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The global impact of Europe’s accounting evolution · PwC's accounting podcast

0:00
SPEAKER_00: Thought Leadership from PWC's National Office.
0:09
SPEAKER_02: Hello, I'm Heather Horn, PWC's U.S.
0:12
SPEAKER_02: Sustainability Technical Leader, and welcome back to PWC's Accounting Podcast.
0:17
SPEAKER_02: In today's episode, we're focusing on the evolving sustainability and broader reporting landscape in Europe.
0:24
SPEAKER_02: Over the past few years, the pace of change in policy, reporting standards, and where assurance is required have accelerated with ripple effects far beyond Europe.
0:34
SPEAKER_02: To help us navigate these developments, I'm happy to be joined today by Ilko Vanjaenden, CEO of Accountancy Europe.
0:41
SPEAKER_02: Many of you will remember Ilko from his time leading the Global Reporting Initiative, but today he'll share his perspective from the heart of the European profession.
0:50
SPEAKER_02: We'll cover Accountancy Europe's role, the biggest forces reshaping reporting and assurance, and the challenges and opportunities for accountants, controllers, and companies adapting to this fast-moving environment.
1:03
SPEAKER_02: Along the way, we'll talk about how companies, especially U.S.
1:06
SPEAKER_02: multinationals, can stay agile amid shifting EU policymaking, how Accountancy Europe helps provide a European level perspective and where controllers can go beyond compliance to add strategic value.
1:18
SPEAKER_02: And of course, much more.
1:20
SPEAKER_02: Before we get started, just a quick note if you'd like to watch the video version of today's discussion, you'll find a link in the show notes along with other resources.
1:29
SPEAKER_02: So, Ilko, thank you so much for joining us today.
1:31
SPEAKER_02: And I was reflecting, or we were just chatting, then I think it's been two years since we've had you on the podcast, or it's something around that time, and definitely a lot has changed.
1:41
SPEAKER_02: Uh, because last time you were on, you were still leading the Global Reporting Initiative, and now you've moved to Accountancy Europe.
1:48
SPEAKER_02: So, just for our listeners' benefit, particularly because about half of our audience is here in the US, can you just explain the role of Accountancy Europe and your role there as well?
1:59
SPEAKER_04: Well, Accountancy Europe is a member organization that represents auditors, accountants, and advisory in Europe.
2:07
SPEAKER_04: We represent 49 institutions that are representing around 1.1 million professionals.
2:17
SPEAKER_04: Our role in uh Europe, and Europe is not only European Union, uh, but also countries like Turkey, Switzerland, UK.
2:27
SPEAKER_04: Uh, what we do is basically bridging the knowledge gap between business, profession, and political decision makers in Europe, contributing to smart uh regulations and legislation.
2:39
SPEAKER_02: Aaron Powell So then from that perspective, would you say that a big part of your role is influencing then what's going on more broadly?
2:46
SPEAKER_02: Well, maybe not influencing, but making sure the perspective of the profession is being considered as new reporting rules and otherwise are being considered in by the uh European Commission or otherwise?
2:58
SPEAKER_04: Yeah, we're uh we're following up on uh public consultations, draft legislations, but also have a lot of interactions uh with the commissions uh to support them indeed in uh drafting uh uh good legislation, so to speak, and making them understand what the value add is of our profession to the uh socioeconomic cohesion that we see and the contribution to uh to capital market as such.
3:24
SPEAKER_02: So, Ilko, we are recording during New York Climate Week.
3:27
SPEAKER_02: So I definitely want to get to sustainability reporting, and our regular viewers know that's what I'm spending a lot of my time on, viewers slash listeners.
3:35
SPEAKER_02: However, I know you have a much broader role, and I do think it's interesting to take a step back and think about the broader reporting landscape.
3:43
SPEAKER_02: And so, from your perspective, then, what are some of the broad forces that you would say are shaping the landscape in Europe?
3:54
SPEAKER_04: In Europe, at this moment, it's all about investment climate and improving investment climate through deburdening business, basically, uh, which means less rules and legislation, more alignment between jurisdictional legislation in Europe and trying to indeed simplify uh reporting.
4:18
SPEAKER_04: That's what we see, and we will get to that in omnibus.
4:21
SPEAKER_04: We've seen it in the Draghi report.
4:23
SPEAKER_04: So they are the main drivers that we will see the next five years out of Europe.
4:28
SPEAKER_02: And Ilkos, we take a step back.
4:30
SPEAKER_02: I mean, again, I you know we mentioned sustainability, but obviously the reporting landscape is is much broader.
4:36
SPEAKER_02: And so do you are there changes then that are also being focused on?
4:41
SPEAKER_02: You mentioned investment and you know developing capital and otherwise.
4:46
SPEAKER_02: So are there other changes that are needed to drive that type of investment then?
4:54
SPEAKER_04: There are a lot of uh things needed to drive investments in Europe.
4:59
SPEAKER_04: And the first of all, the projects that the European Commission is now engaging on are on a single uh European capital market and a savings and investment union.
5:10
SPEAKER_04: There are trillions of Euros being passive on savings accounts of people.
5:17
SPEAKER_04: So we need to make it more attractive for people to invest.
5:22
SPEAKER_04: Uh uh so the financial, how could I say that the financial literacy must really increase?
5:30
SPEAKER_04: Secondly, uh there are a lot of different rules and regulations in Europe that make it quite unattractive for investors because the borders are still there.
5:41
SPEAKER_04: Uh the less uh hindering regulations are there in doing international business, the better it is.
5:48
SPEAKER_04: This all needs a reset in how we uh approach our legal framework when it comes to investing in the European Union.
5:57
SPEAKER_04: And that then, of course, means that businesses need to adapt to changes in legislation and in reporting, uh, whether that's financial reporting or sustainability reporting.
6:10
SPEAKER_04: The big driver, of course, is this attractiveness for investors.
6:16
SPEAKER_04: Um, but it's not only for investors themselves, it's also for the businesses to make it less complicated to do cross-border business in Europe.
6:27
SPEAKER_02: Yeah, and it's very interesting you say that the borders are still there because I think uh for many people coming again from a mostly US perspective, there's a sense of like, oh no, you know, the borders are gone, you don't can just travel on one passport and you don't have to do border control and things.
6:44
SPEAKER_02: But then I think dealing with uh the CSRG and seeing the transposition process and all those things, then you really, I do think, get a much better sense of how different things can be in different countries.
6:58
SPEAKER_02: And so, from an accountancy Europe perspective, then are you then mostly focused on working with the Commission, the European Commission, the Parliament, the Council?
7:09
SPEAKER_02: Is it individual member states?
7:11
SPEAKER_02: How how do you decide where to focus your efforts?
7:15
SPEAKER_04: Well, primarily it is indeed following what's happening in Europe, but then also on behalf of our members, which are also located outside Europe.
7:24
SPEAKER_04: Uh that interaction is very important to know where we can uh support for improvements in uh the European uh European economies.
7:34
SPEAKER_04: Uh the thing that now became most clear is that more alignment between uh jurisdictional legislation is something that we must really bring forward.
7:48
SPEAKER_04: Um we have 27 EU member states um that are all more or less competing for their fair share uh in the market, uh, which is not always that much contributing to growth.
8:05
SPEAKER_04: Because if you as a business uh have to deal with uh uh 26 different tax systems throughout Europe for VAT, it makes it quite difficult to cross-border business.
8:17
SPEAKER_04: Same applies to business law, same applies to local statutory reporting requirements and so forth.
8:25
SPEAKER_04: So we have a ton of possibilities to improve and make it easier for businesses to basically operate in Europe, which will make it more attractive for investors since costs of compliance will go down, which will increase profitability.
8:39
SPEAKER_02: But then I guess what do you see as the role and of the profession, the accounting profession, audit profession, in pushing forward some of those changes?
8:49
SPEAKER_04: We have a lot of experience on how businesses are perceiving and having to work with uh newly introduced rules and regulations or with existing ones.
9:00
SPEAKER_04: Um we know what it means to extract certain data for reporting purposes.
9:06
SPEAKER_04: We know what it means to be compliant in multi-jurisdictions, and uh how complex it can be also to interpret uh certain rules and regulations.
9:17
SPEAKER_04: Uh our profession can support either through advice in the field of accounting or advisory when it comes to IT or tax, and then also assessing the quality of data.
9:29
SPEAKER_04: So building trust in data that are to be published is something that is crucial for capital markets and economic systems.
9:37
SPEAKER_04: And that is where we step in.
9:40
SPEAKER_04: Uh we support and work in close cooperation with tax administrations when it comes to easing up uh audit and compliance systems through cooperative compliance modeling.
9:54
SPEAKER_04: Um we support uh businesses when it comes to introducing uh risk management and control frameworks to better assess risks and enable businesses to extract data in an easy way that is needed under certain types of legislation.
10:14
SPEAKER_04: But that by itself, less legislation uh means less data.
10:19
SPEAKER_04: That doesn't mean automatically that that is better.
10:23
SPEAKER_04: We need smart legislation that contributes to a problem we try to address and to solve.
10:29
SPEAKER_04: And that is where uh we can also contribute towards decision makers in showing them our experience on the intricacies and difficulties of implementing certain parts of legislation into business.
10:47
SPEAKER_04: Looking at supply chains, we assess and have experience on how best to build and introduce these data extracting systems that can automatically validate on behalf of supervising institutions the quality of the report supervising institutions like uh pension administrators, uh, national security institutions, um national banks, uh, stock exchange committees, and so forth.
11:27
SPEAKER_04: So we play a very important part in supporting businesses on the one side, and on the other side, regulators uh in drafting sound legislation.
11:38
SPEAKER_02: Well, and then you have the I'll say profession itself, so the audit firms and and otherwise that also have a perspective and point of view.
11:46
SPEAKER_02: And I guess it's interesting because I'm just reflecting, even in the US, it's not quite the same, but we have the AI CPA that represents the profession.
11:56
SPEAKER_02: But again, there's so many different constituencies.
11:58
SPEAKER_02: And when I start to think about you with all your member organizations, I think so.
12:13
SPEAKER_02: So do you is there difficulty then if in in being one voice for the profession?
12:21
SPEAKER_04: Uh you would think so, because then we have auditors and accountants and tax advisors.
12:28
SPEAKER_04: Right.
12:29
SPEAKER_04: How can you speak with one voice?
12:31
SPEAKER_04: Well, the common objective we all have is seeing that we can work in an environment where uh that that adds value to business and society, because we uh work uh uh on behalf of the public interest, that is our major occupation basically.
12:52
SPEAKER_04: So if you think out of value add, then you have some common themes that really stand out in all aspects of uh our members and our professions, whether you're a small medium practice or a large business or more in the field of IT auditing or accounting or tax advice or sustainability uh audit or accounting.
13:19
SPEAKER_04: Um, and that is that things need to be easy to comply at low cost and showing uh a visible value add.
13:28
SPEAKER_04: So each part of the regulatory supply chain, as I call it, from the inception of an idea, we need to regulate something and introduce something to report on or uh to make less attractive to the moment something transposes into local legislation, um is something where we can contribute and where we with our expertise can say, okay, listen, if you go with this idea, it will be extremely expensive for businesses to comply.
14:03
SPEAKER_04: If you come with this idea, you will see a trickle-down effect that may be detrimental to your original idea, since it is not the business that reports that piece of information, but parts of the smaller medium enterprises in the supply chain that will be faced with some problems.
14:22
SPEAKER_04: If you come with this idea on taxation, it will have a negative impact uh on another piece of your business because investments will be rerouted through a different uh through a different structure.
14:37
SPEAKER_04: Um so what it it it is about smart legislation, it is about proportionality, and there you can very, very much and very well have uh uh a common voice or being the voice of the profession in Europe.
14:55
SPEAKER_02: But so then from that perspective, let's say you are talking to the commission or to legislate someone on the legislative side.
15:02
SPEAKER_02: Do you think there's a knowledge gap in terms of understanding?
15:06
SPEAKER_02: So you're talking about, well, if you do this here, it might impact this other piece of legislation there, and and here's all these different considerations.
15:13
SPEAKER_02: And do you feel like there is the the interest, time, patience, understanding to really understand all those implications because they're dealing with so many different issues.
15:25
SPEAKER_02: And I mean, we've looked at some of their agendas, it's just you know, so many different things.
15:30
SPEAKER_02: So just curious how you feel like some of that messaging is received.
15:35
SPEAKER_04: There is there is a huge knowledge gap, uh, not only between political decision makers and our profession, but also between society and users, right?
15:46
SPEAKER_04: And even between business and our profession, let's be perfectly honest there.
15:50
SPEAKER_04: And I think being perfectly honest, we have to look in the mirror and see how we can improve our messages to messaging to such an account that it will be easier to understand where the value at of the profession lies.
16:07
SPEAKER_04: And that means less technical interactions, more solution-based.
16:14
SPEAKER_04: What is the problem we try to solve, and how can we solve it?
16:19
SPEAKER_04: Political decision makers, members of parliament, commissioners, their agendas are a nightmare.
16:25
SPEAKER_02: Yes.
16:25
SPEAKER_04: They have no time to go into the details, most of their staff haven't uh time uh to go into too much of the details.
16:34
SPEAKER_04: So that means that our communication must be more on the solution and more oriented and driven towards how we can achieve certain objectives, and making them, of course, understand that we also have the technical uh baggage and knowledge to underpin that uh that solution or that idea.
16:58
SPEAKER_04: Um what I also think is that traditionally, our profession, we have we are very much raised as subject matter experts.
17:09
SPEAKER_04: Uh, technical expertise is is is uh crucially important.
17:15
SPEAKER_04: Uh but marketing never was, I think, uh the biggest of talents of our type of organization, so to speak.
17:25
SPEAKER_04: Uh, that is something that that can change, and I don't think it is that difficult if we think more out of that solution than what's the problem you try to fix, angle.
17:37
SPEAKER_04: Um the understanding of what we do already starts at the misapprehension between the role of an auditor and an accountant.
17:54
SPEAKER_04: Um so if we do not have that right at this moment for many uh decision makers and and and the public, then it becomes very difficult to get into more technical discussions on why certain things that we do, how we do it, are are important.
18:14
SPEAKER_04: Um it's by the way, not only the knowledge gap that we see with the political decision makers and the wider public, we also see it with younger people that may or may not be interested in pursuing a career in audit or or or accounting.
18:38
SPEAKER_04: Uh apparently the attractiveness of the profession is a bit under pressure, so to speak.
18:51
SPEAKER_04: Um but looking at the landscape where the things are changing so fast and become so more interlinked, the profession becomes so much more interesting than when I started to do this 35 years ago.
19:13
SPEAKER_04: I mean, we have digital and AI that contribute greatly to getting away with tedious manual labor, uh, but also open fields for predictive analytics at a strategic level to even assessing the technical and the soundness of AI itself.
19:37
SPEAKER_04: We've seen sustainability reporting, which opens up a complete new field of interest for auditors and accountants, which is fascinating.
19:46
SPEAKER_04: We see increased interest in capital markets that are basically the pillar of our of our economic system.
19:55
SPEAKER_04: We have the introduction of crypto stable coins currency.
20:00
SPEAKER_04: Who is going to assess if the countervalue indeed exists?
20:04
SPEAKER_04: It opens up a completely new universe for the profession.
20:08
SPEAKER_04: And I can go on and on.
20:09
SPEAKER_04: Alignment of tax systems in Europe that must happen to achieve the objective of single European capital markets of us are fascinating, even for our legal friends, in order to create the momentum to drive this.
20:24
SPEAKER_04: So yeah, I think my big message is bringing my big task is bringing this message across in the proper way to bridge indeed the knowledge gap in a positive, understandable way.
20:39
SPEAKER_02: So, Ilko, then that sounds like from that perspective, at least, this is the 17 to 23-year-olds that we need to be convincing that there is this huge amount of opportunity.
20:51
SPEAKER_02: And I mean, they also have a lot on their minds.
20:54
SPEAKER_02: We talked about the legislatures, legislators having a lot on their minds.
20:58
SPEAKER_02: Like just reaching them and giving that message, that seems like an enormous task.
21:04
SPEAKER_04: Yes, and you can't start with that task uh uh soon enough.
21:09
SPEAKER_04: So basically already at school, uh making uh making people understand why what we do does matter to society in the public interest.
21:20
SPEAKER_04: Without trust, financial systems don't work.
21:23
SPEAKER_04: We are the providers of that trust, of justified trust.
21:28
SPEAKER_04: Um, that has a big social and environmental uh element in it, of course.
21:33
SPEAKER_04: Um call it financial sevenness or market sevenness, making younger people understand how markets really work, how global supply chains work, and what the role is we play in it, how you can contribute to public and human good while assessing these things or advising on how to deal with them or how to report on some of those.
22:00
SPEAKER_04: Obligations, which is not like uh uh in the old days behind an Expel spreadsheet.
22:07
SPEAKER_02: Or even paper.
22:08
SPEAKER_02: When I started, we had no Excel.
22:10
SPEAKER_02: It was just paper.
22:15
SPEAKER_04: Yeah.
22:17
SPEAKER_02: Yes, yes, and you had to be a weightlifter to carry it around.
22:21
SPEAKER_04: And uh we see things like like like uh like wellness uh uh in in our days.
22:28
SPEAKER_04: You were uh you were the the the the the king of the hill if you had four pizza nights uh during busy periods and it was very uh very much so basically that environment that completely changed.
22:41
SPEAKER_02: Yes.
22:42
SPEAKER_02: Well, I guess when we talk about changing, we've mentioned sustainability a few times, and and this there is an intersection here with the attractiveness of the profession.
22:51
SPEAKER_02: And we talked about sustainability reporting, but very interesting time right now in Europe when we think about the impact of the omnibus, when we think about the consultation that FRAG is doing right now on the new ESRSs.
23:03
SPEAKER_02: And so, from an accountancy Europe perspective, how do you view this broader sustainability landscape and maybe what's what's coming next?
23:12
SPEAKER_02: Obviously, we've there's a lot going on with the content proposal and where that might go.
23:16
SPEAKER_02: So, just curious what your views are.
23:19
SPEAKER_04: I did a strategy paper in my GRI time uh with a title or a subsection, Will the Magic Last?
23:28
SPEAKER_04: So that was two years ago.
23:32
SPEAKER_04: Um everybody was uh in a buoyant mood, uh sustainability reporting, you can't have enough of it, and more and more and more.
23:42
SPEAKER_04: But you already saw a movement preparing a pushback.
23:47
SPEAKER_03: Yes.
23:47
SPEAKER_04: Uh we've seen it here in the US.
23:51
SPEAKER_04: Uh we've seen it in Europe with political landscape changing.
23:55
SPEAKER_04: You will see it everywhere.
23:57
SPEAKER_04: So we are now the pendulum is now swinging the other side, and as always, with pendulums, they go from the left to the right, and then they end in the middle.
24:09
SPEAKER_04: Um the omnibus after the Draghi report was inevitable.
24:17
SPEAKER_04: Also, looking at the political landscape and and and the pushback that came.
24:21
SPEAKER_04: Did we go too far?
24:23
SPEAKER_04: Uh if you look at it from a pure reporting and compliance point of view, the answer was apparently yes.
24:32
SPEAKER_04: Yes.
24:33
SPEAKER_04: Because it was now all scaled down quite substantially.
24:37
SPEAKER_04: Whether that's a good idea from a planet point of view or a bad idea, that's a political question.
24:44
SPEAKER_04: What I do predict is that sustainability will be here to stay.
24:52
SPEAKER_04: Not because we think it's a good idea, but capital markets demand certain information on important topics that give insight into the resilience and risk management capabilities of businesses.
25:06
SPEAKER_04: We see that insurance companies and reinsurance uh refuse to cover damages uh or potential damages in certain regions or certain industries, which has an impact, of course, on the attractiveness to invest in.
25:23
SPEAKER_04: You will not invest in a company that's not insured because if it burns down, your money is gone, you know?
25:29
SPEAKER_04: So that will not happen.
25:30
SPEAKER_02: But you won't build a house if you can't.
25:32
SPEAKER_02: I mean that's the right.
25:32
SPEAKER_04: If you can insure it, if you can't get a mortgage because you can't insure it, it will have a negative impact on uh on portfolios for real estate uh investments.
25:43
SPEAKER_04: So in due time, uh capital markets will respond to the need of certain information, um, and then it will be back again on the political agenda in uh uh not only in a cost of compliance uh way, but also in the value add to functioning capital markets way.
26:06
SPEAKER_04: Um am I negative?
26:08
SPEAKER_04: No, I'm not negative.
26:09
SPEAKER_04: Uh I think there is a reset.
26:12
SPEAKER_04: Uh things are uh politicized, of course.
26:16
SPEAKER_04: Uh uh, but this is nothing new.
26:19
SPEAKER_04: We've seen things politicized on the introduction of international accounting standards for finance.
26:27
SPEAKER_04: So now we're going and the ripple effect to the same.
26:30
SPEAKER_04: Uh so I'm not negative at all.
26:33
SPEAKER_02: Any perspective then on the changes that I mean, we've talked a lot here on the podcast about the the huge amount of change FREG's introduced into ESRES V2.
26:43
SPEAKER_02: And so do you think, given the current environment, uh that it they they're going directly where they need to, and that that will be well well received.
26:55
SPEAKER_04: Yes, I think so.
26:56
SPEAKER_04: I think uh in all honesty, uh what they achieved at FREC now in the last since April six, five months.
27:04
SPEAKER_02: Yes.
27:05
SPEAKER_04: Is is is quite amazing.
27:07
SPEAKER_04: Uh there was a lot of skepticism whether they could indeed uh uh deliver.
27:12
SPEAKER_04: Yes.
27:13
SPEAKER_04: Uh I think they delivered.
27:14
SPEAKER_04: There are always questions and ideas, and but if you look at the big picture, uh I think they did a uh a decent job.
27:23
SPEAKER_04: Uh the cynics always say, why didn't they do that from the start?
27:26
SPEAKER_04: Well, everything has a learning curve in it.
27:30
SPEAKER_04: Uh some say, uh, but now it's completely useless because it does not achieve what it should achieve.
27:37
SPEAKER_04: Well, uh, first of all, we don't know what the end game will be.
27:41
SPEAKER_04: No.
27:41
SPEAKER_04: Uh looking at thresholds of the FTEs that are involved, 500,000, 3,000.
27:48
SPEAKER_04: Um, but it is still better than nothing, uh, so to speak.
27:53
SPEAKER_04: Uh to some the glove is always half empty, to others it's half full.
27:59
SPEAKER_04: Uh what I think what we did learn from this episode is that we should never go through such an episode again.
28:07
SPEAKER_04: Never.
28:08
SPEAKER_04: Uh it wasn't really very favorable to building trust in the institutions and to the system.
28:16
SPEAKER_04: I mean, people and businesses have been working for years under the uh expectation that we would have ESRS in the way how it was presented, then uh in mid-flight turn it around like it was turned around.
28:33
SPEAKER_04: It may have been the necessary thing to do, but it would have been better to have prevented it at all.
28:41
SPEAKER_04: You can't afford to do many more uh omnibuses with very recently or to be uh uh introduced legislation again because it will hurt credibility of the institutions.
28:54
SPEAKER_02: Yeah, although it's interesting, Ilko, because if I just focus in the US on financial reporting, so the sort of modern era started in the 1930s with the SEC and everything else, that was almost 100 years ago.
29:08
SPEAKER_02: And so it's almost as though sustainability reporting was trying to take a hundred almost 100 years of lessons from financial reporting in in one or two years.
29:18
SPEAKER_02: But I I agree with your point.
29:20
SPEAKER_02: I think that's still very frustrating.
29:22
SPEAKER_02: I think it's very difficult for companies, but I also think you do need to give some recognition that it there does need to be some time for evolution.
29:31
SPEAKER_04: Yes, oh absolutely.
29:32
SPEAKER_02: Yes.
29:32
SPEAKER_04: It is all quite new.
29:35
SPEAKER_04: I mean, if you see the the speed with which the standards were uh basically constructed, uh both at the site of the ISB and then at the site of FREC.
29:48
SPEAKER_04: Uh and if you compare that indeed with your very apt uh comparison with financial reporting, it it has gone with the speed of light.
29:58
SPEAKER_04: Uh uh perhaps we went too fast.
30:01
SPEAKER_02: Yes.
30:01
SPEAKER_02: Well, we'll I guess we'll see this next round.
30:03
SPEAKER_02: Hopefully, I think from PwC's perspective, we're saying in our letter a lot of positive changes.
30:08
SPEAKER_02: So it'll be interesting to see what comes next with you know the trilogue negotiations and otherwise.
30:15
SPEAKER_02: Yeah, yeah.
30:16
SPEAKER_02: All right.
30:16
SPEAKER_02: So a few, let's going back to the broader landscape, let me ask you a few other questions because one of the uh questions we hear from companies in the US is that it's so important right now to understand this landscape in the EU.
30:32
SPEAKER_02: And I will say it's quite complicated coming from someone that if you know, with the perspective of someone from the US, just to understand all the parties involved and to understand how this uh landscape is operating.
30:44
SPEAKER_02: So, what advice when you are meeting with non-EU companies are you giving when they're thinking about reporting in the EU?
30:54
SPEAKER_04: Follow us closely.
30:57
SPEAKER_04: Follow us closely and uh stay au current on top of uh of any changes.
31:06
SPEAKER_04: That would be my uh my advice.
31:08
SPEAKER_04: Uh my takeaway for them would be the European Commission and institutions are that serious for reducing uh the burden and the cost of compliance.
31:26
SPEAKER_04: That is a very serious project.
31:29
SPEAKER_04: Um but we have our own legislation as European Union and we will keep making our own legislation, but I think the international lens, the international uh business environment, will be taken more into consideration.
31:48
SPEAKER_04: Um perhaps the the the effects of the Green Deal ESRS, which of course its objectives you cannot disagree with because it's for a healthier, better, profitable planet for all of us.
32:05
SPEAKER_04: Um, but it's a way how to get there that I think uh uh the Waco Call the Commission got uh via the Draghi report and and and other uh other events is being taken very serious.
32:20
SPEAKER_04: So I shouldn't be afraid of an overburdened compliance landscape in Europe.
32:26
SPEAKER_04: Um I think it will improve.
32:30
SPEAKER_04: Uh the issues to follow are, of course, single European capital market.
32:34
SPEAKER_04: How will that work?
32:36
SPEAKER_04: Uh will we be able uh to unlock what I call lazy European capital for more investments in startups, um which could also be very attractive then for uh for foreign investors and foreign businesses.
32:54
SPEAKER_04: Um so yeah, I think Europe is is indeed getting and will get more attractive for US businesses to do uh to do business in.
33:07
SPEAKER_02: Yeah, I well, what you're uh talking about with the single European market and otherwise, I mean, that is an improvement and it it would give access to a lot more.
33:15
SPEAKER_02: So I do think it's important uh for people to pay attention.
33:19
SPEAKER_02: I guess the related question that we often get is you know, we're always getting asked, well, what are other companies doing?
33:26
SPEAKER_02: What are my competitors doing?
33:28
SPEAKER_02: What is this, that, how are they responding?
33:30
SPEAKER_02: And so, in your role as accountancy Europe, you have such a broad view of the landscape.
33:35
SPEAKER_04: So do you have perspectives on some of that or some role in providing some of those that type of information We are currently working on a very large project called Purpose 2030, where we as accountancy Europe will set our longer-term strategic objectives for the five next five, ten years.
33:56
SPEAKER_04: As a member organization, you go back to your members and you ask, what is it, what you need?
34:01
SPEAKER_02: Yes.
34:01
SPEAKER_04: But also to those organizations we have a lot of interaction with, like uh IOSCO, OECD, uh, European Banking Federation, but all of our colleagues of IFAC and so forth.
34:12
SPEAKER_04: Uh uh, we ask uh the same.
34:15
SPEAKER_04: Uh topics that pop up are digital AI, attractiveness of the profession, and then benchmark information.
34:25
SPEAKER_04: So you're spot on.
34:26
SPEAKER_04: Everybody wants benchmark information.
34:29
SPEAKER_04: Is it business what other businesses are doing?
34:32
SPEAKER_04: But it's also uh local regulators or uh our uh our members that asking what is happening in other countries from a regulatory point of view.
34:43
SPEAKER_04: Um yes, we have a reasonable good oversight.
34:47
SPEAKER_04: What we don't have yet at Accountancy Europe is a good, smart way to share that information.
34:54
SPEAKER_04: So part of this P30 project is an overhaul of our IT infrastructure, whereby sharing this information online with benchmarking capabilities and data analytics and so forth will be part of the service offering of our organization.
35:08
SPEAKER_02: Oh wow, somewhere to come on that topic.
35:11
SPEAKER_02: All right.
35:11
SPEAKER_02: And of course, you mentioned digital AI that came up a little previously in our conversation, and I feel like every conversation about accounting right now has those topics in there.
35:22
SPEAKER_02: And so, from your perspective, again, if you're looking at this time horizon to 2030, what are some of the major impacts that you're expecting to see?
35:30
SPEAKER_02: And how are you as an organization considering those?
35:34
SPEAKER_04: I think it's about uh uh improving uh data analytics capabilities and uh getting rid of tedious manual labor.
35:46
SPEAKER_04: Of course, you always hear people that push back on the use of tooling and technology.
35:52
SPEAKER_04: Um it already started with the introduction of the spinning Jenny.
35:56
SPEAKER_03: Yes.
35:57
SPEAKER_04: Yeah.
35:58
SPEAKER_04: I mean, it created more jobs than less.
36:00
SPEAKER_03: Yes.
36:01
SPEAKER_04: Uh certain jobs were uh went, uh, but more came.
36:06
SPEAKER_04: Uh it's the same with technology.
36:08
SPEAKER_04: It will it will give more insights in uh in data, proper data, more predictive analytics for strategic decision making.
36:17
SPEAKER_04: Uh of course, we need now to assess whether certain AI tools deliver what they promise they do in a proper, correct, non-polluted way.
36:28
SPEAKER_04: Uh but this is this is a revolution that is unstoppable.
36:34
SPEAKER_04: Uh the world changes constantly.
36:37
SPEAKER_04: I'm always getting a bit, well, a bit tired.
36:40
SPEAKER_04: People say we live in exciting times.
36:42
SPEAKER_04: Mention me one time that was not exciting.
36:44
SPEAKER_03: No, yeah.
36:45
SPEAKER_04: I mean, everything changes constantly.
36:47
SPEAKER_04: What we must be careful of is that the haves and the have nots, that the gap there gets too big.
36:57
SPEAKER_04: So, business and our profession, uh very well equipped to deal with AI and and and technology.
37:05
SPEAKER_04: We know that some uh governmental institution, oversight institutions and boards, are not there yet.
37:14
SPEAKER_04: So if we see that in oversight or compliance assessment, the institutions responsible for uh do not keep up with the possibilities that the markets deliver, then it may be a more a pullback than a push forward of making things easier to comply at lower cost.
37:34
SPEAKER_04: So we must onboard everybody in that supply chain, as I call it, or in that regulatory environment to be up a standard to knowing what the power is and how you can work in a safe way with these machines.
37:47
SPEAKER_04: So also our supervisors.
37:49
SPEAKER_02: Well, it's interesting then.
37:50
SPEAKER_02: You are really talking then about a profession that is leading by education, by pulling more people into the profession, but by making sure then that we're not being held back in terms of how we can use these tools than otherwise because someone else is saying, Well, I don't understand.
38:07
SPEAKER_02: So I'm just going to say no.
38:09
SPEAKER_02: You're saying part of our responsibility then is to actually help them come up that curve so they can appropriately work with us in governing the organiz the profession.
38:20
SPEAKER_02: Is that a fair way to think about it?
38:23
SPEAKER_04: Yes.
38:24
SPEAKER_04: So I'll give you an example in uh uh in Belgium where I live, and I can compare it with the Netherlands.
38:32
SPEAKER_04: Um, we have mandatory electronic invoicing as from January 1st, 2026.
38:38
SPEAKER_04: Uh, for small medium enterprises, everybody.
38:40
SPEAKER_04: So I have it, uh, we have it.
38:46
SPEAKER_04: Uh it works extremely well.
38:48
SPEAKER_04: And for many small medium enterprises, it's ideal.
38:52
SPEAKER_04: Uh and it really contributes to a less complicated uh compliance framework you have to work in with the papers, and then you have to file, and then you get a question and all and matching and yes.
39:06
SPEAKER_04: There was a little pushback, but now everybody is happy.
39:10
SPEAKER_04: Um in the Netherlands there is still the discussion raging whether or not we should have this system because it could be a burden on behalf of businesses that are not used to work with technology.
39:23
SPEAKER_04: I think that is fundamentally wrong to have that discussion.
39:27
SPEAKER_04: Not to be very careful and to support small medium enterprises in making the transition.
39:35
SPEAKER_04: But you do not live off an island anymore.
39:37
SPEAKER_04: If you see how some countries are using technology in their economies, in their data storage, uh uh uh exchange of data through various uh organizations, uh the ease with which it is done and the value it can bring.
40:01
SPEAKER_04: You cannot stay behind.
40:03
SPEAKER_04: You just cannot stay behind.
40:05
SPEAKER_04: So governmental institutions should also uh adapt to the fact that things are changing faster than they may have foreseen in the past, but that doesn't mean that they should keep doing what they do.
40:23
SPEAKER_04: Um that let's say let's say it what it is.
40:27
SPEAKER_04: It erodes uh trust.
40:30
SPEAKER_04: It erodes trust in institutions if they lag behind with the technical capabilities that are available and are being used in order to provide better data at lower cost.
40:42
SPEAKER_02: Yes.
40:43
SPEAKER_02: So if I'm and I'm just thinking that I'm one of these small companies, and if if I'm ready and the government is saying, well, I'm not, I mean, to your point, that you don't want that should not be what happens, and that's where it seems like we as a profession have an important bridge.
40:59
SPEAKER_04: Yes, oh absolutely.
41:01
SPEAKER_04: And and and and also looking at uh I didn't even mention it.
41:06
SPEAKER_04: So uh in Europe, uh uh uh we were shaken up and woke up to the fact that we need to really invest not only in our infrastructure but also into our defense and security.
41:21
SPEAKER_04: There's a lot of money going around there.
41:23
SPEAKER_04: So public accountability by governments through public accounting and auditing will become a huge topic and a huge field of interest for our profession.
41:36
SPEAKER_04: So also there we can uh we can contribute.
41:39
SPEAKER_04: It's uh uh it's a field you don't hear many people speaking of, but I think that uh that uh the for not only for the public interest but to all our interest, uh I think uh uh public accounting is is is is will get a lot of attention or should get a lot of attention.
41:58
SPEAKER_02: Is this going full circle back to attracting more people to the profession because there is so much different opportunity?
42:04
SPEAKER_02: Yeah, yeah, yeah.
42:05
SPEAKER_02: So, Ilko, if I just take a step back then and you mentioned your project for 2030, what should our listeners expect to see coming out of Accounting Europe over the next few years?
42:18
SPEAKER_02: Any places to watch?
42:20
SPEAKER_04: Well, first, of course, of course, our board needs to approve the ideas.
42:24
SPEAKER_02: Yeah, so I guess you don't have to get ahead of yourself, but maybe any previews you feel comfortable with.
42:29
SPEAKER_04: So, okay, if uh if uh uh if we uh get a go ahead, then uh the quality of the technical work will still be there.
42:39
SPEAKER_04: I mean, uh the team is doing an amazing, excellent job when it comes to the the quality of publication and supporting our members therein.
42:49
SPEAKER_04: The thing that will be topped up is our, let's call it, increased policy engagements.
42:56
SPEAKER_04: And uh we will become more vocal in the market to support decision makers uh uh in their decision-making process.
43:06
SPEAKER_04: So that's what you will see more.
43:08
SPEAKER_04: You will see more accountants in Europe, global, because the uh the the uh extraterritorial effect of legislation is touching us all.
43:21
SPEAKER_03: Yes.
43:21
SPEAKER_04: Uh if we make regulations in Europe, they have an effect on uh on uh uh US business.
43:30
SPEAKER_04: If the US administration takes a position on uh import duties, then it has an effect on European business.
43:39
SPEAKER_04: So whether some say or want to see more uh isolationism uh in the current markets, that is difficult to achieve.
43:50
SPEAKER_04: You you you cannot put the clock back.
43:54
SPEAKER_04: Um so we will engage more internationally uh to that effect uh with our Colleagues with the other public accounting organizations.
44:03
SPEAKER_04: There are some universal topics that attract us all.
44:06
SPEAKER_04: That is standard setting, the global baseline would be very helpful for providing more comparable data to markets and stakeholders.
44:18
SPEAKER_04: It will reduce cost of compliance.
44:21
SPEAKER_04: It will make, by the way, the uh audit easier because you can work out of one set of standards.
44:30
SPEAKER_04: It's the uh attractiveness agenda, attracting young people for the profession.
44:35
SPEAKER_04: We need more people.
44:37
SPEAKER_04: Um so that is a really universal global issue.
44:43
SPEAKER_04: Then we have indeed the use and bridging the knowledge gap on digital and uh AI, including data security.
44:52
SPEAKER_04: Um, that is a topic that is quite important.
44:55
SPEAKER_04: And there is another one that we also see at the global level, something we we we must get our well, our ideas more around how to communicate that one.
45:08
SPEAKER_04: Um more and more governmental institutions, uh they come with certain regulations, but the traditional oversight and all that of that work is no longer done by a governmental institute, uh like a a uh a tax administration or uh a digital bank or uh what do we have?
45:32
SPEAKER_04: A pension uh oversight committee.
45:36
SPEAKER_04: Um a lot of the work they traditionally done has now been basically transferred to business itself, that then looking for advice or support of accountants or auditors.
45:52
SPEAKER_04: I think of anti-money laundering, uh know your customer, uh issues around um cooperative compliance modeling.
46:04
SPEAKER_04: So that means that there is more to be done by businesses and by accountants, but in the past business didn't pay for it because it was an activity performed by the government or by governmental institutions.
46:22
SPEAKER_04: Now our support costs money, and there you can see some friction.
46:27
SPEAKER_04: So offloading certain uh activities out of uh regulatory bodies towards uh towards business, towards the private sector can be done, but please take into account that that has a cost, it comes at a price.
46:46
SPEAKER_04: So that a governmental institution doesn't have the capacity or capabilities or investment power to do it themselves and thereby ask support basically uh by law from business and our sector, doesn't come for free.
47:03
SPEAKER_02: Right.
47:04
SPEAKER_02: Well, and I think that's an important point.
47:06
SPEAKER_02: And I if I loop back to what you said about reporting in a global baseline, because I do think that's something we hear from companies, but I think that goes all the way back to the comment you made about um value add and easy to understand and you know simple some level of simplification as well.
47:24
SPEAKER_02: We want to make sure whatever those standards are are that meet all those requirements and are really fit for purpose in the current environment, particularly given all these other forces that we're talking about.
47:34
SPEAKER_04: Yeah, and you see also that in legislation and sometimes also in in standards, they serve multi-objectives, and that's making them very difficult to understand.
47:49
SPEAKER_04: The famous example is, of course, tax law.
47:53
SPEAKER_04: It's being used as a source of revenue, but also uh as an instrument, as a tool to encourage or discourage certain behavior with the energy taxes and uh high taxes on tobacco, whatever you have.
48:08
SPEAKER_04: And it's being used, mostly in Europe, as a tool for the uh redistribution of wealth.
48:14
SPEAKER_04: So, well, if you then are a lawmaker or you're in a parliament and you all want to have your little specific objective, then you create these compliance monsters that that in the end perhaps serve nothing.
48:30
SPEAKER_04: Uh so what is it that we try to solve?
48:35
SPEAKER_04: And it's very difficult to, with one standard or one law, serve everybody.
48:43
SPEAKER_02: All right.
48:44
SPEAKER_02: Well, maybe final question for you.
48:46
SPEAKER_02: We've covered a huge number of topics today, and really I think you've outlined many of the reasons as a professionist uh were the profession is so important, and then the role of accountant CR.
48:59
SPEAKER_02: But any other points that I I didn't hit on that are sort of top of mind for you right now, or that you think should be top of mind for accountants, auditors, or preparers to be thinking about as they look ahead to the future?
49:15
SPEAKER_04: I would like to say that some of the negative sounds I hear are completely unfounded.
49:25
SPEAKER_04: The profession has a tremendous future.
49:29
SPEAKER_04: We are changing rules and regulations in Europe that need to be embedded in business, business processes, that need, uh, let's call it new reporting angles that make it very attractive to be in this field.
49:50
SPEAKER_04: The role we play in certain uh uh societal relevant topics is only increasing, sustainability reporting, but also uh AML uh supporting in the global supply chains.
50:08
SPEAKER_04: I'm very positive uh on the future.
50:12
SPEAKER_04: Um we always go to to pluses and minuses, that that's that's that's part of life.
50:20
SPEAKER_04: Uh I think that the economy is doing quite well.
50:27
SPEAKER_04: Um I think the interaction between international organizations is improving.
50:35
SPEAKER_04: I think the focus we see in Europe on deregulation and coming to more prudent regulations is serious.
50:44
SPEAKER_04: Um it is up to the individual member states now to make sure that we can push forward and make the alignments that we want to make, because it is uh the the the the there is a thing in Europe, uh and I guess you will also see the same here in the US at state level, that if things go wrong at a national level, then Brussels is blend.
51:09
SPEAKER_02: Yes.
51:11
SPEAKER_04: Um if things that Brussels initiated uh contribute to value and prosperity, then it's of course the responsibility of the local politician.
51:21
SPEAKER_04: So that's a bit uh that's a bit how it is.
51:25
SPEAKER_04: Yeah, we have we have to live with that.
51:27
SPEAKER_04: But uh I think we are uh we are on the right track of uh of uh growing value and prosperity in Europe and across the world.
51:36
SPEAKER_02: All right.
51:36
SPEAKER_02: Well, Yilko, that's a very positive note to end on.
51:39
SPEAKER_02: So definitely, as always, I really appreciate all your insight and thank you so much for joining me today.
51:44
SPEAKER_04: Thank you for having me.
51:46
SPEAKER_02: All right, and to our viewers slash listeners, thank you also for joining us today.
51:50
SPEAKER_02: I hope you enjoyed our discussion, and I encourage you to tune in again next week for more developments in the world of sustainability and more broadly across the world of accounting.
52:01
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52:11
SPEAKER_02: Thanks again for joining us today.
52:14
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52:36
SPEAKER_01: From Thought Leadership at PwC, I'm Heather Horton.
52:40
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