Ways of Environment governance. Focusing on all your stakeholders, developing strong relationships with people, communities, and society to drive positive change .Responsible investment, financing, insurance. Policies and practices that help ensure corporate decision making aligns to purpose-led performance .Ecological impacts, such as pollution.ARE INTENDED to provide investors and related users with decision-useful, neutral information that faithfully represents an entity’s economic activity as a basis for investment and other capital allocation decisions.”

1. Environmental, Social &
Governmental STRATEGY
ESG Module
Accounting Capstone, Spring 2022

3. ESG Strategies
a.k.a. “Sustainable Growth”
Environmental: Climate change, decarbonization and renewables
Social: Focusing on all your stakeholders, developing strong relationships
with people, communities, and society to drive positive change
Governmental: Responsible investment, financing, insurance. Policies and
practices that help ensure corporate decision making aligns to purpose-
led performance
(www.kpmg.us)

4. Environmental
• Climate change
• Ecological impacts, such as pollution, deforestation,
and loss of biodiversity
• Energy management, such as energy-efficient
buildings and production processes
• Greenhouse gas emissions
• Litigation risk, for example, related to environmental
contamination
• Policies and regulations
• Raw material sourcing
• Renewable energy
• Sustainable products and packaging
• Water and waste management
Social
• Community relations
• Diversity, equity, and inclusion
• Employee health and safety
• Human capital development
• Labor management
• Privacy and data security
• Product quality and safety
• Supply-chain standards
Governance
• Antibribery and anticorruption
• Business ethics
• Corporate resiliency
• Diversity of leadership
• Executive compensation
• Lobbying and political contributions
• Ownership structure
• Tax transparency
Common ESG Matters
(www.FASB.org)

5. You can’t control what
you don’t measure.
ESG concerns are generally
two-fold:
• What are companies doing to
ensure their own practices have a
positive impact on society and the
environment?
• What are they doing to manage
business and financial risks related
to those matters?
From reporting these
activities to developing
strategies to tackling ESG
issues, accountants are
playing a major role.

6. “Financial accounting and reporting have long
been the language of business and the capital
markets.
They are critical, but on their own they are not
sufficient for boards to fulfil their duty of
accountability for long-term value creation.
We need to improve business reporting and
sustainability disclosures in order to meet our
current and future challenges.”
JESSICA FRIES, EXECUTIVE CHAIRMAN, A4S “As professional accountants, the chief stewards of
business information, we have both an important
responsibility and a transformative opportunity to
engage in and lead on upcoming changes in
corporate reporting, and improving the quality of
sustainability information.”
KEVIN DANCEY, CHIEF EXECUTIVE OFFICER,
INTERNATIONAL FEDERATION OF
ACCOUNTANTS (IFAC)
(WWW.ACCOUNTINGFORSUSTAINABILITY.ORG)

7. IFRS Foundation announced significant initiatives at the COP 26 in Glasgow in November
2021.
IFRS Foundation established the International Sustainability Standards Board (ISSB) to
develop a comprehensive baseline of high-quality sustainability disclosures
for listed companies. The ISSB will focus on the material impact of
sustainability factors on the future cash flows and enterprise value of
public companies rather than the broad implications for society.
The Climate Disclosure Standards Board (CDSB) and the Value Reporting
Foundation (VRF) joins the IFRS’ initiative.
The VRF houses the Integrated Reporting Framework
and the SASB Industry Standards.
IFRS Foundation
ISSB
CDSB
VRF
Integrated Reporting
Framework &
SASB Industry Standards

8. Will the United States follow the standards promulgated by
the ISSB?
That’s a decision for the U.S. to make. The staff of the U.S.
Securities and Exchange Commission (SEC) has been actively
involved in the technical readiness working group.
In addition, the SEC is a key player in IOSCO, and
U.S. officials are members of the monitoring
board.
While the SEC will likely propose sustainability
reporting rules in the first quarter, it is hoped the
commission will coordinate closely with the ISSB.
(www.CFO.com)
(www.FASB.org)

9. Intersection of ESG Matters with Financial Accounting
Standards
“General purpose financial reporting provides
information about current conditions and trends that
help investors in predicting a reporting entity’s future
cash flows and results of operation. Financial
accounting standards are …
NOT INTENDED to drive
behavior in any way,
including … spurring
businesses to take certain
actions.
ARE INTENDED to provide
investors and related users with
decision-useful, neutral
information that faithfully
represents an entity’s economic
activity as a basis for
investment and other capital
allocation decisions.”
(www.FASB.org)

10. How might an entity consider the direct or indirect effects of material ESG matters when applying current
GAAP? While the FASB does not establish standards for ESG reporting, the application of many current
accounting standards requires an entity to consider changes in its business and operating environment when
those changes have a material direct or indirect effect on the financial statements and notes.
Topic 330, Inventory: Estimates of net realizable value could be
materially affected by, for example, a regulatory change that
renders inventories obsolete, a significant weather event that
causes physical damage to inventories, a decrease in demand for an
entity’s goods resulting from changes in consumer behavior or an
increase in completion costs because of raw material sourcing
constraints.
Topic 275, Risks and Uncertainties: The guidance requires an entity to provide
qualitative disclosures about certain risks and uncertainties that could significantly
affect the amounts reported in the financial statements in the near term.
Disclosure requirements include information about the nature of an entity’s
operations and current vulnerability arising from certain concentrations.
Topic 718, Stock Compensation:
General guidance on reporting compensation of
employees including disclosures.

11. ESG Investing is driving the need for standardized ESG reporting. But what
is ESG investing any way?

13. By uncovering additional risks
and opportunities in a
company, ESG can potentially
provide better outcomes for
investors over the long term.
www.blackrock.com

14. Certified B Corporations

15. Let’s look at
some
companies!
• Ben & Jerry’s
• Patagonia
• Puma