Big Four accounting firms rush to join the ESG bandwagon

The sustainability boom has transferred trillions of dollars to environmental, social and governance funds, bringing new stakeholder-led agendas to corporate executive offices.

Today, the Big Four accounting firms are on the cusp of offering two fascinating opportunities. It’s an opportunity to expand what companies have to explain and rebrand their scandal-stricken professions as experts on climate change, diversity and consumer confidence.

PwC Demands Rapidly Growing Demand for ESG Advice $ 12 billion investment plan In June, it announced the launch of the Trust Institute to add 100,000 employees and train client ethics.

Global Chair Bob Moritz said the investment would redefine and rebrand the company “to make sure it’s worth what clients need and what the world needs.” Stated.

This month, Deloitte announced a “Climate Learning Program” for 330,000 employees. KPMG’s ESG work includes helping IKEA analyze the social and environmental risks associated with raw materials for Swedish furniture retailers and advising on the first green bonds issued in India. It is.

Alongside EY, all four are at the table as business groups are breaking new international standards for measuring sustainability.

But as the focus of new ESG grows in marketing, some partners question the extent to which they can transform their business and warn that companies may be exposed to backlash if they don’t follow the standards they drive. I am.

Big Four is partially responding to increasing client budgets for developing net zero emissions plans and other sustainability initiatives. Tracking non-financial indicators such as a company’s carbon dioxide emissions gives you the opportunity to generate more commission income and improve your profit margins, not just your financial results.

The introduction of standardized ESG reporting indicators for enterprises will create more work for accountants as well.This may be facilitated by the proposed proposal International Sustainability Standards CommitteeAn organization that may be established by November to reflect the role played by the International Accounting Standards Board in setting financial reporting standards.

“One of the challenges faced by the profession … was that auditing or financial statements were considered a compliance function,” said a former senior partner at PwC.

“If [companies] Seeing something as compliance or purchasing goods, they grind the price. If they consider it value-added, they will be willing to pay the right price for the value provided by the service provider. “

Beyond accounting, ESG trends also offer other opportunities for big four.

According to partners at the Big Four accounting firms, they will increase their ability to cross-sell their expertise, including adding climate-related standards to the design of executive compensation packages. According to the company, the number of global companies that include environmental or social indicators in determining executive compensation has already doubled since 2018. Latest annual report From ISSESG.

The purpose of PwC’s “new equation” is Rebranding based on “trust”The person who was briefed on the plan was to grasp the “inflection point” when considering how the company would explain its impact on society after the pandemic.

Rather than simply “answering the questions we are asked,” he added, he wants to “assemble” the client’s questions and involve a PwC team with expertise related to other stakeholders such as employees. rice field. For example, a consultant who advises companies buying new technologies could help help workers at risk of losing their jobs as a result, he said.

It is clear that consultants and accountants see ESG as a commercial opportunity. It’s not very clear if the scale of organizational change is in line with marketing hype.

Sometimes companies struggle to figure out what it really means to focus on a wide range of concepts such as “trust” and “sustainability.”

Deloitte Global CEO, Punit Renjen, recently I posted a tweet About the company’s senior thinker’s article on “The Relationship between Trust and Economic Prosperity”.

“Trust is inclusive,” the work declared. “Physical. Emotional. Digital. Financial. Ethical. What is convenient to have is now a must. The principle is now a catalyst. Value is now irreplaceable.”

The Climate Learning Program is Deloitte’s latest climate-related initiative. All promotions correspond to 35-45 minutes of online presentations, some interactive elements, and invitations to staff to reduce their personal climate impact.

Big Four emphasizes climate change and equality in its marketing and recruitment resources, but much of its investment is directed to unrelated areas. While PwC’s strategic announcement focused on “trust” and “sustainability,” much of the $ 12 billion planned to invest will be directed to two major growth prospects: technology and Asia. ..

The majority of the 100,000 net new jobs are expected to engage in technology, leveraging demand from companies seeking help with cybersecurity, cloud platforms and data science. Only some are relevant to ESG. PwC does not give a number.

According to Source Global Research, one-quarter of new investment will be directed to doubling PwC’s business in Asia, where the consulting market alone has grown to $ 32.9 billion, one-third from 2015. It accounts for less than 15% of revenue.

However, despite the topic of climate and social impact, the continued interest of consulting firms in other growth opportunities is that ESG advice replaces or transforms all existing businesses. It suggests that you are aware that nothing is happening.

They also find that ESG-themed strategy outperformances are fantastic, or Short-lived..

Two professors at Harvard University concluded this month that the 2019 statement at the US Business Roundtable, which heralds a new era of stakeholder capitalism, is “mainly show off.” Members of the Roundtable include the heads of the four major accountants and competing consultancy firms Accenture, Bain & Company, Boston Consulting Group and McKinsey.

Even if they are hedging their bets by investing in technology and regional shifts ESG bandwagon Protecting yourself as a light of trust also carries risks for consultants.

“I think they’ll be the target of activists,” said a UK managing partner at another accounting firm at PwC’s plan, arguing that by promoting ESG eligibility, the company would attract scrutiny of its records. ..

“It doesn’t take long … The person who found PwC in Country X is not fully compliant with its own carbon emissions. [standards] Or, we serve clients with a terrible profile and history of modern slavery. ”

Given the scandals that have plagued the PwC industry, when asked if PwC’s focus on trust was hostage, U.S. PwC chairman and senior partner Tim Ryan said: .. We’re not perfect, but we’re making a big investment to make sure everything we do is related to improvement. “