Kindly, respond to the below assignment in a professional way.

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Accounting CD#1

These questions are based on the article entitled How Will ESG Impact Be Measured?, which appeared in the digital magazine CFO.com on July 21, 2022 (link provided below).

Summary of Article

While a universal reporting standard is currently under development through the International Sustainability Standards Board (ISSB), companies are looking at how impact accounting fuses with monetary values on ESG principles. Sitting in the shadows of looming regulation and other potential corporate mandates, the characterization of the income statement will likely change. It will need to account for revenues, expenses, and the value(s) of ESG impacts. According to the article, several organizations have been formed to address these changes and, more importantly, how they will be measured financially and comparatively across companies. The article suggests that it will be difficult to effectuate such a radical change in corporate action and in the corporate mindset. The purpose of ESG impact-weighted accounting is to assign a dollar value to the harm a corporation may make on the environment (Jackson, 2022. p. 1). In short, the discussion outlines the details of the challenges facing corporate CFOs, regulators, accounting standards boards, and shareholders in determining how monetary values will be placed on impact accounting events within the vortex of accounting reform.

Article: How Will ESG Impact be Measured?

https://www.cfo.com/news/how-will-esg-impact-be-measured/655002/

Published July 21, 2022, By Ted Jackson

Corporate reform similarly to how Ernest Hemingway described bankruptcy in his novel The Sun Also Rises, happens two ways: gradually, and then suddenly.

Environmental, social, and governance (ESG), a movement that seeks to hold corporations accountable for far more than just ordinary financial results, is gathering speed and building momentum.

Of course, it is one thing to back what ESG stands for, and another to implement the needed changes. One of the key things that need to be done to facilitate the change is to develop an accounting system a way to put monetary values on transgressions or successes of ESG principles.

Today, impact investment is measured in trillions. Tomorrow, the whole of capitalism will be measured by impact-driven measures, says Ronald Cohen, chair of the leadership council of Harvards Impact-Weighted Accounts Initiative and co-founder of London-based private equity firm, Apax Partners.

Harvard Business School academics, of which Cohen is one, are leading the way with work on how to express in monetary terms environmental and societal impacts, such as water purity, biodiversity, workplace safety, greater pay equality, and employment diversity, to name just a few.

A companys financials would be weighted on its impacts on all the above factors, and more. The first step is going to be to value impacts, Cohen said.

One of the key things that need to be done is to develop an accounting system a way to put monetary values on transgressions or successes of ESG principles.

But not everyone is focused on the weighted impact approach of Cohen. The commercial real estate ESG consultant Aquicore points out that the huge $36 billion global commercial real estate industry formed an organization called Global Benchmark for Real Assets (GRESB). The non-profit collects, validates, scores, and benchmarks ESG data to provide business, intelligence, and engagement tools. The benchmarks are based on data from more than 1,500 real estate investment trusts (REITs), the primary method of organizing enterprises in commercial real estate.

More than 120 institutional and financial investors use GRESB to make decisions that lead to a more sustainable and resilient world, GRESB says.

The ESG Focused CFO

ESG measurement standards, if implemented, will revolutionize the role of the CFO. The CFO of the future is going to have a job that is far more complex than it is today as they seek to weigh the companys ESG compliance.

The first step is going to be to value impacts and prepare an income statement that shows revenues, costs, and impacts. In my view, this will be mandated by regulators in the next three to five years, Cohen says.

Throw in the huge leap in awareness of issues such as climate change, the recent wildfires, George Floyds death, and the rise of the MeToo movement, and what really has occurred is a perfect storm that has driven powerful and widespread calls for ESG implementation.

The first step is going to be to value impacts and prepare an income statement that shows revenues, costs, and impacts. In my view, this will be mandated by regulators in the next three to five years. Ronald Cohen

Today, companies such as Intel, Unilever, and LOreal are voluntarily disclosing their impact-related data and improving their impact performance as a result. In fact, there are hundreds of corporations like Unilever and LOreal who have started to issue reports on their adherence to the values that drive ESG.

But Cohen says its not enough: We need mandatory accounting of social and environmental impacts so that impact performance is measured and compared in a similar way to financial profit.

That means governments are going to have to step in and legislate or regulate for ESG adoption to become commonplace. So far, signs are encouraging as European and U.S. regulators have begun to work on regulatory frameworks. However, nothing has been mandated by law or by regulation in either locale yet.

Accounting for Company ESG Impacts

Another thing that is critical to the weighted impact ESG accounting, being developed by the Harvard Business Schools ESG Weighted Impact Accounting Development Committee, is that the weighted average ESG accounting system they are working on may have a good chance of being widely adopted. Or even mandated by regulatory authorities to be the standard by which ESG adherence is measured.

Other organizations that are reportedly considering working on developing ESG impact accounting frameworks are the Sustainability Accounting Standards Board (SASB), the Task Force on Climate-Related Financial Disclosures, and the Big Four accounting firms.

With this type of the adoption of impact-weighted ESG accounting, if it is widely accepted or even mandated, investors will be able to look at ESG-weighted impact income statements and compare those statements to other companies in an apples-to-apples way, making the values espoused by the ESG movement deeply embedded in the corporate mindset and value and reporting systems.

But it cannot be overemphasized how difficult it is going to be to effectuate such a radical change in corporate action and in the corporate mindset. The purpose of ESG impact-weighted accounting is to assign a dollar value to the harm a corporation may make to the environment, for example. And as it does harm, to charge them in dollar terms until the corporation changes its ways.

Investors will be able to look at ESG-weighted impact income statements and compare those statements to other companies in an apples-to-apples way.

And while it is true that regulators such as the Securities and Exchange Commission (SEC) have been working on ESG-inspired regulation since the start of the year, it is mostly contemplating mandating data be published on the E in the ESG equation. And even if the SEC does implement these regulations, its mandate is only for public companies. The SEC has zero jurisdiction over private enterprises.

We are a long way toward widespread adherence and mandating ESG impact-weighted accounting. One thing is for sure though, we are at the forefront of a new form of corporate reform and the fight around it promises to be one of the most important and interesting in corporate history.

After reading the article in full, answer the following questions:

Questions to be answered:

1. How do you define ESG? How does MCI OneHealth Technologies Inc. define or recognize ESG?
2. There has been a lot of discussion about how to approach ESG reporting models within the financial statements, in addition to the disclosure notes, to better inform users decisions. Of the options discussed in the article, which one(s) do you feel would be the better approach? Explain.
3. How important do you feel the needs of financial reporting entities, accounting standard-setting bodies, and financial statement users be(come) perfectly aligned? Can the assurance of documented corporate disclosure criteria outlining how ESG impact(s) are measured add credibility to its climate responsibility efforts?

Discussion Tasks:

response to the posted article and guiding questions within the discussion board. Your response should be at least 250 words to a maximum of 500 words. Your responses should provoke inquiry, meaningful discussion, and reflection on course materials and learning to date.