The Impact of ESG Reporting and Assurance on Small and Midsize Accounting Firms

Assurance, tax and advisory services related to climate and other Environmental,Christopher Tower Social and Governance (ESG) disclosures are expected to rise significantly over the next 24 months for both public and private companies. Verdantix research found that investment in ESG and sustainability consulting reached $6 billion in 2021 and forecasts a compound annual growth rate of 17% to reach $16 billion by 2027.

Given such swift change, is the accounting profession prepared to navigate this emerging landscape to take advantage of a market opportunity? And have they thought about and invested in their own ESG journey?

Christopher Tower recently joined the Pennsylvania Institute of Certified Public Accountants’ (PICPA) Insightful podcast to offer his thoughts on this topic as BDO USA’s ESG Strategy and Services Leader. Building on new survey data from PICPA members, the episode covers everything from proposed ESG regulations to standard setters to advice for accounting firms.

The ESG Landscape

While rules and regulations are still pending in the U.S., investors, customers, employees and other stakeholders are increasingly demanding that ESG factors be measured and reported. That means that regulators and standard setters are analyzing the best ways for companies to provide clarity and consistency for their ESG disclosures. 

This is where the accounting profession comes in.

“Smaller, midsized organizations are joining the large public companies in wanting to understand their exposure to ESG risk and believe there is true value in addressing it,” says Tower. 

When looking to provide services to this market, the landscape is broad, and it takes time and resources to develop a full, service offering. Clients are looking for help in their ESG journey, and if you’re not skilled enough or able to jump in and help them, they will go somewhere else. 

Key Takeaways for Accounting Firms

For accounting firms considering a move or expansion into providing ESG-related consulting services, consider these critical points:

  • There is a danger in trying to be all things to all clients; you just can’t do it all. Don’t fake it, or you will damage your brand. Figure out where you may have existing resources or talent to dedicate to building a practice, and then make the decision as a firm to move forward.
  • Focus first on your firm’s internal strategy. Get your senior leadership and partner group in alignment. Determine what your own ESG strategy is as a firm. And if you don’t have a strategy in place or a full understanding of what ESG means for you, don’t offer those services to clients. 
  • It’s important to also have someone in the firm deeply immersed in the standards. Familiarize yourself with the standard setters (GRI, SASB, ISSB, TCFD, Greenhouse Gas Protocol, etc.), which are the basis for ESG reporting.
  • When you determine you are ready to go to market, look at the services landscape and decide what you want to specialize in. Determine your delivery model: what technical resources you need, how you will go to market, and how you will grow the offering. In short, establish how you can be truly excellent with a quality product. 
  • If you don’t have someone in your firm that can support you when a client comes calling, start building your network now to find those resources. 

BDO USA is proud to be a leader in helping clients develop ESG strategies and programs and serves as a trusted resource to the 250+ independent CPA firm members of our BDO Alliance USA

To listen to the full episode: 

We look forward to continuing the conversation and welcoming Christopher Tower to our annual BDO Alliance USA Member Conference in Las Vegas this spring, where he will be leading a session for our Alliance Members on “Key Considerations in Attesting to ESG-related Non-Financial Information.”