How the Accounting Industry is Creating Value for Businesses in the Wave of Sustainable Development

As developments in the global low-carbon economy gain pace, businesses may need to invest more resources in non-financial information analysis linking to Environmental, Social and Governance (ESG). Disclosing key corporate ESG information provides an opportunity for investors to improve the accuracy of risk assessments.

Being an international financial hub, Hong Kong’s regulatory bodies, corporations, and financial institutions are increasingly placing more importance on sustainable disclosure. This trend is leading to new demand for professional services in Hong Kong's accounting industry, while also giving the accounting sector an opportunity to serve as a bridge for the business community and, by doing so, driving the overall development of ESG disclosure in Hong Kong. HSBC recently organised a sustainability roundtable for professional accounting firms, where industry experts shared insights on how the accounting sector should conduct sustainability transformation.

Unlike financial audits, ESG disclosure in most markets is not mandatory, but related regulations are developing rapidly.

In June 2023, the International Sustainability Standards Board (ISSB) published the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards with the aim of providing an international standard for businesses disclosing climate and sustainability related information. As an international financial centre, Hong Kong is also preparing to introduce relevant standards and regulatory measures – striving to align with global benchmarks and seize the opportunities that climate and sustainable development bring.

In March 2024, the Hong Kong SAR Government released its “Vision Statement on Developing Sustainability Disclosure Ecosystem in Hong Kong”, with the goal of making Hong Kong one of the first jurisdictions to align local sustainability reporting standards with the IFRS Sustainability Disclosure Standards.

Kit Wong, Director of Education and Training at the Hong Kong Institute of Certified Public Accountants said, “The Hong Kong Institute of Certified Public Accountants (HKICPA) is also working with major financial regulators and stakeholders to develop local sustainability reporting standards by adopting a roadmap for the ISSB standards, aligning with international practices, and implementing these in a way that is appropriate for Hong Kong's specific circumstances, providing transparency and a clear path to local businesses in sustainable reporting”

At the same time, the HKICPA is actively developing comprehensive skill-enhancement programmes to cultivate more relevant talent by continuously improving course syllabuses for professional qualifications, incorporating sustainability-related projects into various course modules, and continuing to refine the courses further¹.

Today, many businesses have already begun to practise ESG disclosure. However, Daniel Lo, Advisory Specialist of Diginex believed that businesses publishing ESG reports for the first time may face organisational management and coordination challenges as outlined below.

To ease the above pain points, businesses need to establish accurate and clear data collection and management systems, and make good use of technology to ensure the reliability and integrity of information, improve efficiency, and achieve scientific transformation. For example, Daniel Lo said that ESG reporting service provider Diginex employs blockchain technology to assist organisations in collecting, analysing and improving their ESG and climate data, conduct genuine and transparent report disclosure to promote the popularity of sustainability reporting.

Currently, the public and some businesses may only have a limited understanding of ESG. Accounting firms can therefore play a role as a bridge, providing a more easily understood benchmark and common language for ESG and driving the overall development of ESG disclosure in Hong Kong.

Accountants have advantages and corresponding expertise in ESG disclosure. They have rich experience in financial reporting and auditing, internal control and risk management, and they are familiar with the relevant standards². Additionally, accounting firms already have long-term cooperation and maintain a good relationship with businesses, which gives them a unique advantage in promoting the implementation and development of ESG disclosure within organisations.

Although small and medium-sized enterprises (SMEs) in Hong Kong are not currently required to compulsorily disclose sustainability information, SMEs play a crucial role in driving sustainable development across the entire value chain, and the accounting industry should be well positioned to drive this change. However, because many SMEs lack funding, technology and expertise, their sustainable transformation is relatively slow. This gives accounting firms the opportunity to support them with this transformation.

The government is actively promoting Hong Kong's sustainable development and creating a sustainable disclosure ecosystem, the role of accountants is particularly important in this process.

In the future, in addition to auditing and preparing financial reports, accountants can play a role in helping businesses enhance their overall sustainable development through activities including formulating business strategies, implementing new disclosure requirements, and, for listed organisations, ensuring that they are fully prepared before new disclosure regulations take effect³. To make sure they are equipped to provide this support, accountants will need to continuously strengthen their sustainability-related skills and expertise.

Sustainable disclosure will become one of the main issues of concern in business operations. The accounting industry needs to consider how it can support businesses in dealing with various sustainability tasks, maintain close cooperation with different stakeholders to align with the direction of Hong Kong's sustainable development and international standards, strengthen the competitiveness of Hong Kong enterprises, and consolidate Hong Kong's long-term position as an international financial centre.

Today HSBC finances a number of industries that significantly contribute to greenhouse gas emissions. We have a strategy to help our customers to reduce their emissions and to reduce our own. For more information visit www.hsbc.com/sustainability.

¹ https://www.hkicpa.org.hk/en/News/News-Release/20240327_Govt-vision-statement-on-sustainability

² https://www.hkicpa.org.hk/en/News/News-Release/20231114_ESG-Assurance-Research-2023

³ https://www.recruit.com.hk/Resources/ArticleDetail.aspx?articleId=44158