Sustainability for Accountants
SJLS Australia and New Zealand (SJLS ANZ) is a mid-tier accounting practice that operates through ten offices in Australia and six in New Zealand, with 58 partners and 650 employees. Its offices are located in major cities, with two offices in Sydney (CBD and Western Sydney), two offices in Auckland (CBD and South Auckland), and the remaining offices located in regional centres, including Lismore in northern NSW and Nelson in the South Island of New Zealand. SJLS ANZ is part of SJLS, a global network of firms.
Key aspects of SJLS ANZ’s business and strategy are outlined below.
SJLS ANZ is governed by a management board, comprised of the managing partner from each office, and two independent directors (one from Australia and one from New Zealand). The chair role alternates every two years between the independent directors.
SJLS ANZ’s values are as follows:
1. Acting with integrity
2. Empowering clients
3. Valuing our people
SJLS ANZ’s board and partners believe their people are key to their success. This is reflected in the company’s investment in its people through regular technical and professional training, flexible working arrangements, and generous leave policies.
SJLS ANZ is proud of its regional footprint. Through its connections with these regional communities, SJLS ANZ is regarded as an industry leader in Australia for its work with Indigenous organisations and communities. It developed and published its first Reconciliation Action Plan in 2010, and now works with university careers services to offer targeted First Nations/Maori/Pasifika internships at all its offices. This has resulted in several interns taking up permanent employment with SJLS ANZ, with one of the early interns being promoted to partner at the start of this year. SJLS ANZ also sponsors local community events and organisations, with the recipients of sponsorship being determined by a sponsorship committee in each office. A sponsorship committee is typically composed of the office’s managing partner, another senior partner and an employee representative.
Within each SJLS ANZ office, there are efforts being made to reduce power use and waste. SJLS ANZ largely operates as a paperless office. In 2022 it migrated its data onto a cloud server, with sustainability criteria included in its selection of the cloud provider.
ESG measurement and reporting
To date, SJLS ANZ’s sustainability activities are largely ad hoc, and there are no goals, measures, or targets. The only reporting is for people recruitment and retention and the internship program, which are included in board reports.
However, there is increasing interest from staff and clients in sustainability related issues. This reflects the increased societal expectation that organisations act responsibly. This sentiment has grown stronger over the last year with the occurrence of severe flooding in parts of Australia and New Zealand. The Lismore and Nelson offices each experienced flooding, as were several homes belonging to SJLS ANZ’s staff. These floods caused significant disruption to clients’ businesses. An additional three SJLS ANZ offices have been identified as being in flood prone locations.
SJLS ANZ’s board is aware that competitors in the accounting industry are making sustainability and net zero commitments, and some have issued sustainability or corporate responsibility reports.
Part A – Written submission
Scenario 1: Climate-related action
SJLS’s global board is debating whether its network of firms should become a signatory to the Net Zero Financial Service Providers Alliance (NZFSPA), an alliance of financial service providers committed to net zero greenhouse gas emissions by 2050 or sooner. As the net zero commitment would be binding on all SJLS network members, the SJLS global board is seeking input from its network members, including SJLS ANZ.
The eight principles underpinning the commitment are as follows:
1. Align all relevant services and products to achieve net zero greenhouse gas emissions by 2050 or sooner, scaling and mainstreaming Paris Agreement-alignment into the core of our business.
2. Build internal capability to understand the risks and opportunities of the net zero transition using best-practice net zero methodologies1 where they exist and, where methodologies or data are missing, proactively and collaboratively work to address those gaps.
3. Set an interim target for relevant services and products offered to be aligned to the net zero transition which is consistent with a fair share of the 50% global reduction in carbon emissions needed by 2030. Review and update such targets at least every five years with a view to increasing the proportion of services and products to achieve full alignment.
4. Address our own operational impacts by setting science-based emissions reduction targets across all operational emissions (Scopes 1 and 2 and, where material, 3) in line with 1.5°C emissions pathways. Set interim science-based reduction targets within 12 months of joining for no later than 2030 across all operational emissions.
5. Consistently raise with our key stakeholders the importance and implications of setting net zero targets and strategies across Scopes 1, 2 and 3 emissions and understanding the impact businesses can have to help reduce GHG emissions2.
6. Work to ensure our relevant services and products take into account the best available climate science, including credible emissions reduction pathways to net zero. Support innovation and prioritise our efforts where we have, or can have, the most significant impact. Support the development of products and services supporting the net zero transition.
7. Advance our efforts by proactively engaging with stakeholders and policy-makers on corporate and industry action, as well as public policies, that support a net zero transition of economic sectors in line with science and with regard to social impacts. Contribute to Glasgow Financial Alliance for Net Zero (GFANZ) efforts within the financial services provider alliance, which will aim to bring together existing tools and alliances.
8. Report progress, individually as firms signing this Commitment, at least annually, including publishing disclosures aligned with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD)3 and climate action plans.
1. Such as Science Based Targets initiative and alliance partners of Race to Zero and GFANZ. Best methodologies to incorporate scope 3 emissions as well as appropriate use of carbon offsetting should be incorporated.
2. This commitment does not apply to service providers, including without limitation credit rating agencies, whose business model and/or regulatory obligations require them to maintain complete independence, both actual and perceived.
3. As comprehensively as possible, while being cognisant that some sections do not directly apply to all signatories.
(Source: Net Zero Financial Service Providers Alliance 2023, Commitment, viewed 28 February 2023, https://www.netzeroserviceproviders.com/our-commitment/)
You have been asked to draft the SJLS ANZ board’s response to the global board outlining whether SJLS ANZ supports signing up to the NZFSPA.
As part of formalising its approach to sustainability, SJLS ANZ’s board has decided that climate-related risks and opportunities should be included in its enterprise risk management framework. In particular, it is interested in gaining a better understanding of potential climate-related risks and opportunities the organisation could face in the future.
As a starting point you have been asked to identify and explain these risks and opportunities by applying the TCFD risk framework.
Risk &Opportunity Reference to the background information on SJLS ANZ Clearly explains why both risks and opportunities are material for SJLS ANZ Clearly and concisely outlines the potential financial impact of both risk and opportunities for SJLS ANZ.
(Write climate related TRANSITION risk) 50 words 50 words 50 words
(Write climate related PHYSICAL risk) 50 words 50 words 50 words
(Write climate related Opportunity 1) 50 words 50 words 50 words
(Write climate related Opportunity 2) 50 words 50 words 50 words
Scenario 2: Diversity, equity and inclusion
The SJLS ANZ board has determined the time has come for SJLS ANZ to adopt a strategic, organisation-wide approach to sustainability, and has appointed a sustainability sub-committee of partners to lead this change.
As a result, SJLS ANZ has consulted key stakeholders to identify SJLS ANZ’s material sustainability issues. These stakeholders are SJLS ANZ’s partners and employees, directors and clients. This process identified diversity, equity and inclusion (DEI) among the top 10 material issues for the organisation, and top five among employees.
SJLS ANZ is a people-based service organisation, and its people are critical to servicing its clients. This is the reason why SJLS ANZ has a policy of investing in its people, and why ‘valuing people’ is embedded in its values and culture. Despite this, SJLS ANZ, like most organisations in the accounting industry, is finding it difficult to attract and retain staff. On average, it is taking 90 days to recruit for new professional staff compared to 30 days pre-2020. In 2022, SJLS ANZ was only able to fill 85% of its graduate positions.
The sustainability sub-committee has set a goal of enhancing DEI, and is prioritising this goal given DEI is a material issue and because of the talent shortage currently challenging SJLS ANZ. To achieve this goal, the sub-committee has agreed to introduce the following initiatives over the next year:
1. Include women and people from diverse backgrounds on selection panels.
2. Offer leadership training and mentorship to professional staff, and track participation to ensure diverse staff and partners are involved as mentors and mentees. If necessary, improve diversity by targeting people for the mentoring program.
3. Introduce a quarterly team-building afternoon in each office, with diverse activities.
4. Implement mandatory online training for all employees on the importance of an inclusive workplace, and in cultural competence.
The sustainability sub-committee would like to measure its progress against these initiatives and has asked for your advice in selecting the most relevant metrics.
It is now nine months since the introduction of the initiatives, and SJLS ANZ is preparing its first sustainability report, including qualitative and quantitative information about its DEI initiatives. You have been seconded to assist with completing the DEI section of the sustainability report. Some parts of the report have already been drafted by the sustainability sub-committee, and the sub-committee has provided you with the following information.
An internal analysis of pay rates across SJLS ANZ has identified the following pay gaps*:
Overall gender pay gap including partners^ 15%
Overall gender pay gap excluding partners 8%
Partner gender pay gap 20%
Director gender pay gap 12%
Manager gender pay gap 9%
Supervisor gender pay gap 3%
Accountant gender pay gap -2%
*Pay gap is defined as the difference in the average earnings of men and women across all roles. A positive number indicates men are paid more on average than women.
^Partners are a mixture of equity partners who receive a share of profit, and salaried partners who receive a salary plus a profit-based bonus.
The sustainability sub-committee has drafted the following disclosures based on the internal analysis above for inclusion in the sustainability report.
SJLS ANZ 2022 gender pay gap analysis
Our gender pay gap Our overall gender pay gap in 2022 is 8%. This figure compares the pay of the average wage for men and average wage for women at SJLS ANZ. It includes base salary, overtime, miscellaneous payments and superannuation. In 2021, our gender pay gap was 10.5%. Our analysis covers all permanent and fixed-term employees, except for Partners as they are remunerated differently from other staff.
Pay equity We are confident that we are improving pay equity across all of our roles. This means equal pay for equal work. Across our internal pay bands, men are sometimes paid more within a band and women are sometimes paid more.
Gender pay gap by role
Closing the gap We are committed to closing the gender pay gap within our organisation. This year, we have made a range of commitments aimed at addressing the gender imbalance, including offering more training and leadership opportunities to women. We also pledge to continue to work towards addressing disparities in pay equity.
Task 4 – SJLS ANZ’s draft DEI disclosures on employee remuneration and gender
Recommend six (6) improvements to the draft DEI disclosures on employee remuneration and gender. Focus on disclosures that may misrepresent the data provided to you by the sustainability sub-committee, or disclosures that lack transparency. Include at least one quantitative and one qualitative improvement.
For each recommendation, explain how SJLS ANZ could improve the disclosure to provide more meaningful information to its key stakeholders.
Recommends six relevant improvements to SJLS ANZ’s DEI disclosures on employee remuneration and gender, including at least one qualitative and one quantitative improvement Clearly explains how each recommendation provides
more meaningful information to key stakeholders.
1. (Write Mandatory one qualitative recommendation) 50 words
2. (Write Mandatory one quantitative recommendation) 50 words
3. 50 words
4. 50 words
5. 50 words
6. 50 words
Part B –
The International Sustainability Standards Board (ISSB) published its first two proposed sustainability standards in March 2022: Exposure Draft IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information, which covers general sustainability-related disclosures, and Exposure Draft IFRS S2 Climate-related Disclosures, which covers climate-related disclosures. These proposed standards, when finalised, are intended to form a comprehensive global baseline of sustainability-related disclosures designed to meet the information needs of investors in assessing enterprise value.
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