automated bank reconciliation tools cross-reference incoming bank feeds, invoice records, and purchase orders automatically. By resolving transactional variances instantly throughout the month, corporate accounting teams eliminate the traditional workload spikes associated with quarterly and annual closes.

Machine Learning in Audit Trails and Anomaly Detection
Advanced natural language processing (NLP) and machine learning tools are redefining internal audit and financial control environments. Automated systems analyze 100% of general ledger entries, identifying anomalous transactions, duplicate payments, and unauthorized journal entries in real time.

Rather than relying on random statistical sampling, corporate internal auditors can focus their attention on high-risk flags automatically surfaced by algorithmic monitoring platforms. This continuous risk assessment strengthens internal controls over financial reporting (ICFR) and significantly reduces fraud risk.

Evolving Roles for Accounting Professionals
As routine data entry and manual reconciliation tasks become fully automated, the skill set required for accounting professionals is shifting toward data analysis, system design, and strategic business advisory.
– Systems Governance: Accountants are increasingly responsible for monitoring algorithmic accuracy and managing data integration pipelines.
– Business Partnership: Finance professionals leverage real-time financial dashboards to advise operational leaders on margin management and working capital allocation.
– Regulatory Compliance Management: Accounting teams utilize automated platforms to ensure compliance with dynamic tax codes and international accounting standards.

Core Implementation Recommendations
1. Deploy Automated Reconciliation Tools: Integrate continuous transaction processing modules into existing enterprise ERP architectures.
2. Establish Algorithmic Governance Controls: Implement strict internal testing protocols to ensure automated accounting rules comply with GAAP/IFRS standards.
3. Reskill Accounting Teams: Invest in training finance staff on data analytics, workflow automation, and predictive financial modeling.

Continue Reading

Accounting

Global ESG Reporting Standards and Double Materiality Compliance

Published

4 weeks ago

on

August 9, 2026

By

Corporate accounting departments face expanding reporting expectations as international sustainability disclosure standards achieve regulatory enforcement across major global jurisdictions. Chief Accounting Officers (CAOs) and corporate controllers are establishing rigorous internal accounting controls to treat Environmental, Social, and Governance (ESG) metrics with the same data precision, auditability, and governance as traditional financial statements.

Regulatory Harmonization Under Global Sustainability Frameworks
The implementation of standardized sustainability reporting frameworks—notably rules established by international sustainability accounting boards—has created unified expectations for public and large private enterprises. Corporations must report standardized metrics covering greenhouse gas emissions (Scope 1, 2, and material Scope 3), energy utilization, workforce demographics, and supply chain governance.

In Europe and other participating international jurisdictions, double materiality principles are mandatory. Under double materiality, organizations must report both how external sustainability risks impact corporate financial performance, and how internal corporate operations affect surrounding environmental and social structures.

Integrating Sustainability Metrics into Core ERP Systems
To provide auditable non-financial data, enterprise organizations are integrating specialized carbon accounting and ESG management platforms directly into core ERP systems. Automated data collectors capture energy utility invoices, logistics fuel consumption metrics, and vendor compliance records in real time.

Establishing automated, traceable data pipelines ensures that non-financial reporting is supported by clear audit trails. This structured approach allows external financial auditors to provide reasonable assurance on sustainability disclosures during annual corporate reporting cycles.

Financial Impacts and Capital Market Disclosure
Accurate ESG reporting directly influences corporate cost of capital and institutional credit ratings. Commercial lenders and institutional asset managers systematically incorporate sustainability metrics into risk pricing models. Companies that demonstrate transparent, verifiable progress in operational energy efficiency and climate risk mitigation benefit from expanded access to green bond markets and lower debt pricing.

Action Steps for Accounting Leadership
1. Implement Double Materiality Frameworks: Conduct comprehensive assessments to identify material financial and operational sustainability metrics.
2. Build Auditable Non-Financial Data Pipelines: Automate ESG data collection within core accounting software to ensure data integrity.
3. Align Sustainability with Annual Financial Filings: Prepare non-financial disclosures concurrently with financial statements to satisfy regulatory audit expectations.

Continue Reading

Trending