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The sustainability boom has shifted trillions of dollars into environmental, social and governance funds and brought a new stakeholder-led agenda to corporate boards.

Today, the Big Four accounting firms are jumping on a bandwagon that offers two tantalizing opportunities: an expansion of what companies must account for and a chance to rebrand a scandal-ridden profession as experts of change. climate change, diversity and consumer confidence.

PwC has put growing demand for ESG advice at the heart of a $12 billion investment plan it announced in June, which will involve adding 100,000 employees and launching “trust institutes”. to train clients in ethics.

Bob Moritz, its global chairman, said the investment would redefine and rebrand the company “to ensure we are valuable for what our customers need and what the world needs”.

Deloitte, in turn, this month announced a “climate learning program” for its 330,000 employees. KPMG’s ESG work included helping Ikea analyze the social and environmental risks associated with the Swedish furniture retailer’s raw materials and advising on the first green bond issued in India.

Alongside EY, all four have been at the table as business groups try to develop new international standards for measuring sustainability.

But as their new ESG focus increasingly looms large in their marketing, some partners wonder how much it will transform their businesses and warn it could expose companies to backlash if they fail to meet the standards they promote. .

The Big Four are responding in part to an increase in customer budgets for developing net zero emissions plans and other sustainability initiatives. Tracking non-financial metrics like a company’s carbon footprint, not just its bottom line, gives companies the opportunity to generate more commission revenue and improve profit margins.

Introducing standardized ESG reporting measures for companies would also create more work for accountants. This will potentially be facilitated by the proposed International Sustainability Standards Board, a body that could be created by November to mirror the role the International Accounting Standards Board plays in setting financial reporting standards.

“One of the challenges the profession has faced. . . is that auditing or financial statements were viewed by some as a compliance function,” said a former PwC senior partner.

“Yes [companies] consider something like a compliance or commodity purchase, they squeal the price. If they view it as something that adds value, they are willing to pay the appropriate price for the value the service provider provides.

Beyond accounting, the ESG trend also offers the Big Four other opportunities.

There will be a growing ability to cross-sell expertise, such as adding climate-related criteria to the design of executive compensation packages, said a partner at another Big Four company. According to the latest ISS ESG annual report, the number of global companies that incorporate environmental or social measures when determining executive compensation has already doubled since 2018.

The aim of PwC’s ‘new equation’, which includes a ‘trust-based’ rebranding, was to capture an ‘inflection point’ as companies consider how to explain their impact on the society after the pandemic, said a person briefed on the plans.

Instead of just “answering the question posed to us”, he wants to “frame” client questions and engage PwC teams with relevant expertise for other stakeholders such as employees, the person added. Consultants advising companies buying new technology, for example, could help support workers who risk losing their jobs as a result, the person said.

That consultants and accountants view ESG as a business opportunity is clear. It’s less clear whether the scale of change in their organizations will match the hype.

Sometimes companies struggle to articulate what their focus on broad concepts like “trust” and “sustainability” means in practice.

Punit Renjen, Global Managing Director of Deloitte, recently posted a tweet about an article written by some of the firm’s senior thinkers on “the link between trust and economic prosperity”.

“Trust is all-encompassing,” the piece said. “Physical. Emotional. Digital. Financial. Ethical. A nice-to-have is now a must-have; a principle is now an enabler; a value is now priceless.

A solar farm
The Big Four are responding in part to an increase in client budgets to develop sustainability initiatives © Roslan Rahman/AFP via Getty

The Climate Learning Program is Deloitte’s latest climate initiative. For the entire promotion, this amounts to a 35-45 minute online presentation, a handful of interactive elements and an invitation to staff to reduce their personal climate impact.

While the Big Four emphasize climate change and equality in their marketing and recruiting materials, much of their investment is in unrelated areas. PwC’s strategy announcement had a strong focus on “trust” and “sustainability,” but much of the $12 billion it plans to invest will go toward two other key growth prospects: technology and Asia.

The bulk of its 100,000 net new jobs are expected to be in technology, capitalizing on demand from companies seeking help with cybersecurity, cloud platforms and data science. Only some will concern ESG; PwC did not give a figure.

A quarter of the new investment will go towards doubling PwC’s business in Asia, where the advisory market alone has grown by a third since 2015 to $32.9 billion, according to Source Global Research, but represents less than 15 % of PwC revenue.

Big Four Asia-Pacific Revenue

However, despite the buzz around climate and social impact, advisory firms’ continued interest in other growth opportunities suggests they recognize that ESG advice will not displace, or even reshape, all of their operations. existing.

They are also pushing further into sustainability consulting despite criticism that the outperformance of ESG-themed strategies is either illusory or will be short-lived.

Two Harvard professors concluded this month that the US Business Roundtable’s 2019 statement heralding a new era of stakeholder capitalism was “mainly for show.” Roundtable members include the heads of the Big Four accountants as well as competing consultancies Accenture, Bain & Company, Boston Consulting Group and McKinsey.

Even if they hedge their bets by investing in technology or regional shifts, jumping on the ESG bandwagon so publicly and presenting themselves as beacons of trust also carries risks for consultants.

“I think they will become a target for activists,” said the UK managing partner of another PwC project accounting firm, saying that by promoting its ESG credentials the firm would attract attention. pay attention to his own file.

“It doesn’t take much. . . for someone to find PwC in country X not quite meeting their own carbon emissions [standards] or is serving clients who have an ugly profile or history of modern slavery.

Asked if PwC’s emphasis on trust was held hostage to fortune given the scandals that have plagued its industry, Tim Ryan, President and Senior Partner of PwC in the United States, said: “There always has a risk to manage. We’re not perfect, but we invest heavily to make sure everything we do is tied to improvement.

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Letter in response to this article:

More bosses need to jump on the bandwagon on ESG reporting​ / ​From Jeffrey Ridley, Visiting Professor of Corporate Governance Assurance, Lincoln International Business School, University of Lincoln; Fellow, The Corporate Governance Institute; Former President of the Chartered Institute of Internal Auditors, Woodhall Spa, Lincolnshire, UK