Controllership strategies for ESG reporting

The reporting landscape is shifting rapidly. At home and abroad, governments and regulators are introducing proposed or final ESG disclosure mandates.

To stay on top of changing reporting responsibilities, you need to know what’s required. We recommend identifying:

• Jurisdictions you operate in (e.g., cities, states, countries, regions)
• Regulations proposed or final in those jurisdictions
• Timing of the proposed or final regulation, including the company’s required implementation date
• Due date for submission of proposed regulations, along with periods to present (i.e., retrospective reporting or current period only) and reporting frequency
• Which standards and frameworks apply
• How to efficiently address multi-jurisdictional mandates with overlapping requirements
• Overlap and integration with existing financial reporting requirements

Report highlights:

• Navigating decentralized reporting responsibilities
• Using technology to manage multiple standards and frameworks

ESG disclosure may not be accounting for information in a currency, but it’s accounting just the same. The technical considerations for ESG information present similar academic questions as found in financial reporting standards such as generally accepted accounting principles in the United States (US GAAP) or international financial reporting standards (IFRS). To add complexity, the outcomes, or considerations sometimes in ESG accounting don’t align with those reached in financial reporting standards.

Controllership should see itself as a business partner, not an adversary, to their sustainability function. Mutual respect and understanding will be paramount to achieving the collective objective of preparing information in a way that’s in accordance with maturing technical accounting for ESG information.

Report highlights:

• Sharpening your team’s technical accounting skills for new ESG standards and frameworks
• Using technology to manage multiple standards and frameworks
• Enhancing your internal control environment

ESG data aggregation is a complex undertaking. The volume of information to gather can be significant.

For example, The European Union’s Corporate Sustainability Reporting Directive, includes 82 disclosure requirements (quantitative and qualitative) representing over 1,000 different data points. That information may need to be pulled from a wide variety of systems by different people in different locations, not all of them in the same language. And it all needs to happen timely and in line with appropriate policies.

Report highlight:

Identifying data sources and strategy for incorporation into reporting

As companies mature and begin building ESG information into their overall sustainable business strategy, senior management will likely look to the controllership team to share quality data they can use to (1) set goals and monitor progress, and (2) monitor their response to sustainability risks and opportunities. Helping management tactically achieve the company’s vision layers another responsibility for the controllership team on top of compliance with reporting requirements.

Controllership should confer with relevant constituents involved in strategy and risk management to understand the sustainability strategies they currently have or aspire to build. Determine how the strategies relate to any mandates (regulatory or voluntary) for reporting goals and progress.