Skills shortage on the cards with new reporting role
Skills shortage on the cards with new reporting role
With the EU’s Corporate Sustainability Reporting Directive on the horizon, accountancy firms need to invest in talent to be ready for the huge changes to come.
Accountancy firms need to prepare for the major role they’re set to play in the EU’s new Corporate Sustainability Reporting Directive (CSRD), with the measures set to take effect in 2025.
The CSRD is designed to bring sustainability reporting on a par with financial reporting, with companies having to provide “reliable information on sustainability-related impacts, risks and opportunities (IROs) across their value chains”.
Those affected by the CSRD include those with securities listed on an EU-regulated market and unlisted EU companies of a certain size, including subsidiaries of companies headquartered outside the EU.
The move marks a significant step-change in reporting, with more companies impacted, more data required and more stakeholder scrutiny.
PwC recently launched its inaugural CSRD survey – The promise and reality of CSRD reporting – which shows that, despite high levels of confidence in their readiness to comply, businesses must still address major hurdles.
Big role to play
Polly Tsang, senior financial services regulatory manager at the Institute of Chartered Accountants in England and Wales (ICAEW), has spoken to AccountingWEB about what the directives mean for the accounting industry with auditors set to play a big role.
“The whole point of this is to hold people accountable so that you can see how much progress they’re making against sustainability standards,” she said. “That’s something that the profession is currently grappling with, interpreting the regulations.
“This is the first time they’ve ever been asked to collect this data and you’re not going to have it. You can start collecting it but you’re not going to have everything and it’s a learning process for both the firm and for the accountants.
“The market should see this as a journey and be prepared for a raft of qualifications in year one and year two because that’s just the nature of the beast.”
Affected by change
Tsang noted that the big firms have already been looking at how the changes will affect them, with about 50,000 firms in the UK caught by CSRD – in other words they report to an EU parent.
“Firms really need to do a readiness assessment ASAP because this is huge,” she said. “Imagine your financial auditing team. You basically need the equivalent of that but with the right skill set to do CSRD. So you need to hire people and you need to train people.
“You need to do all that before 2025 when it all kicks it. It’s huge.”
Tsang also warned that the resources required to audit CSRD shouldn’t be underestimated, stressing that the readiness assessment should be at the forefront of their minds.
“Do you have the number of people required with the right skill set to both do your financial audit and also the CSRD component – because it’s so involved. You can’t just have the same team. You either need more people or you need more time but I can tell you, you’re not going to have more time.
“I would say there’s probably a shortage of that skill set, in terms of supply and demand. I think the demand is greater than supply right now.”
Risks of not being ready
ICAEW is working with firms to hash out ideas for what the journey with CSRD looks like before sharing it with the industry and asking if it makes sense.
“As a producer of these reports or as a reader of these reports, do you think it allows you to compare it better?” said Tsang.
With the directives set to take hold sooner rather than later, Tsang touched on the risks of accounting firms not being ready to play their part.
“If you don’t have the people and you don’t have the skill set, you’re going to miss regulatory deadlines and your client isn’t going to be happy about that, so there’s a reputational risk. There’s quite a lot on the line there.
“You’re essentially doing a double audit for the same client, so it’s not an upfront investment for nothing – you’re building a pipeline here.”
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