UK accounting watchdog tightens scrutiny of ESG in company audits, or do they?
I was reading an article on the Reuters website on Monday titled “UK accounting watchdog tightens scrutiny of ESG in company audits”. The article detailed how the UK financial watchdog, the Financial Reporting Council (FRC) said it is going to monitor whether auditors were making spot checks on their compliance with Environmental, Social and governance (ESG) requirements in company audits. The aim is to prevent “Greenwashing”.
This got me thinking, firstly, what legislation is there in place in the UK or around the world to force companies to comply with ESG requirements? Secondly, what are these ESG requirements?
The sad fact, certainly in the UK and across most nations globally there is no legislation or requirements for ESG. This then makes the statement by the FRC pointless.
Whilst they may well be making the right noises, they do not have the tools to be able to enforce any common standards. However, what I do agree with is the desire to improve transparency. It is essential that all organisations are open and honest with their ESG activity and the impact this has on all aspects of the business.
Whilst there will, hopefully, be regulatory requirements for all organisations to not just report on ESG, but to implement effective ESG strategies, there is a far more fundamental reason to fully embrace ESG.
Gen Z are now in the work force and are basing a lot of their decisions, where to work, what to buy and where to go on holiday on the ESG credentials of an organisation. Put simply, if you don’t have this in place you are going to lose business and a workforce. Money is no longer the only driving factor for the majority of people!