Sustainability and the ICAS Code of Ethics: Pressure to breach the fundamental principles

Sustainability, the CA and The Power of One

Society is changing. There is an ever-growing emphasis on sustainability, and Environmental, Social and Governance (ESG), at government and regulatory level as well as increased societal expectations for organisations to behave responsibly.

Whilst the “E” is clearly important, sustainability is not just about climate change - the importance of societal matters (the “S”) as well as governance and ethical corporate cultures (the “G”) are of equal significance. Organisations need to be thinking about the impact of sustainability/ESG on their organisation and the impact of their organisation on the environment and society.

The accountancy profession has a responsibility to act in the public interest. Ethics is the conscience of organisations, it is at the core of driving behaviours, and is the key to long-term thinking and trust. The golden thread of ethics and The Power of One weaves through sustainability and ESG. There is a need for all CAs to be aware that sustainability/ESG is not a niche topic that they can ignore. Every CA has their part to play in their own sphere of work around ethics and sustainability.

CAs must always ensure their obligations to the five fundamental ethics principles enshrined within the Code of Ethics (the “Code”) are met: integrity; objectivity; professional competence and due care; confidentiality; and professional behaviour. The new guidance to the Code seeks to assist CAs by signposting a number of areas of the Code where provisions could relate to sustainability related matters.

This extract is the final of a series from the guidance and highlights how the provisions within the Code in relation to ‘Pressure to breach the fundamental principles’ could apply to sustainability.  Links to the other extracts are provided below.

Pressure to breach the fundamental principles

Section 270 recognises that pressure exerted on, or by, a professional accountant might create an intimidation or other threat to compliance with one or more of the fundamental principles.

R270.3 states:

“A professional accountant shall not:

(a) Allow pressure from others to result in a breach of compliance with the fundamental principles; or

(b) Place pressure on others that the accountant knows, or has reason to believe, would result in the other individuals breaching the fundamental principles.”

Paragraph 270.3 A1 provides examples of where pressure might arise including in relation to: the preparation or presentation of information; acting without sufficient expertise; financial interests; and non-compliance with laws and regulations.  All of which could arise in relation to sustainability/ESG related matters.

The section goes on to provide application material in relation to how the professional accountant might evaluate and eliminate the threat, including disclosing the matter in line with the organisation’s ethics and whistleblowing policies.

Integrity:  Having the strength of character to act appropriately

The 2022 IESBA ‘role and mindset’ revisions to the Code introduced new application material to the fundamental ethics principle of Integrity to emphasise that, for professional accountants, integrity includes having the strength of character to act appropriately when faced with challenging circumstances.

The Code now states:

“R111.1 A professional accountant shall comply with the principle of integrity, which requires an accountant to be straightforward and honest in all professional and business relationships.
111.1 A1 Integrity involves fair dealing, truthfulness and having the strength of character to act appropriately, even when facing pressure to do otherwise or when doing so might create potential adverse personal or organisational consequences. Fair dealing includes respecting values of equality, diversity and inclusion.
111.1 A2 Acting appropriately involves:

111.1 A3 It follows that a professional accountant’s advice and work must be uncorrupted by self-interest and not be influenced by the interests of other parties.”

This new material contains the substance of the concept of ‘moral courage’ which was first introduced into the ICAS Code of Ethics in 2017. ‘Moral courage’ being regarded by us as an enabler – an underpinning qualitative characteristic - which helps CAs to comply with the fundamental principles. This is discussed further in ICAS’ The Power of One publication – Moral Courage.  We viewed this new IESBA material as reinforcing the message of moral courage and retained moral courage as an enabler in paragraphs 110.2 A0 and paragraph 270.1 A1 of the Code.

Speak Up?  Listen Up? Whistleblow?

Whistleblowing and ‘speak up’ mechanisms are vitally important for the long-term success of organisations. A speak up culture allows issues to be dealt with at the earliest opportunity before they escalate. Individuals throughout organisations should be encouraged and empowered to have the confidence to ‘speak up’ if they encounter ethical issues, to promote good behaviour and to influence others. If a problem is left to fester, the potential harm that could be caused increases. Ultimately, ‘turning a blind eye’ could lead to reputational ruin for an organisation.

In 2019, we published two research papers – Speak Up? Listen Up? Whistleblow? - reflecting the results of a project which investigated the experiences of our members when encountering ethical dilemmas.

The research found that CAs are likely to encounter ethical dilemmas throughout their careers, either of a technical and/or behavioural nature.  Technical dilemmas reported mainly related to accounting irregularities, fraud, theft and bribery, taxation, auditing, bonuses, incentives and executive pay. Behavioural issues related mainly to bullying, pressures from managers and clients, and work pressures relating to workload or work-life balance issues.  Bullying was the third most frequently cited type of dilemma after accounting irregularities and fraud/theft.

Given the growing importance of sustainability related information, it may be envisaged that CAs will experience similar issues to those noted in the research but in relation to sustainability matters.

Section 220 of the Code provides requirements and application material in relation to “Addressing Information that Is or Might be Misleading” and Sections 260 and 360 focus on responsibilities when there is a situation of ‘Non-compliance with laws and regulations’ (NOCLAR).

In order to assist CAs, as well as resources from the Speak Up? Listen Up? Whistleblow? research, we also have published guidance which focuses particularly on the importance of organisations ‘listening’ to their employees when they ‘speak up’ -  Organisational culture: The importance of listening.

We also provide an Ethics Buddy Service to enable CAs with an ethical dilemma, where deemed appropriate, to have confidential, informal, discussions with an experienced ICAS member.  This is a supplement to the ICAS Ethics Helpline Service as well as access to the confidential helpline of Protect, the independent whistleblowing charity.

Find out more

The guidance signposts the following other areas of the Code where provisions could relate to sustainability related matters (please note that these areas are provided by way of example and should not be considered an all-inclusive list):

• Sustainability and the ICAS Code of Ethics
• Preparation and presentation of information – integrity and objectivity
  • CAs shall not knowingly be associated with misleading information
  • Internal controls
  • Inquiring mind
  • Reliance on the work of others or on the output of technology
  • Financial interests, compensation and incentives
• Professional competence and due care, confidentiality and professional behaviour
  • Acting with sufficient expertise
• Non-compliance with laws and regulations (NOCLAR)
• Organisational culture, including responsibilities with regard to values of equality, diversity and inclusion
• Professional appointments
• Assurance

ICAS ethics resources

Find out more about the ethics resources we provide to support our members below.

ICAS ethics resources

We are partnered with whistleblowing charity Protect to provide members and students with access to an independent, confidential helpline. This service offers free advice regarding whistleblowing and speaking up.