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The accounting profession is facing unprecedented challenges as the risk landscape continues to evolve, largely driven by a surge in climate-related and sustainability regulations. Over the last decade, sustainability and environmental, social and governance ("ESG") regulations have increased by a staggering 155%.
"2024 has already demonstrated the escalating impacts of climate change, with January, February, and August all breaking records as some of the hottest months globally. These alarming trends highlight the urgency for accountants to incorporate climate risks into their assessments and decisions to support long-term resilience." - Jose Hopkins, Founder and CEO Simplify Climate.
On top of this, accountants are grappling with the implementation of new accounting standards and additional assurance reporting requirements. This expanding regulatory environment adds complexity and pressure, making it essential for accountants to ensure climate-related risks are accurately considered in their reporting and advisory roles.
The UK’s climate readiness has come under scrutiny, with the government’s climate change advisors warning that the country is “strikingly unprepared to cope with the impacts of climate change.”
In 2024, the UK experienced its hottest day of the year on 12 August, with temperatures reaching 34.8°C in Cambridge. This extreme heat is part of a broader trend, as the European Union's Copernicus Climate Change Service reported that August 2024 was the second hottest on record for Europe, following August 2003. These unprecedented temperatures underscore the escalating climate challenges we face.
Extreme weather volatility is no longer a future concern; it is reshaping decisions in real time, particularly in risk assessments, which are critical to the profession.
The impact on mental health and wellbeing
The mounting pressures on accountants extend beyond professional responsibilities, taking a toll on mental health. Reports from CABA, the wellbeing arm of ICAEW, have consistently highlighted the growing stress within the profession. Many accountants report feeling unable to prioritise their mental wellbeing amidst ever-increasing workloads.
As we face 2024’s record-breaking weather patterns and economic uncertainties, the anxiety surrounding these changes is expected to intensify.
The World Economic Forum has flagged extreme weather events as a top risk to the global economy, while the UK has experienced both the hottest February and the wettest March on record (Met Office). This dual challenge of adapting to professional demands and coping with personal stress underscores the urgent need for better mental health support within the profession.
Key risk and reporting considerations for 2024
To help accountants navigate these challenges, various resources and initiatives have been introduced:
IFRS foundation materials: Educational tools have been developed to clarify how climate-related risks impact IFRS financial statements. These are crucial in understanding the intersection of climate risks and financial reporting.
FRC factsheets: The Financial Reporting Council’s “Climate-related Matters” factsheet (amended in 2024) offers essential guidance for applying FRS 102 in the UK and Ireland.
Audit focus on climate-related risks: The FRC’s “Audit Quality Inspection and Supervision Report” emphasises climate-related risks as a priority area, underscoring the need for robust audit approaches.
Practical steps for accountants
To thrive amidst these challenges, accountants must take proactive steps:
Stay Informed: Regularly engage with updates from regulators such as the FRC and IFRS Foundation. Self-education is vital to keeping pace with changes.
Engage with Stakeholders: Actively participate in regulatory consultations and dialogues with policymakers to stay ahead of ESG expectations and help shape future regulations.
Build Connections: Join ESG-focused networks and communities to share insights and keep up to date with industry developments.
Master Double Materiality: Expand your understanding beyond financial materiality to include impact materiality, as this is becoming increasingly important in the ESG landscape.
Supporting mental wellbeing
Mental health cannot take a backseat in the face of these pressures. Simplify Climate advocates for better support systems to enhance cognitive functioning and overall wellbeing for accountants. Stress and anxiety from climate-related risks must be addressed holistically to empower professionals to navigate this complex landscape effectively.
How Simplify Climate can help you
Struggling to keep up with sustainability, climate change and ESG requirements? Simplify Climate is here to support you. From providing clarity on regulations to offering tailored solutions, we aim to make climate action simpler and more accessible.
Reach out to us at help@simplifyclimate.co.uk to learn how we can help.
Together, we can turn these challenges into opportunities. Let’s simplify climate action and shape a resilient future!
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