Environmental, Social and Governance (ESG) is the term used to define issues that are usually associated with sustainability or corporate responsibility, with a focus on environmental and broader societal impact, and monitors three “pillars” of sustainability and responsibility of a business outside of financial performance. For accountants of all sizes, the demand to evidence a commitment to on ESG continues to intensify as practices are increasingly asked to disclose more about their ESG performance and future strategies.
In a recent webinar, ESG & Cyber Security: Shaping the Future Practice, Richard Jackson explained how ESG will impact your accountancy practice moving forward.
1. Increased Requests for Data Sharing Agreements and Impact Assessments: As ESG becomes more embedded in business operations, there will be an increase in requests for data sharing agreements and data protection impact assessments. These documents are crucial in demonstrating that your firm takes privacy and legislation seriously. It's no longer sufficient to declare that you run a GDPR compliant practice; you must provide tangible evidence of your commitment to privacy and cybersecurity best practices.
2. Enhanced Cybersecurity Measures: With the rise of digitalisation and remote work, cybersecurity has become a critical concern for businesses worldwide. Accountancy firms, which handle sensitive financial data, are particularly vulnerable. Therefore, gaining certifications like Cyber Essentials or ISO 27001, which evidence robust cybersecurity measures, will become increasingly important. Not only will this enhance your firm's security, but it will also raise your status for potential buyers, mergers, or acquisitions.
3. Greater Focus on Third-Party Suppliers: The accountancy sector relies heavily on third-party suppliers. As such, there will be a heightened focus on these suppliers' ESG standards. Firms will want to do business with suppliers who can prove their commitment to ESG standards, especially those processing personal data on their behalf.
4. Increased Attention to Software as a Service (SaaS) Tools: As part of ESG compliance, firms will start paying more attention to the SaaS tools they use, such as CRM, payroll software, and practice management. They will demand more evidence that these tools meet the necessary ESG and privacy standards.
5. Scaling Up Privacy Expertise: As privacy becomes a more prominent issue, firms may need to scale up their privacy expertise. This could involve bringing someone in-house, investing in staff training, or looking at a managed service supplier for advice or guidance.
6. Reputational Risk Management: ESG compliance is not just about following the law; it's also about managing reputational risk. Firms that fail to embrace ESG requirements may face significant reputational damage, which could impact their commercial viability.
The impact of ESG on accountancy practices is far-reaching, affecting everything from cybersecurity measures to supplier relationships. By embracing these changes, firms can not only mitigate risks but also seize new opportunities and enhance their reputation.
To watch the full session by Rich Jackson, just click here. In the session, Rich covers the above as well as:
• Review ESG in plain-English
• Understand why ESG is so important to accountancy practices
• Take a deep-dive into the ESG-Cyber Security relationship
• Consider why both ESG and Cyber Security are independently and collectively key to all accountants
• Discover how we can generate a strong cyber security and data privacy ESG score
The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.