Earth Day 2023: Ganesh Ramaswamy
April 21, 2023
As Earth Day 2023 approaches, it’s important to consider the role that businesses can play in promoting sustainability and combating climate change. Ganesh Ramaswamy, Partner at Kreston Rangamani and Associates LLP, provides valuable insights into how businesses can incorporate sustainability into their financial reporting and tax compliance.
- The business world is among the most significant emitters of greenhouse gases and other pollutants. How can businesses incorporate sustainability into their financial reporting and tax compliance?
In order to reach the Paris Climate goals businesses need sustainability reporting standards to measure their social and environmental impact more effectively. The business world expects the most significant innovations to happen soon in the corporate accounting and tax reporting standards due to the inclusion of ESG and sustainability reporting in financial statement reporting. Many businesses are embracing sustainability goals and seeking to reduce their carbon footprints. Most businesses have started sustainability reporting on a voluntary basis in their financial statements. ESG and sustainability reporting are part of the board agenda for many companies. To move forward the finance reporting function in businesses must be integrated with ESG and sustainability reporting. Moreover, the finance teams of businesses the world over should contribute to the process of setting standards in sustainability reporting.
- Earth Day 2023 theme is ‘Invest in our planet.’ Businesses can profit significantly from a sustainable transition if they invest early on. How do you think businesses will profit – or benefit?
Investing in sustainable practices would definitely see businesses improving their ROI in the next decade. Building and growing a sustainable business has a lot of benefits like attracting a large pool of capital, building a stronger corporate brand, and promoting long-term growth which will definitely help the company and the investors benefit a lot. Individual and institutional investors are investing heavily in companies that proactively adopt ESG practices and have them integrated into the business strategy. Adoption of renewable energy like solar energy, wind energy and bioenergy automatically reduces costs.
Corporations that understand the importance of adapting to evolving socioeconomic and environmental conditions are better positioned to identify strategic opportunities and overcome competitive challenges. Proactive and integrated ESG policies can help companies gain a competitive advantage over other industry players. Employees generally care deeply about the companies they work for and the businesses they support, hence, they embrace values that are aligned towards social good, and environmental and social responsibility.
- What are some tax incentives available for companies that implement sustainable initiatives, and how can businesses take advantage of them?
The tax incentives for businesses that implement sustainable initiatives are referred to as “green incentives” which comprise the following among various others:
- Accelerated depreciation for investments in the sustainable energy sector.
- Vehicle tax credit for electric motor vehicles
- Grants for small businesses which take sustainable initiatives
- Emission reduction credits which are encashable
- Grants on salary payment to employees coming out of a green initiative.
These types of incentives can push many businesses would move in a more sustainable direction, or boost that allows these businesses to make the initial investment in green energy options or set up a new eco-friendly venture.
- How can sustainable practices positively impact a company’s bottom line, and how can tax and accounting professionals help businesses quantify these benefits in their financial statements?
Sustainability reporting is a form of non-financial reporting that enables companies to convey their progress towards goals on various sustainability parameters, including environmental, social and governance metrics, and risks and impacts they may face. By disclosing the sustainability report, companies are able to communicate more transparently with the public about their business activities related to non-financial management and performance aspects. Though a number of different measurement and valuation methods exist, most of them are focused exclusively on ecological aspects, i.e. impact on climate, forest decline or water. Tax and accounting professionals can help businesses to quantify these benefits by valuing the following key dimensions for sustainable development:
- Effects of economic activity on the environment e.g., resource use, pollutant discharges, waste.
- Environmental services to the economy e.g., natural resources, sink functions, contributions to economic efficiency and employment.
- Environmental services to society e.g., access to resources and amenities, contributions to health, living and working conditions
- Effects of social variables on the environment e.g., demographic changes, consumption patterns, environmental education and information, institutional and legal frameworks.
- Effects of social variables on the economy e.g., labour force, population and household structure, education and training, consumption levels, institutional and legal frameworks.
- Effects of economic activity on society e.g., income levels, equity, employment.
- What is the role of accounting networks like Kreston Global in the education and behaviour change that firms and their clients need to take us to net zero by 2050?
Networks like Kreston Global should act as strategic visionary which understands and guides the member firms on the trade-offs among people, the planet and profits. The networks can also function as a catalyst which can align the member firms’ strategy and culture so as to develop a sustainability agenda for the member firms. It is also quite easy for networks to provide an integrator role among member firms spread over various regions so as to uphold an overall commitment to the sustainability of the network.
- Kreston Global recently partnered with Treedom Agroforestry to mitigate the emissions generated by enabling our members to connect face-to-face. What actions have you taken in your firms or your personal life that you can share that will help mitigate or reduce emissions?
The initiatives taken by our firm are the following:
- Pooling of cars among staff while commuting to the office
- Vegan food replaces fish and meat for lunch.
- Water in glass bottles replaces PET bottles.
- Use of natural light during daytime.
- Focus on staff recreation facilities.
- Increase in per diem for employees to travel by train instead of planes.
- Floor carpets are made of natural fibre and not artificial fibre.
- Employees are encouraged to use cotton clothing over synthetic clothing.
- Natural jute bags replace plastic containers.
To conclude, Ganesh makes note of the importance of incorporating sustainability into financial reporting and tax compliance is a vital step for businesses in reducing their carbon footprint and achieving sustainability goals. Investing in sustainable practices benefits businesses in the long run, as it improves ROI, attracts capital, and strengthens the corporate brand. Tax incentives for implementing sustainable initiatives can help businesses to make the initial investment in green energy options or set up new eco-friendly ventures. On this Earth Day 2023, let’s pause and consider how our actions affect the planet and strive for a future that prioritises sustainability.