‘Greenwashing’ is rightly becoming an increasing concern for companies globally - but complying with complex and evolving environmental, social and governance (ESG) regulations can be a challenge for time-poor sustainability, compliance and audit professionals.
Keen to offer a solution, UK-based tech company Ideagen, which provides software for high-compliance and regulated industries, has today announced that it will offer a new ESG tool to its customers at no extra cost.
The functionality, believed to be the first of its kind, allows auditors to highlight and then separate non-financial disclosure requirements – commonly referred to as “ESG reporting” – from the Financial Reporting Standard (FRS 102) enabling companies to start the financial year with a clear understanding of what they need to do to be compliant with legislation.
Few things have had as much focus as ESG in recent years. It is becoming more important, and thus more of a challenge, for companies and their auditors. “Greenwashing” claims, where a company overstates its green credentials, whether intentional or not, can significantly impact brand reputation and puts them at risk of from the regulators.
This new development is a direct response to an Ideagen customer trying to navigate this challenge, as Ideagen’s Senior Technical Accountant, Tina Whitington, explains: “Audit firms are constantly looking to provide increased value to their clients, particularly around ESG which can be a minefield for many.
“The UK is ahead in many respects, as it requires companies to report against ESG, but there’s no one single piece of legislation, it’s enshrined within no fewer than seven UK and EU laws, such as UK Corporate Governance Code 2018, the Companies Act 2006, the Listing Rules and the Disclosure Guidance and Transparency Rules.
“And to add extra complexity, the people responsible for collating the data are usually compliance or sustainability managers who sit outside the finance or audit teams.
Ideagen Pentana software has always enabled auditors to tailor based on company size, also whether they’re listed or not-for-profit, which then presents you with a checklist of the regulatory reporting requirements specific to that entity type.
“However this new development allows an audit firm to separate the non-financial disclosures and provide a bespoke summary of what is required with the specific legislation for reference if needed.”
The new functionality was road-tested during its development by a number of firms, including audit firm service provider Croner-i.
“The introduction of the new ESG FRS 102 checklist broadens the scope of Disclose to create reports with the ultimate users’ needs in mind whilst addressing regulator concerns,” said a Croner-i spokesperson.
“It aids our clients in keeping up to date with current issues and improve the robustness of front half reporting. The benefit of the flexibility of the checklist means it can be viewed either side of the year-end process helping our clients with planning and reviewing narrative reporting.”
The new FRS 102 checklist is being offered as a free enhancement to all existing Pentana Disclose customers from December 2022 allowing audit firms to immediately enrich their non-financial reporting support to their own clients. It is