Accountany Europe's Mark Vaessen on driving the sustainability agenda in the profession
By CA magazine
24 August 2023
As President of Accountancy Europe, Mark Vaessen has a vital role to play in harmonising reporting. And, as the release of the first ISSB standards shows, his work also has major repercussions for the sustainability drive, hears Ryan Herman
The greatest long-term opportunity for the accounting profession is also one that presents a serious short-term challenge. That’s the view of KPMG partner and President of Accountancy Europe, Mark Vaessen. He is the figurehead for a body that represents 50 professional organisations (including ICAS) from 35 countries, with a combined membership of one million accountants, auditors and advisers. Mark has also been a key figure in driving the sustainability agenda within the profession and the wider business world.
“Sustainability is a huge opportunity, and also a new lifeline,” he says. Across Europe and the US, firms have reported a drop in the number of people wanting to become accountants. Trying to make the profession more attractive and diverse is both a necessity and a desire. And that is where making companies and organisations more sustainable comes in.
“The sustainability agenda is much more aligned with a purpose-driven generation like Gen Z and the generations after that,” says Mark. “We, as a profession, can show how we can add value to society, because in the end that is what the profession should be about. I talk both to our members and to the outside world, to our stakeholders, and I emphasise how our profession is changing, because we need to look at what we offer through the eyes of our stakeholders.
“Society has many issues. What we are talking about right now is a polycrisis. So how can we be [part of the] solution and help with the expertise and the skills that we have? That’s very important because, in the past, we have been too inward-looking.
“We can’t prevent climate change completely, but what we can do is add trust to sustainability reporting, so that greenwashing will diminish and we get a clearer picture of how companies are progressing towards goals that politicians have set. We have a once-in-a-lifetime opportunity to create a global ecosystem that’s efficient and effective.”
The aim of compiling those sustainability reports to uniform standards recently took a major step forward with the publication of two drafts (IFRS S1 and S2) by the International Sustainability Standards Board (ISSB) in June. The UK government has previously stated that it will continue to support the IFRS sustainability disclosure standards and is currently assessing the appropriate approach for UK companies.
But the introduction of these two standards is itself a challenge for the profession. “The ISSB only started in spring 2022, so to have what I think are well-drafted standards that have a broad level of support is a major achievement,” says Mark. “Even the most advanced companies will be struggling with the speed with which this is being introduced. And there is a consequent challenge for assurance providers. We are used to a world where we usually issue clean opinions on financial statements. We’re going into a situation with sustainability reporting where it will take time to settle. So accountants will not always be able to give clean opinions, there will be modified opinions where you will say, ‘Everything is okay, except in a particular area where they’re not ready.’ The market is not used to that.
“We need to work with the regulators, governments and market participants to see how we manage this. It will take a bit of time for the whole system to settle down. I heard the other day, on a call with KPMG, that in Australia there’s a proposal to have some ‘safe harbour’ provisions for directors on climate reporting in the first two years of implementation to make sure that people doing reporting have time to get it right. That’s an interesting idea… Ultimately, I would like to get to a world where everything is streamlined and everyone contributes to setting the standards. So Europe says, ‘we have already thought about water’ or ‘we have thought about biodiversity’, then China can contribute. But at least have a common base.”
First step
While IFRS S1 and S2 are hopefully a first step towards creating a more streamlined set of rules for sustainability reporting, akin to the world of financial reporting, right now we have the dreaded “alphabet soup” of different bodies and standards. Mark was one of the panellists at this year’s sustainability reporting summit, held by ICAS. When Director of Policy Leadership, James Barbour CA, asked where we would be on this issue in five years’ time, Mark said he hoped we would have one set of sustainability standards. Saskia Slomp, the CEO of the European Financial Reporting Advisory Group, however, thought 20 years was more realistic.
Mark is, by his own admission, an optimist. But he stands by his belief that we can get there much sooner. “I think that can be achieved within five years,” he says. “Maybe that’s ambitious, but that is if we really are committed to international cooperation because all of these topics are actually global topics. Human capital and how you deal with your own workforce or human rights are global issues, especially when you think about some of the supply-chain issues in developing economies.
“Let’s talk about water shortage in the world, which is the next big crisis because of climate change. It is a worldwide issue. The global south may be disproportionately affected by it but these issues deserve global solutions, and also global reporting on it. So if everyone’s on the same page, and investors can see whether a company in Japan is doing better or worse than a company in Europe or in Canada, then everyone benefits.”
Mark’s professional interest in sustainability, and accountancy’s possible role in it, dates back more than a decade. “I was a young accountant, five years into my work with KPMG when I was seconded to the European Commission for two years,” he says. “The big discussion at the time was how do we further harmonise accounting in Europe, because every country was doing its own thing. So it really got me thinking much more in policy terms about the whole reporting agenda.”
This led in early 2000 to the establishment of the International Financial Reporting Standards (IFRS). Mark was appointed Global Head of IFRS for KPMG, initially in London. He adds: “In 2011, we first saw the emergence of integrated financial reporting, of which ICAS was a supporter. I thought there’s something in this because financial information is only one piece of the puzzle.”
Accountants playing a key role in sustainability reporting may also help to restore trust in both the profession and the corporate world. On the latter, Mark is perhaps more realist than optimist, conceding that corporate scandals are a fact of business and that auditors will inevitably be dragged in, complicit or not.
“There will always be companies that will go bust, there will always be companies where fraud is being committed which is very hard to detect. So to think that we can build a system that is completely without these incidents is a fallacy – it’s not going to happen. If you’re in the trust business and something goes wrong, that reflects on you and the profession. But that doesn’t mean that there isn’t an enormous amount of commitment and hard work within all of the large accounting firms, and more broadly across the profession, to pursue the quality agenda.”
Making a difference
As President of a Europe-wide body, but also somebody who lives and works in the Netherlands, Mark can see how sustainability is being incorporated across borders, and how some ideas and directives introduced in one territory can be adopted in another.
“What you want is a situation where what you report outside of the company is also what you’re actually managing inside. That could be water usage if you’re brewing beer, which needs to be reduced because you will have a water shortage in the future. But the first thing you do is really embed it into your strategy. And I think the leading companies are actually doing that, but they’re only just starting.
“If I look at the big Dutch companies, several of them have at least 25% of remuneration linked to sustainability targets, whether that’s decarbonisation, whether that’s diversity and inclusion, or some other metric. And from there you can start driving that down the organisation so that actually everyone in the organisation is aligned. So it is no longer just about hitting financial targets.”
But sometimes making an impact isn’t just about redefining a profession or tackling a world-scale problem, it’s about something far simpler and closer to home. As Mark concludes: “It’s a great privilege to be a spokesperson for 50 organisations in 35 countries. But if I speak to my children now, I explain what I’m doing and that the profession is doing something in the space of sustainability, then I get much more understanding and appreciation for the role of accounting than when I was doing IFRS, which was way more abstract for them. So, yes, it’s nice to know they can appreciate it and understand we can make a difference.”
For more resources, visit the ICAS sustainability hub