Subscribe
Share
Share
Embed
In the Original Thinking Podcast, experts and academic colleagues discuss their latest research and original thinking at Alliance MBS.
For a list of our latest webinars, news and useful business content please visit ambs.ac.uk
JIM PENDRILL:
OK. Afternoon, everybody, and a very warm welcome to this latest Original Thinkers podcast from Alliance Manchester Business School. I'm Jim Pendrill, I'm the Research Communications Lead here at the school. I'm delighted today to be joined to my right by Jenni Rose, who is a Senior Lecturer in Accounting here at the school. Welcome, Jenni. And by Richard Karmel, who is a Partner in Audit and Assurance at Forvis Mazars. Welcome, Richard.
RICHARD KARMEL:
Thank you.
JIM PENDRILL:
Today's subject is all around human rights assurance. You may wonder, what is that? Well, we're going to find out. But first of all, Richard, just explain very briefly your role, who you are and what you do.
RICHARD KARMEL:
Yeah. Thank you, Jim. So, Richard Karmel, I'm a statutory audit partner at Forvis Mazar, which means I sign financial audit reports. But I also work in the area of human rights, advising companies on how best not to harm people. And when they write a report on what they're doing and how they're not harming people, assisting in the assurance of those reports.
JIM PENDRILL:
And, Jenni, your role here at the school?
JENNI ROSE:
So, I'm a Senior Lecturer in Accounting and education focussed. And today I've had Richard in talking to my first year students who are doing their Assurance and Audit module. And after speaking to Richard that we met through a connection through the ICAW, I was really fascinated about how this whole idea of human rights assurance is developing. I'm very aware that our first year students, who are training to be accountants and auditors, will be entering the world of audit and assurance exactly at the time when human rights assurance will become so much more important for them.
So I wanted to get Richard to come and speak to my students today and really bring to life what's happening in the world of assurance and how this is starting. But it's such an exciting time to be in that world as things are developing.
JIM PENDRILL:
OK, great. Well, I think the first question has to be, what exactly do we mean by human rights assurance, a term that's not, you know, not particularly, I think pretty well known. Richard, what exactly does it mean?
RICHARD KARMEL:
So, human rights assurance in my world essentially is going to be for the assurance providers to provide confidence and credibility to the reports that companies are putting out there on how they are respecting human rights, ie how they are not harming people. And that means telling us about what their key risk areas are, telling us, what are the policies and processes they have around those key risk areas, how they know that they're effective, and then reporting on them.
And the assurance provider will come along and actually say whether what the company is reporting is essentially true and fair. So that's what human rights assurance is, it's assurance of the report. It's not assurance of performance at the moment.
JIM PENDRILL:
Right. It's very much on the report. Yeah. And in terms of sort of this whole area and what are the sort of significant developments we've seen then? At the moment, you know, in today's world, what is driving this whole move towards this?
RICHARD KARMEL:
So look, it actually started back in 2011 when the UN produced the UN Guiding Principles on Business and Human Rights. And the reason why I have to go back that far is because it has taken us that long to actually get anywhere close to the UN GPs, the UN Guiding Principles in being enshrined in some form of law or legislation. And it's the EU that has really taken this forward in their recent publication of the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive.
Underpinning that are the UN Guiding Principles on business and human rights. And that is all about respect for people. It's essentially telling people, telling companies how to go about not harming people and what to do if you do actually harm people, and setting out their responsibilities around that.
JIM PENDRILL:
I mean, there is legislation in the UK around human rights and reporting human rights, etc. So there's a movement, isn't there, towards this?
RICHARD KARMEL:
Well, there's very little for business actually. Yes, you have specific health and safety issues and we can put health and safety within the wrapper of human rights. But actually - and we have discrimination and we have forced labour. But actually the role of business to actually tell people about how they're not harming people, what are the key risk areas? So we were talking this morning about the fashion brands. Quite often the fashion brands, their head offices in in Western countries, they don't necessarily own the workplaces where the fashion, the garments are being made, but actually they have a responsibility to the people that may be in their supply chain, and they should be telling the readers of the accounts what they're doing about that. So trying not to harm people in their supply chain.
JIM PENDRILL:
An obvious question for bringing Jenni in is why it's taken 13 years to get this far, when, as you say, it's been, you know, since the Guiding Principles back in 2011, I mean, why is it taking so long? Yeah. Different schools of thought. Some people think actually the world has moved very quickly in 13 years because what we're doing is changing the movement of a supertanker, the corporate supertanker.
Other people say, "No, we should be moving much faster." And I think this is definitely an area where regulation is helping. Regulation is the catalyst here because if companies on the whole wanted to do the right thing, they would have done it quite a long time ago. But companies just need a bit of a reset to think actually in producing those, um, those products, are we actually harming people or not? And if we are, what are we doing to mitigate against that harm?
And that's why the legislation coming out of the EU, which is going to impact certain UK companies, is absolutely key because you can tell many companies will follow best practice and best practice, I think will actually become quite quickly enshrined in the companies' behaviours. We'll go to Jenni in a moment. But just before, I mean, you mentioned the EU's driving it. Given the UK's position with the EU, is that an issue or will the UK companies, as you mentioned, there still have to sort of abide by these kind of regulations?
RICHARD KARMEL:
Yeah, it's slightly frustrating that actually the UK, whilst previously being at the forefront of all of this and when we were part of the EU, we were actively contributing to that discussion, well then 2016 happened and we were no longer part of the discussion directly. So the EU has moved forward. We've kind of stood still, but the legislation is going to bring in UK companies who have activities in the EU. So the big UK companies that are operating in the EU will have to follow that EU guidance.
And you can kind of see, even if companies aren't necessarily operating in the EU, they might actually follow that because all of a sudden they're going to have their peers going, This is what we're doing to make sure we don't harm people." And these other UK companies going, "Oh, well, if our peers are saying that, we better actually be doing something about it as well." So I can see the trickledown effect from it.
JIM PENDRILL:
Jenni, what's your interest in this area? What is it? Why are you particularly really interested in this?
JENNI ROSE:
I think it's really interesting for my students in particular, because they're going to enter a world in a few years' time when they graduate that's going to be this new world where auditors and accountants are responsible for making judgements and giving their opinions on things that are very complex, very nebulous, and very uncertain. So it's trying to help students start to grapple with those problems now so they can face these big, big questions in the not so distant future. I think it's really interesting how linked is to legislation as well.
So our students are very familiar with a regular audit, a financial audit, which is governed by the Companies Act and requires auditors to test whether the accounts are true and fair. But actually, those exact same skills can be pivoted slightly to really enable them to hold companies accountable for their sustainability actions. And I think that's where our students can make a really big difference going forward as they move into this new world.
If they can cope with uncertainty and they can cope with the vast scale of the problem and the fact that there's not just one right answer, there's actually different answers for different organisations in different ways. And we're talking a lot about how you work with from moving the table. So how you work with companies that may not start off in the best position, but working from the inside to help them improve what they do. And I find that really fascinating as well.
JIM PENDRILL:
I mean going on from that, I mean, are there sort of, Richard, emerging sort of best practices and, you know, methodologies, if you like, in this whole field?
RICHARD KARMEL:
Look, there are indeed. And what's wonderful about the, we call it the CSDDD, the Corporate Sustainability Due Diligence Directive, the due diligence concept was actually enshrined in the UN Guiding Principles, and that is giving companies a process by which they can identify and assess the potential harms to people. And then what to do if they actually do cause a harm. So this due diligence process is in very few companies at the moment. But because it's gone into this directive, all of a sudden the large multinationals are going, "Crikey, we actually, we should focus on this. And it's also becoming a license to do business in the 21st century.
With social media, transparency is there. And our advice to companies is it's really important you tell your story objectively, because there are going to be a lot of people out there who might not tell it so objectively, if you are committing a wrong. I mean, there are examples when companies have been out there and there have been issues in their supply chain, and some companies have actually come out and said, "It's got nothing to do with us, and they've been really pilloried. Other companies - and it stayed in the news for quite a while. Other companies have gone, "Oh crikey, this is really horrendous. This is awful.
This is not what we're about and this is what we're going to do about it. It's been in the news for a week. So this is the whole due diligence process, knowing to do with the what-if scenarios. And it's quite tricky sometimes to get companies to focus on the what-if scenarios, because, you know, you sit around the table and they often go, Richard, that's not going to happen. We know. But what if it does? And you have to go down that and explore how you're going to react, if it does, to mitigate against the risk of actually causing more reputational harm and damage to the company than it could have. And obviously, the big example of that is the way BP reacted to Deepwater Horizon.
JENNI ROSE:
Yeah.
RICHARD KARMEL:
You know, What if there is a blow-out four miles down in the Gulf?" Well, it's just not going to happen. But what if? If they'd been through that scenario, maybe there would have been a different reaction to the way BP actually fell out of that.
JIM PENDRILL:
You mentioned EU, EU legislation. And I wonder about the rest of the world. I mean, US and elsewhere. Are the moves similar moves going on at the moment or is it really EU leading the way at the moment on this?
RICHARD KARMEL:
Australia, there is quite a lot going on. And in some of the Southeast Asian countries, there is legislation, but it's very, very low key. And that's not to say yes, the EU is leading with these directives, but actually what's really going to show if they're going to work is whether there are proper sanctions. All of a sudden, one of the reasons the Bribery Act was so successful in the UK, if you fall foul of that, there are big sanctions, big sanctions on the directors, big sanctions on companies.
At the moment, with the Corporate Sustainability Due Diligence Directive and the reporting directive, yes, there are sanctions, but obviously they're very new and they haven't been tested. Now, who is going to hold who to account? That is going to be key because potentially if business sees sometimes they're not really going to be held to account, then you can just see the bar is going to be a lot lower than if they are being held to account like they are in the financial world. You know, really, there should be no difference between the sanctions applicable in the financial world as to they will be in the sustainability world.
JENNI ROSE:
And I think that's what's really fascinating about why accountants are involved in this. So increasingly, I'm speaking to CFOs and they say that all of this humans rights breaches or even green sustainability measures all was in the marketing department, but now it's having to come into that finance department. So they're having to upskill very quickly to apply their rules of accountability and measurement and their judgements to matters that are less financial, but actually have a bigger impact on the people and the planet.
They're finding they're changing their roles from just being a technical accounting role to thinking about their moral responsibilities and their social responsibilities. And that is quite often falling into the accountancy role. So I see the accountants of the future being the ones that are going to be responsible for not just the sustainability assurance around the carbon emissions and around the damage to the planet, but also putting people first, and not having that damage to people is going to be right in there with the accountant's role. So our students need to be able to do that if they're going to be accountants.
JIM PENDRILL:
And that's not a role you traditionally would associate with accountants.
JENNI ROSE:
Yeah. Yeah.
RICHARD KARMEL:
But it is to do with the training, the training of accountants. We are trained to be professionally sceptical and curious.
JENNI ROSE:
Yeah.
RICHARD KARMEL:
You know, what better training program to work in the area of sustainability? Because one of the big issues at the moment is with companies. The sustainability systems that they have in place are really quite embryonic and let's say immature compared to the financial controls that they have in place, which, you know, have been going 70, 80 years. And it's not surprising. The sustainability world, they are quite immature. But it's so important for the accountant then to come along and say, "OK, just because you're saying that, we can see what exists but what doesn't exist? What's not there? You're telling us about those risks. But you work in that industry. Why aren't you talking about these other risks that we know are happening in your industry?
Because I just go on to YouTube and I can see the impacts that you're having. So you should be talking about that. You should be reporting on it. You don't necessarily have to tell the world that you've sorted it out because you probably haven't. But just be aware. Just communicate that this is a challenging area and we're working on it and this is what we're trying to do. And then set out the next steps about what you're going to do next. This is what the companies should be doing. And this is how accountants are trained because we do it in the financial world. Just move the crosshairs slightly to human rights and the environment.
JENNI ROSE:
Oh, sorry.
JIM PENDRILL:
You said next steps because that was actually my next question. Do you want to come in now, or...
JENNI ROSE:
Yeah. Is that OK?
JIM PENDRILL:
Yeah, yeah. Go on.
JENNI ROSE:
Yeah. I think the challenge that accountants face, though, is that they're used to having an answer. So the accounts are true and fair, full stop. This thing should be accounted for in this way, full stop. Because we've always done it like that. Whereas now accountants are facing a lot of uncertainty, so they can't say it is true and fair. They can say it's maybe 80% there, or maybe that we're fairly comfortable with this part of it. But the idea of an assurance report, which is not completely clean, is quite alien to a financial auditor.
Whereas I think, as the roles of human rights assurance evolves, you're going to get more of those kind of not a clean opinion, but, "This is OK and this still needs work." And I think as accountants, we need to get more comfortable with the fact that things are not going to be that kind of sign off, everything's fine. It's going to be, "This is how far you've got, and this is how far you've still got to go. No matter what company it is.
RICHARD KARMEL:
Yeah, absolutely. And it's not only getting the accountants and the companies comfortable with these modified assurance reports. It's actually, it's the stock exchange. It's the capital markets. I mean, actually, these companies should be Should be applauded for actually being transparent about, these are the issues and these are the challenges and the auditors coming along and going, "Yeah, they're right. This is the challenge. And yes, they haven't quite got it all there, but this is what they're doing about it.
JENNI ROSE:
Yeah.
RICHARD KARMEL:
And if the capital markets do that and actually start to reward those companies that actually are doing better on this area than those companies who aren't reporting at all, then I can see we've got systemic change in the way we actually value companies.
JENNI ROSE:
Yeah. They're not looking for things, they're not going to find them.
RICHARD KARMEL:
Yeah.
JENNI ROSE:
Whereas this is at least the companies that are looking for things, they haven't found something and then responded to that and are doing something about this and making a difference.
JIM PENDRILL:
Yeah. Back to my next steps. It's OK. What are the... So, OK, we're going to do an assessment. What actually, what are the specifics here? What is actually, what's involved in actually conducting an assessment? And how do these sort of processes differ maybe depending on the industry or the context?
RICHARD KARMEL:
So, the actual assessment. You start with the company, the company being able to actually identify what is, what we call salient human rights issues are. And the definition of salient are those human rights most at risk of a severe negative impact. So the company has already been through that process. We would expect most companies to report, let's say, on 3 or 4. They might have plenty of other issues. But what this is doing, this is giving companies a sense of prioritisation, the thinking being that if companies start to address their salient human rights issues properly and really try and do something about it, what they're actually doing is they're changing the culture of the business.
They're actually pushing down that respect for people. So when the assurance provider comes along, the steps that they're going to be doing is, OK, company, what are you reporting? OK, I can see you've reported on those three salient human rights risk areas. Now tell us, how did you did you identify them? Who's accountable for them? What's the governance all around it? And then what are the processes for making sure that you can collect the sufficient data, sufficient and appropriate data to be able to report? So as the assurance provider, I'm coming in at the beginning and I'm trying to scope out the whole assurance process.
It's not... It's really quite different from a financial process, which is well, all the documentation, all the evidence should be within the company. Here in human rights, we know actually there's going to be quite a lot of evidence that's outside the company, because what you've done in looking at the risks, you're not looking at risk to business. You're looking at risk to the externalities, risk to the environment and risk to people. And that's this concept of double materiality that the EU directives have brought in. Financial materiality impacts on people and the environment.
And so the assurance provider is going to be looking at those externalities. And in the planning, they're going to think, Crikey, how are we going to test what the company is saying? Because we don't have anybody in those areas. So we need to get up to speed in making sure we identify who are the subject matter experts, who are going to be able to work with us to inform us what the company is saying is credible?
JIM PENDRILL:
That's going to bring really quite significant challenges to identify these external...
RICHARD KARMEL:
Absolutely.
JIM PENDRILL:
The external links. And in terms of industries and, you know, different sectors, does it... It sounds like it's going to vary a lot depending on what you do as a business.
RICHARD KARMEL:
Yeah, very much so. I mean, you have, you know, obviously the high risk, the high-risk industries that we all know about, which are going to be the garment manufacturing, the industry is involved in agro. So that's pharmaceutical, that's tobacco, that's coffee, that's chocolate. You know, there are some really significant human rights issues in those industries. But then you have, let's say, the big social media platforms, you know, there's a whole raft of different human rights issues over there, and we see some awful stories going out there. But what are they doing to mitigate against the risk of these issues actually coming to light?
So depending on what industry you're in, there are some really big issues. And just because let's say you're more on the techie side, doesn't mean to say that you don't have the potential to harm people. It's just a different set of risks.
JIM PENDRILL:
Going back to your point about, you know, accountants, traditionally it's been very clear about how you structure an audit. Everything's very clear. It strikes me this is... A very, very different skill set is going to be required here.
JENNI ROSE:
Yeah, I think the skill set is similar. It's in professional scepticism and judgement. It's just that what you're focusing on is not just what's within the company. It's looking all the way down the supply chain, and it's looking for those risks that aren't necessarily usual financial risks that auditors will be used to looking for in finance. It's looking for the risks of, for example, a subcontracted company which may not be paying the wages you're paying to the company onto the employees. So that's your risk of modern day slavery. That's a classic red flag.
JIM PENDRILL:
OK, let's just move on. What are the sort of... OK, well, actually a related point, actually. What are the common challenges encountered in collecting and analysing the data? You've sort of touched on it already, really, haven't you, Richard? But what are what are the key challenges?
RICHARD KARMEL:
The challenge...
JIM PENDRILL:
Just getting all of the data in the first place?
RICHARD KARMEL:
Well, look. Absolutely. The challenges are, in the financial world, the data is the piece of paper, the contract, the payslip, the invoice. All of a sudden now we're going, Crikey, we've got to deal with the impacts on people. How do we know there's been a harm to someone? And it'll be out there in the media if there has been harm to someone. But then do you believe everything you see? And so there's this concept called triangulation that the assurance providers go through, which is OK, we have one piece of evidence online, now who are the other stakeholder/rights holders we should be talking to in order to triangulate to work out, well, what's the reality here?
Because all of a sudden when you get into the world of human rights, you have people's own agendas that they want to push for whatever reason. And the job of the assurance provider is going to be trying to work out what's the reality of the situation. And quite often, it's not just the job of the assurance provider, it's the job of the company. This is where we say companies actually, you should start to be friendly with local NGOs where you are working in your supply chain. Because these NGOs, they are generally on the ground, they know what's going on.
You might be on the ground, but what we've seen is that between you and the company, there are so many different tiers of management that actually you never get to hear the real story unless you can go round the outside to hear the real story of what's going on. And the NGOs are a really good starting place. And from our conversations with them, they'll be delighted to say, because what they can see is that companies who are taking this seriously will work with NGOs to help make sure they can address those issues going forward. So that, to me, is, that's one of the fundamental challenges is how to actually find out what is really going on.
JIM PENDRILL:
I suppose that's one of the benefits we've already touched on, haven't we, Richard? But what are the benefits of actually implementing robust human rights assurance practices for organisations? I think you've already answered the question, really. It's reputational, isn't it, as well as...
RICHARD KARMEL:
So it's both reputational... But actually, you know, companies quite rightly are still in the mindset of generating profits. And long may they do so. This is not human rights and profitability are mutually exclusive. They are absolutely entwined. And if you get the human rights side right, you not only protect, it makes you more resilient, you actually should become more profitable.
And let me give you the example. Paying a fair wage. Most companies will say, look, of course, and they probably do say we are paying a fair wage, a living wage. But actually down the supply chain, not so sure. And we know in certain countries where they're not having a living wage paid because the minimum wage is less than 50% of a living wage, you know, there are issues, but it has been seen that where you've started to increase the level of wages, it's not just a cost. The benefits to that are huge. You have the employees staying in the company much longer, so you're retaining the institutional knowledge.
You're not having employees leave and therefore it means you don't have to pay recruitment agents to find you new people. And so, and then on top of that, if employees stay, you get more discretionary effort just because they like the fact they're being paid more. So they're willing to give you something back. So this is not a zero sum game. You pay one. In theory you will get two, three, four back. So actually the business case is really there. And one of the cases we worked on, whilst they say they couldn't directly correlate it to this, they said, "Ever since we started addressing this, the quality of our garments improved such that we had less returns going back to the supplier, which meant our profitability increased."
JIM PENDRILL:
OK. Interesting. Jenni, would you like to come in on that?
JENNI ROSE:
Yeah. I think we've got to consider the wider complexities as well. So the impact of a company increasing their living wage for that company might also have impacts on the local community and might trigger things like wage inflation. Or we were talking earlier about that, it might trigger employees moving away from organisations and recruiters charging other locals to get work at the company that's paying that higher living wage.
So I think we need to think about this on a systematic and a global basis. We're living in a global world and we as accountants are very focussed on the company, but we need to think beyond the company in the wider supply chain, but also those local communities that are affected beyond the immediate impacts that might suffer as a result of a company increasing their wage to minimum... to the living wage.
JIM PENDRILL:
And there's a number of studies going on here at the school, aren't there, around multinationals across the world and the impact they're having in those communities and a lot of work going on to see what sort of best practice is emerging amongst particularly big multinationals around many different parts of the world. So these are areas which are very, very, topical. A lot of research going on into them and the... Yeah, but it's also, the landscape is changing, isn't it?
JENNI ROSE:
Yeah.
JIM PENDRILL:
The impression is clear that multinationals are realising they have to sort of, really have to move on with the times and adopt these sort of practices. Yeah. OK. Just a few final things. I mean, this is a good question, I think. How can human rights assurance contribute to building trust and reputation amongst interested parties? Again, you've kind of already answered it, but yeah, I mean...
RICHARD KARMEL:
Well, I think one needs to go back to, you know, why does financial reporting and the assurance on that give trust? It's because what's happening is at the moment, it feels like it's not exactly a level playing field. When we start to have human rights assurance, we're going to have comparable information, consistent information and complete information that is going to give confidence and credibility in the reporting that's taking place. So I very much see the world of human rights assurance as being a fundamental part to the annual report.
And not just human rights, it's the wider environmental. I mean, every time I really talk about human rights, include the environment, because we can wrap that up in one. You know, I very much come to sustainability through the environment, through the people lens, the human rights lens, and the environment is wrapped up in that. Why do we care about the environment? Well, because we want to protect the environment for the future generations, for people. So it's absolutely enshrined in this. And so when companies are going to start reporting on it, and assurance providers are starting to provide their assurance reports, all of a sudden society can have that confidence that what is being reported is fair.
JIM PENDRILL:
And I guess investors as well, crucially.
RICHARD KARMEL:
Absolutely.
JIM PENDRILL:
Because not everyone's going to read an annual report, are they? But then maybe shareholders might. But you know, beyond that. It's got to go beyond that, hasn't it?
RICHARD KARMEL:
Yeah. The investors are absolutely key stakeholders - pension schemes.
JIM PENDRILL:
Yeah. I'm glad you mentioned the environment because there's work here that colleagues here, such as Professor Quattrone, have been looking at nature on the balance sheet, which is kind of all part of the same kind of conversation, isn't it?
JENNI ROSE:
Yeah, yeah. Because it's not really the environment that we're worried about. It's the effect that it has on people and that effect is disproportionate on those communities that tend to be less well-off and unable to cope with the effects of climate change as they happen. So I agree, it's really wrapped up together. I think sustainability, the sustainability standards, very much focus on those areas that are easier to quantify, like carbon, like those environmental risks.
But we need to remember that it's those social elements that make a difference to people's lives. And that's why it's so important to consider this evolving sphere of sustainability assurance and the difference that it might make to people in the future. If we can really trust what companies say that they are doing and they are they are actually doing this and they have contingency plans when things go wrong that they can cope with it, then we can start to make a difference to the world, and companies can move far beyond that. Focus on profit and into their wider impacts, taking responsibility for that.
JIM PENDRILL:
Are there dangers you know of, say, greenwashing in this area? You know.
RICHARD KARMEL:
Oh, massively. Massively. And actually you know, we need to be careful as well as a professional services provider that our assurance reports are not masquerading poor performance because some of the assurance reports, when you read them, they might give you two pages of the report. But when you actually get into the report, actually the assurance is only being provided on 2 or 3 areas. And the rest of the report is kind of setting the scope, maybe a load of caveats in there. And yet the report might be 20 or 30 pages long, and yet the assurance provider's only looked at two, three, four areas.
So hence why we need the regulation and the guidance to actually say, "Actually, if you're going to give a report, make sure it's meaningful and that you're not masquerading this poor performance."
JENNI ROSE:
OK. And I think our students are getting better at spotting that. And it's a really important skill that I want to inspire in our current students and future accountants, is that ability to get underneath what's happening, to pull out poor performance. So saying things like, We are working to reduce modern day slavery in our supply chain" doesn't actually mean anything. And it's teaching students to pull out those kind of phrases and realise that they can't be assured, they can't be confirmed, and therefore they're fairly meaningless.
JIM PENDRILL:
It goes back to the data metrics you're using and giving them more prominence within your reports. OK, I just have a couple of final questions, Richard. One was, where are we going to be in 13 years' time after it's taken 13 years to get this far? And secondly, why are you so passionate about this area yourself?
RICHARD KARMEL:
I think... It's taken 13 years to get here. Actually, I think the curve has been like that. I think it's going to ramp up. I think we are going to see the impact of the legislation, the EU legislation. So I'm always optimistic. I think we are going to see a significant change. It is going to become a license to operate from 2030 onwards. Companies are going to have to do this. Otherwise consumers may vote with their pocket. And so to my mind, this will become key and people will get smarter. The investors and the analysts, they'll get to understand, OK, which companies are making profits not at the harm or expense of people? So this is going to be key.
JIM PENDRILL:
And timeframes are... Is it 2030-ish?
RICHARD KARMEL:
Look, I think you were right, actually. I think it's not quite generational, but I see maybe in five-year, in five-year stages, we're going to see big step changes. I would hope because we've got... 26 is the standards really biting. 28, you've got assurance and then beyond. And we'll see what happens in the UK. The reason I'm passionate about it? Look, as an accountant, you go into being an auditor because you feel you're actually giving trust to the market. And it felt like with this stage of human rights and the environment, we have such an important role to play.
And I'm just passionate on hoping to make sure that accountants really see how crucial their role is to society. It's not just about the numbers anymore. It is about the wider ecosystem in which accountants can have a role to play.
JIM PENDRILL:
And there's been government reviews into this very subject, and the fact that there have been calls for more of that ecosystem. You know, you'll know more about this than I will. You know, there's been talk of the various government reviews of late, saying the need for this.
JENNI ROSE:
Yeah, absolutely. I think trust and credibility are really important in today's world, and I think accountants of the future will be able to turn their skills of judgement and professional scepticism onto this absolutely vital area so that we can actually live in a world where people can prosper as well as companies. Not at the expense of companies, but that kind of people, planet and profit align together. And I think assurance is a really key part of that. So we can trust what companies are saying and hold them accountable for what they are promising.
JIM PENDRILL:
Great. Well, I think on that very, very positive note from you both, I'd like to end it there. But many, many thanks, Richard, for coming into school today. It's been great to hear you. Thanks, Jenni, as well for today's discussion.
JENNI ROSE:
Thank you. Thanks very much.
RICHARD KARMEL:
Thank you very much, both.