Inspired by CPA Canada’s Complexity and the professional accountant: Practical guidance for ethical decision-making, we recently mused on what might be some of the characteristics of an “accountant of the public interest.”
Let’s return to this now, inspired by a recent consultation paper issued by the Independent Review Committee on Standard Setting in Canada. The committee’s purpose was to “conduct a review of the governance and structure for establishing Canadian accounting, auditing, and assurance standards, and to identify what might be needed for the future – including sustainability standards.” The paper reflects on the concept of the “public interest,” acknowledging “that stakeholders may at times have mutually inconsistent interests, at least in the near term,” and taking the (no doubt debatable) view “that the focus should primarily (but not exclusively) be on the interests of users and, more specifically, protecting the long-term interests of capital providers, as they are key to the efficient functioning of financial markets.” It does observe that “this historical focus on users could shift in the future.”
The document focuses on diversity, equity and inclusion (DE&I as it terms it) more fully than might have been expected of such a project in the past:
- The Committee thinks that the quality of standard setting in Canada is enhanced when a wide range of experiences and perspectives are embedded in standard-setting (and related oversight) processes, fully reflecting Canada’s diversity. This applies to membership and composition of standard-setting boards and oversight councils, as well as to garnering views from a broad range of stakeholders. A diverse mix of backgrounds and experiences ultimately leads to better discussions, better decisions and better outcomes.
- Diversity has several aspects: geography, language, gender, experience and expertise, among them. In the Canadian context, diversity may also include different economic sector expertise. Historically, diversity considerations, such as geographic location, language and gender, have been taken into account in selecting members for standard-setting boards and oversight councils. More recently, the importance of addressing other aspects of diversity and inclusion have come into sharper focus, with calls for greater participation by underrepresented communities.
- It is important to acknowledge the emphasis in a broader business context for DE&I to address the challenges of creating long-term, sustainable value in an increasingly competitive and global marketplace. It has become generally agreed that a lack of DE&I can pose organizational risks.
Although that sounds good, I’m always a little suspicious of justifying diversity with reference to value creation or enhanced performance (I made the same point recently in the context of climate change). It seems to me that the benefits of diversity might as well manifest themselves in arguing against various corporate activities that (even if in some sense “sustainable”) are problematic on ethical or other grounds, thereby reducing corporate value (at least as it’s usually measured). Actually, the best way to diversify many boards and suchlike might be to stick one or two committed leftists on there. But anyway, to the extent that the concept can be implemented without avoiding tokenism, we can agree that the accountant of the public interest would indeed prioritize DE&I (and might also, incidentally, prioritize minimizing the use of silly acronyms).
By the way, the consultation paper also addresses Indigenous Peoples, noting that they “already rely on and are affected by accounting, and sustainability reporting, and related assurance thereon…As Indigenous governments and businesses rapidly grow, there will be increased reliance on standards. Indigenous Peoples may be affected by the reporting or absence of reporting of ESG factors in sustainability standards.” It doesn’t make any specific recommendations in this regard though, asking for comments on how best to ensure that standard-setting processes “reflect and respond to Canada’s diverse populations, including the unique rights of and responsibilities to Indigenous Peoples.”
It’s not surprising that sustainability reporting forms a large chunk of the paper. It advises forming a Canadian sustainability standards board to complement the upcoming international body, noting for example that there could be a need for industry-specific standards or guidance, and that Canadian stakeholders could require implementation guidance to assist in applying the standards. It also notes: “As sustainability reporting evolves, it will be important to respond proactively to the demands for assurance services and to continuously assess the adequacy of existing assurance standards and the quality of assurance services. This includes considering the need for additional standards.” Although I suppose that’s all inevitable, I often worry, as I mentioned before, that this area will be infested from birth by rapacious overload, generating a mass of reporting that for all its data-packed offerings, fails to directly grapple with the core questions (at least as I see them) – of whether the entity in question, by its very nature, is compatible with our collective aspirations for a sustainable future; of whether stakeholders should hope (and work) for its survival or its demise.
Anyway, comments on the consultation paper are due by February 28, 2022. No doubt we’ll return to it in the future.
The opinions expressed are solely those of the author