ESG Emphasis Reinvigorates Accounting Pipeline

• Candidates are opting out of the accounting field because of lower pay, ongoing scandals, and the difficulty of obtaining professional credentials.
• Schools can spark more passion for the profession by emphasizing the role accountants play in helping companies achieve ESG goals.
• A group of academics has published a free online textbook that expands the traditional definition of accounting to include “the flourishing of organizations, people, and nature.”

 
Around the world, enrollments in accounting programs are falling. In the U.S., the number of accounting undergraduates has dropped to the lowest level in 15 years, and similar trends are playing out in Australia and New Zealand. Sector surveys point to various factors that have contributed to the decline.

For instance, some potential candidates feel no interest in or passion for the field. Others opt out because accountants often earn less money than professionals in the finance and technology fields. Still others turn away because of continued scandals that have plagued the profession, indicating systemic failures across multiple jurisdictions. Recent cases of cheating on ethics exams in the U.S., Australia, and the Netherlands have further tarnished the profession’s reputation.

One of the major obstacles is the difficulty of attaining professional qualifications. In the U.S., students must complete 150 credit hours at a university—the equivalent of five years of study—before they can obtain CPA licenses. Research from the Massachusetts Institute of Technology has shown that this requirement hasn’t measurably improved CPA service quality, but it has created additional barriers to entry for students from underrepresented populations.

Governments and professional organizations are already seeking ways to reverse the decline. In the U.S., some states have reduced the 150-hour requirement to 120 hours, or the equivalent of a bachelor’s degree. Prominent voices in the field, such as KPMG, also have called for a revision of the 150-hour rule. While some people fear such a reduction could have a negative impact on the university sector, it seems unlikely to have a direct effect on accounting departments because students are already free to use those additional 30 hours to study subjects from any discipline.

Meanwhile, Chartered Accountants Australia and New Zealand has proposed developing an alternative apprenticeship route to qualification that would bypass the traditional university sector and mirror existing arrangements in the U.K. A recent report from the International Federation of Accountants explores some of the other ways nations are grappling with the challenges of attracting new talent to the field.

Business schools can do their part toward addressing the talent shortage. Schools might start by tapping into what young people say they want for their futures. Many Generation Z students are looking for careers that fill them with a sense of purpose. At the same time, companies are striving to prove to stakeholders that they are addressing environmental, social, and governance (ESG) issues.

Both trends point to an effective way to make accounting a more attractive option for students who are pursuing degrees and seeking professional qualifications: emphasizing the crucial role accountants can play in promoting the social good.

The Impact of ESG

Schools can appeal to both students and employers by showing how the tools and techniques of accounting enable companies to meet sustainability targets. For example, accountants might use these tools to align their companies’ policies with the United Nations Sustainable Development Goals. Or they might rely on sophisticated new accounting technology to assess carbon emissions reporting.

But the profession itself must make a more deliberate effort to achieve these objectives. That’s why, in 2023, a group of accountants came together with the goals of engaging with Gen Z, helping companies meet ESG goals, and boosting the profession. Together, we founded a project called Accounting Streams—which stands for sharing, transparency, reporting, and ethics accounting for management and society.

Schools can appeal to both students and employers by showing how the tools and techniques of accounting enable companies to meet sustainability targets.

I am one of the leaders of the effort; the others include Richard Murphy of the University of Sheffield and Jenni Rose of the University of Manchester, both in the U.K. We seek to develop teaching resources that reflect important trends in accounting and to provide students with the skills and knowledge they need to be at the forefront of our evolving profession.

Central to the development of Accounting Streams has been our desire to expand the content of accounting programs. As defined by the American Institute of Certified Public Accountants, the discipline is the “art of recording, classifying, and summarizing significant amounts of money, transactions, and events that are, at least in part, of financial character, as well as interpreting the results thereof.” But that traditional definition focuses on the technical aspects of the field. It doesn’t explicitly consider the ethical and societal impacts that appear in nonfinancial reporting.

With Accounting Streams, we want to broaden that definition to the one coined by Garry Carnegie and co-authors: Accounting is “a technical, social and moral practice concerned with the sustainable utilization of resources and proper accountability to stakeholders to enable the flourishing of organizations, people and nature.” By embedding ethics and sustainability throughout its learning materials, the project seeks to develop learners as critical thinkers who are comfortable with ambiguity and at home in different contexts.

A Principled Approach

Our first practical step toward creating meaningful change in our profession has been to develop a textbook called Principles of Accounting. The book, which is open access and available for free online, can be used by itself or as a supplement to other teaching resources.

We designed the book so its contents would mirror the conclusions of the Future Accountant Stakeholder Symposium, which has pledged to revitalize principles-level accounting courses to address the issue of the declining student pipeline. We developed its outline through a co-creation workshop held with other academics, and we drew contributions from leading international academics by putting out a call to those who might be interested in writing chapters.

We also gathered student input. During the 2023–24 academic year, we asked students in introductory accounting classes, “What is the most pressing problem accountants today should be addressing?” More than 1,500 responded. Among their foremost concerns were AI, ethics, technology, and sustainability; many also pointed to topics such as economic instability, transparency, and the climate. Therefore, we made sure to embed elements such as ethical practices, sustainable issues, and technological change into our book and in the revised definition of accounting that we adopted.

It is clear that the field of accounting will thrive only if its professional members come to a holistic definition of the discipline and its role in society.

As a result, Principles of Accounting takes a broad view of organizations, ethics, and sustainability. The book and other class materials challenge learners to cope with uncertainty and to question the assumptions that are commonly made in introductory courses. The intention is to engage students with the inherent dilemmas and tensions that are often overlooked in early accounting classes.

For example, Unit 1 starts by asking what accounting is, exploring its roots, and outlining the contemporary definition of accounting that frames the textbook. The objective is to encourage students’ intellectual development as they contemplate different perspectives.

Unit 10 teaches students to consider capital beyond money and machines. It introduces them to concepts of double materiality—that is, the idea that an issue can be considered from both a financial and an environmental perspective. It also covers integrated reporting, in which companies describe how they embed environmental considerations into their operations. Unit 11 extends those concepts by having students take a critical approach to measuring the social and environmental costs of a reporting entity.

Throughout the book, “Pause to Reflect” sections encourage students to think about some of the ideas they’ve just learned. For instance, in one section, students study the six capitals of integrated reporting (financial, manufactured, intellectual, human, social and relationship, and natural).

When they pause to reflect, they are asked what might be missing from these six capitals. They’re also urged to think about organizations they’re familiar with—such as charities or sports teams—and consider how the assets of these organizations would fall into each of the six categories. This approach highlights dilemmas students might face in the working world.

A Step Forward

It is clear that the field of accounting will thrive only if its professional members come to a holistic definition of the discipline and its role in society.

While there is still much work to be done, we believe the Accounting Streams project could enable the profession to take a significant step forward in redefining accounting education to meet the needs of today’s students. In this way, it will also meet the needs of companies—both today and in the future.