More and more companies are caring about things beyond their profits. Small businesses are spending time making sure they’re protecting the environment, supporting social justice issues, and creating a positive impact in their community. If your clients approach you to do a study on their sustainability, here’s a few things to keep in mind.
Make the Scope Clear
The idea of a sustainability audit is somewhat vague. What does this mean? There’s a number of different ways your client can be sustainable. The first thing you want to do is check with your client about the scope of the attestation. To do this, discuss the purpose of the findings report. If your client is looking to secure government grants that require specific metrics, the attestation is well-defined. If your client wants to see how its business is doing and compare its practices to industry standards, there’s a bit more work for you to do. Before you consider making an attestation of your client’s sustainability, know why it needs this information.
Are You a Subject Matter Expert?
Again, there are different meanings behind the idea of being sustainable. Your client could be striving to become more economically sustainable by making sure its market presence, product demand, and other outside forces won’t end up putting it out of business. It could also want to be more mindful of the materials it’s using and energy it’s consuming, and how it’s getting rid of waste. Other topics of sustainability could include health and safety measures, nondiscriminatory practices, or product safety.
Before you agree to check out your client’s sustainability, think about what you know. As an accountant, you probably don’t have an environmental science or engineering background. Are you able to report on Canadian environmental protection acts and requirements? Do you know enough about product safety requirements? If you don’t feel comfortable reporting on these elements, it’s best to make room for experts who are more experienced in these fields. This is especially important if you’ll be the one in direct contact with regulatory or government agencies.
It’s Tough to Measure
One of the main problems you’ll come across in doing a sustainability audit is figuring out how to measure stuff. Some things, especially environmental practices, might be tough to measure with high accuracy. To get very specific measurements, technical and specialized equipment might have to be used. If you decide to go ahead with the engagement, you’ll have to decide whether to place more focus on these areas of higher risk. If your client needs specific environmental readings or safety test qualifications, make sure you know how to perform measurements, decide on your degree of risk, and communicate with your client about how it should share these results with the world.
Figuring Out What Is Material
You don’t want to spend tons of time looking at something that doesn’t matter. Before taking on an engagement to do a sustainability audit, talk with your client about what is important. Understand what management has done and is looking for. Is there a certain area that’s more significant for reporting purposes? Before starting your work, set a threshold of materiality for any numbers you’ll be calculating and comparing. Also, research if there are indicators your client wants or needs to reach, such as a certain number of products having to be tested, as this directly defines your scope.
Forming an Opinion/Presentation
If you’ve already done a financial attestation, you’re probably in good shape here. Make sure you and your client know the scope of what you’ll put together. In general, you’ll usually form an opinion in a findings report over the overall presentation of your client’s sustainability information, whether there’s consistency in its practices, the information it has presented is complete, and that its disclosures are correct. Get a sense of what your client needs in your final presentation. For example, if it plans on reporting the findings to regulatory agencies, it might need diagrams, tables of data, or other visual representations.
Uh Oh….There’s a Misstatement
It’s not the end of the world if you find a misstatement. But it’s important you understand how to communicate this to your client. You might come across four different types of mistakes, so touch base with your client on what it needs to know if any of them appear. These include:
- Your client misstated quantified info. For instance, it didn’t state the right emissions or didn’t include activity for a certain period of time.
- Your client gave a misstatement of narrative.
- Your client omitted information.
- You client didn’t include all the necessary descriptions such as methodologies, measurement methods, estimates, and assumptions when doing sustainability tests.
In all of these cases, you need to display each type of misstatement differently because they each represent a different type of mistake.
There are many different ways to do a sustainability audit. It’s up to your client to determine what it needs tested or what it wants to know. Communicate with your client about the scope of the engagement, the final product it’s looking to get, and the sort of matter it wants covered. By touching base early about the items above, you know right away whether the engagement is a good idea to accept.