Ladies and gentlemen, dear colleagues:
It is an honor and a great pleasure to be with you today on Global Ethics Day. I congratulate the ACCA/SINGAPORE for hosting for the fourth year, and virtually for the first time, the Ethics Film Festival, an engaging and significant event.
Today, I am speaking to you in my capacity as Chairman of IESBA, the global standard setter of the International Code of Ethics for Professional Accountants, including the International Independence Standards. I am pleased that Singapore is among the 80 jurisdictions around the world that have adopted the 2018 edition of the Restructured Code which came into effect last year, in its substantively revised form.
Ethics is a social endeavor that permeates our mindset and orients our judgments. Events as this Film Festival offer an innovative and enticing way to bring together accounting professionals for discussion, and cultivation of awareness of ethical challenges that continuously accompany professional practice. And unfortunately, the COVID-19 pandemic makes awareness of ethical values a pressing need. We, at IESBA, perceive demand for ethical guidance to be clearly on the rise globally. We are doing much work at IESBA to explore new themes, for example in the areas of technology and tax planning.
The role ethics plays in the accounting profession cannot be overstated. Accountants are no strangers to dealing with complex and challenging situations. The Code’s provisions – the fundamental principles, the conceptual framework, the requirements, the application material – require individual accountants and firms to behave ethically and uphold their responsibility to the public interest.
The role of leaders of organizations is paramount in guiding, incentivizing, and shaping a professional culture. That is why the conversations among leaders, as among today’s distinguished panelists, provide individual accountants with insights and inspiration. So, I have been looking forward very much to tonight’s event.
THE ESG AGENDA AND THE GLOBAL PUBLIC INTEREST
The broad commitment of the profession to the public interest is of course reflected on our responsibilities as global standard setters. We have a strong commitment to crafting our standards with clear public interest objectives. The Ethics Code has long been a source of public interest education and practice by the profession.
For many years, I have encountered a persistent request: define the global public interest. It has been hard to offer a satisfactory answer. As commonly understood public interest is a concept varying across jurisdictions and across time, reflected in variety of laws and regulations. Yet today, with all the vicissitudes of crises, a global notion of the public interest has emerged. It is embedded in the environmental, social and governance (ESG) agenda. This makes the vector of objectives for both global standard-setters and global practitioners very definitive. There are surely complexities to be ironed out, but the value system built around sustainability is stable, foundational, and global. This is indeed a very exciting time. A time for work, vision, and restructuring.
How does ethics precisely relate to an agenda about sustainable environment, society, and governance? How does ethics fit into a discussion about Troubled Water?
Ethics and sustainability are close relatives. Ethics is crucial for the sustainability of human relationships, based on trust. There are ethics involved in every facet making up the ESG agenda. How do the policies and decisions of public and private entities and of professionals affect the ESG matrix for shareholders, employees, taxpayers, society at large? Sustainability will be by construction ethical, or it will not prevail. Sustainability standards must acknowledge and embody ethical values.
International organizations, public authorities, and private entities in many countries – including Singapore – are crafting policies for sustainable operations and investments. Capital markets are also affected. In January 2020, Blackrock’s Chairman Larry Fink stated “... companies have a responsibility … to give shareholders a clear picture of their preparedness. And in the future, greater transparency on … sustainability will be a persistently important component of every company’s ability to attract capital.” The big 4 accounting firms, and others as well, are focusing on ESG matters. I note with interest the recently released ESG metrics by the World Economic Forum. We look forward to a standardization of a common approach for measuring and reporting ESG metrics.
THE UNIQUE ROLE OF ACCOUNTANTS
The longstanding expectation of accountants to prioritize the public interest and commitment to the Code of Ethics fits very well with the role of measuring and reporting on ESG objectives. Transparency on sustainability metrics will require strong application of ethical provisions both in the preparation and in the assurance of ESG. The accounting profession is uniquely positioned to lead in this space, as ethics forms part of its value-proposition.
In this connection, I read with special interest the ACCA’s global report: Mainstreaming Impact: Scaling a Sustainable Recovery, launched this month. A large majority surveyed agreed that professional accountants should be involved in understanding social and environmental impacts and dependencies, prioritising the creation of positive social impact alongside financial returns and improving risk management of social and environmental issues.[1] This is a very encouraging finding.
The Code has many lessons for these novel tasks in non-financial reporting. Highlighting the Code I would remind that:
- Accountants are required to be honest and competent and should not associate themselves with misleading or fraudulent information.
- To follow the pace of innovation and technology, accountants must be agile, alert, and open to continuous learning and upskilling.
- Accountants cannot cave under pressure nor can they turn a blind eye when they witness or suspect illegal or illicit behaviors and activities.
Today’s Netflix film, Troubled Water, is a dramatic reminder of the importance of this pair, ethics and sustainability, as technological and social change are unfolding at breakneck speed.
Change is inevitable. Professional standards must be modernized to remain fit-for-purpose. We understand this well at IESBA. Our work program includes projects that enhance transparency and improve communications, among other goals. Earlier this month, we released a new comprehensive pronouncement on “Role and Mindset” that elevates accountants’ societal role and strengthens the mindset and expected public interest orientation.
The drive for sustainable economies and societies will depend very much on building transparency, accountability, and trust in private and public organizations and among the financial professions. Accountants have a central responsibility in this construction for recovery and future well-being. And already, from ACCAs work, it appears that the new generations in the profession are ready and eager to move in that direction. That is the most encouraging sign of all. Keep going!
Thank you very much.
[1] ACCA, Mainstreaming Impact: Scaling a Sustainable Recovery, page 26 October 2020
Opening Remarks Given by IESBA Chairman Dr. Stavros Thomadakis to ACCA Singapore's 2020 Ethics Film Festival
