Ep. 166: Liv Watson and David Wray - Digitizing Sustainability Information: It Takes a Village

Contact Liv:
https://www.linkedin.com/in/livwatson/
Contact David:
https://www.linkedin.com/in/david-w-29627882/


Visit Adviseers website: : www.adviseers.com
 
Visit David's website: https://davidwray.com


FULL EPISODE TRANSCRIPT:Adam:
(00:05)
 Welcome back to Count Me In, IMA's podcast about all things
affecting the accounting and finance world. I'm your host, Adam
Larson. And this is episode 166 of our series. Today we are
fortunate to be joined again by Liv Watson and David Wray. Liv
and David recently shared their perspective on a proposal for the
digital transformation of sustainability information, in United
Nations Climate Change conference sponsored site event. Attendees
from around the world included policymakers, standard settlers
regulators, to preparers, NGOs and funders. The goal was to
leverage the worldwide momentum for climate change and
sustainable economies. In this episode, they summarize their
perspective and share with us their view on what the profession
can do to accelerate this transformation. More specifically, they
discuss how management accountants can support their
organizations in managing the data life cycle of sustainability
information from cradle to grave. Keep listening as we head over
to the conversation now.
 
 Mitch: (01:15)
 So I understand you both talked in Glasgow about the
greening of data and to start off our conversation, I'd like to
first to ask, what do you mean by this?
 
 David: (01:24)
 It's a great question to start really setting their context
for the conversation and the discussion we're going to have
Mitchell, because you're right. We were in Glasgow talking last
week about the data life cycle and Liv and I have coined the term
greening of the data as a way to describe some of the problem,
but let me be put it in context for you. So if we think back to
the IFAC work, and we've talked about this in previous podcasts
and some of us may be very familiar with their work, they
basically look to assess the cost of prudential disclosure
reporting. And it was just one example of the issue that we see
around data management and the cost of that data, to the
compliance and regulatory reporting that ends up happening.
 
 David: (02:08)
 So we know that in the context of the IFAC report, that
about 780 billion US dollars is spent every year by the financial
services industry alone on this type of reporting. So what we are
saying is, look, what if we could save half of that data, like
half of that cost, of processing that data through digitization
and structuring data at creation. So if we really started to
think about it at the point of inception or origination, and we
really carry that idea through to how it's processed, how it's
disclosed or how the user consumes it, imagine the kinds of
things that we could do in terms of environmental initiatives
that we can invest in to better the planet with the money that we
save. So really what we're talking about is it's about reducing
the ecosystem costs for the sustainability reporting and
basically reinvesting this spend into initiatives that will
ultimately result in sustainable economies and business models
and have better stakeholder citizenship, because that's really
what it's all about.
 
 David: (03:13)
 And all of this could be done without raising a single
incremental tax dollar, because frankly, I think we all need to
look at more creative ways to start achieving sustainability
objectives without defaulting to what we've always done, which is
raising taxes. And we can see the effect of these tax discussions
in bipartisan decisions all around the world. It's not, you know,
unique to one geography because as effectively a tug of war
between fiscal responsibility and the social climate
responsibility, and that's really what's tugging this discussion.
So unless we can start to unlock this barrier, we might still
actually be talking about this subject in 10 years time and time
being a luxury that we don't have much of anymore. So greening of
the data is all about reducing the cost of compliance and then
reinvesting that for the better of the planet.
 
 Mitch: (04:03)
 Well, you have certainly piqued my interest and I think a
natural follow up question to what you just discussed is how,
right? So I'd like to direct this second question to Liv. How do
you make this digital vision a reality that really benefits
everyone? And, you know, David just mentioned some of the
stakeholders and the tug of war. How do we get everybody in
alignment around the world, on this topic?
 
 Liv: (04:28)
 Okay not an easy task, but Mitchell, thank you again for
having us back on the IMA podcast and amazing platform to get new
topics, new ideas from. I would also think IMA's and many of the
listeners might not know this, but IMA was actually part of the
founders of the digitization of financial and business reporting
as a founding member. So, XPRL international. So our industry
organization had been a thought leader in this topic for a long
time. I have had lately the opportunity to lead an initiative
appointed to the European commission or by the European
commission to EFRAG. And for those of who don't know EFRAG,
answering your question here very quickly, but the players are
key to understand is that EFRAG has been kind of the similar to
fast P in the United States and standard center for financial
reporting.
 
 Liv: (05:39)
 EFRAG is the European equivalent working with the
International Accounting Standard to recommend international
standards, to the European commission that they then adopt and
embed into legislations. Right now, we have talking about
greening of data, two drivers, right? Regulators wants to reduce
the cost of compliance and standard setters has to start thinking
digital from the outset. And so EFRAG, who used to be a standard
take. And with now becoming after a consultation that I was
appointed to a special task force, and we proposed 54 detailed
proposals on how the European commission could accelerate
sustainability disclosure and improve on their current reporting
requirement, which was a legislation called the Non-Financial
Directive Reporting Directive to now becoming a delegated act to
improve. Because now they want to be thinking not just standard
that are more descriptive, not only just more descriptive, but
also we are in the statement.
 
 Liv: (07:03)
 So for an annual report in the management discussion, we
are now writing the standards, proposed standards for the
European commission to mandate the data, to be disclosed in the
management report. And why is this important is thinking digital
from the first trying to get standards that are written by silos,
and then trying to bring consistency so that you can digitize
them, not just the reporting. So the taxonomy for the reported
data, but also think about digitize the standards that today sit
locked up in PDF files, et cetera, that they've actually become
executable codes. So yes, number one, we need to start thinking
digital from the outs and not digital after the standards and
legislation, are put in place. So that is why we feel that now is
a momentum b...