As environmental, social and corporate governance (ESG) focus continues to intensify across the globe, giving audit firms an opportunity to uncover value and help clients navigate the ESG landscape as it continues to evolve.  

Confirmation Territory Manager for Northeast Asia, Polly Lok, shares her thoughts on this changing landscape and how audit firms can navigate these shifts. 

Can you introduce yourself and share what sparked your interest in ESG?  

Polly Lok: My passion for ESG goes beyond mere rhetoric; it is about embodying sustainability in every aspect of everyday life. My mindset was shaped by a valuable lesson from one of my professors, who emphasised that sustainability should not just happen when you mention ‘sustainability’, it should permeate our actions and decisions at all times. 

I pursued Environmental Management and Technology at Hong Kong University of Science and Technology followed by an esteemed exchange program at KTH Royal Institute of Technology, Sweden, recognised for its exemplary sustainable practices. Throughout my university years, I was also involved in an air quality project for Hong Kong public transport. 

How is ESG creating more opportunities for accounting firms? 

Polly Lok: Audit firms are expanding their services to help clients prepare ESG offerings including supporting them with data, assurance and ESG-related tax optimisation strategies to help them stay competitive and compliant. 

What are some of the barriers facing audit firms when it comes to implementing ESG practices? 

Polly Lok: One barrier is the structure of audit and accounting firms. Most operate as partnerships. In partnerships, gaining consensus to start and sustain an initiative can become challenging if stakeholders change. This can quickly become a barrier to advancing ESG initiatives because ESG is a long-term investment and takes time to realise return on investment.  

Secondly, maintaining and monitoring ESG plans can become difficult in partnerships. The decision-making processes are often more complex, especially for larger firms, and ownership of ESG initiatives can become unclear. Thus, identifying the correct stakeholders who will passionately drive these initiatives becomes crucial. 

Thirdly, paper-based processes impact the capabilities of accounting firms to implement ESG practices. It is almost ironic that we are trying to drive sustainability and environmental consciousness with dated, manual processes. We know paper-based processes have a negative impact on the environment, but they’re also time consuming, tedious and waste precious talent and intellectual capital. 

What are some quick ways audit firms can overcome these challenges? 

Polly Lok: Accounting firms must change the ‘don’t fix what’s not broken’ mentality.  Today, ESG presents an opportunity to expand service offerings proactively. Data shows that clients care about ESG performance and are prepared to divest from companies with poor environmental track records.  

Regulatory requirements are evolving in a way that makes digital transformation a requirement, not a choice. Firstly, firms need to look at existing processes and identify simple processes that can be quickly optimised for speed and efficiency. For example, making processes like audit confirmations paperless. 

Secondly, communicate the importance of ESG across the organisation. Establishing ESG priorities will change some processes. As such, showing how ESG will benefit and having clear change management policies in place can help ensure ESG adoption. 

Thirdly, make ESG goals measurable and establish clear metrics to monitor, measure and reward progress. 

Overall, when asked about how to initiate an ESG journey, I always advise starting small rather than immediately adopting a comprehensive framework, as it can feel overwhelming. One practical example is to examine paper consumption. Surprisingly, many organisations I’ve spoken to are unaware of the volume of letter or paper confirmations they generate, let alone their overall paper usage. Reducing paper consumption presents a simple yet impactful first step, often considered a low-hanging fruit in the pursuit of sustainability. 

How can the next generation of auditors champion a transition towards a more sustainable future? 

Polly Lok: We need the next generation of auditors to bring innovative mindsets and be confident and forthcoming with their ideas. We need them to believe that they are not just executors. Next-gen auditors can fundamentally change the way the system has been working just by being more curious and by asking firms to adopt technology to become more data-driven. 

Audit firms must now shoulder the responsibility of championing sustainable practices to attract this new, digitally-savvy and environmentally conscious workforce. 

Why does navigating this ESG landscape need a technology backbone? 

Polly Lok: Because we need things to change and move faster. ESG is changing very fast, and regulatory changes are moving towards global standardisations. You cannot thrive in this economy without technology. However, it’s not an all-or-nothing game. Technology and digital applications can help firms and next-gen auditors improve workflows and processes and make them faster and more sustainable. This is a good place to start. 

We must now move from paper-heavy to digitally transformed processes and adopt technology that can connect teams and make work simpler. The pace of ESG evolution will soon demand integrating regulatory requirements regarding sustainability into the clients’ organisational frameworks. If we are going to recommend this to our clients, we need to do the same for ourselves to remain competitive, deliver better value to clients, and attract and retain a talented workforce.