Who should own sustainability reporting and disclosure: The case for controllership
By Robert Kerr, Audit & Assurance Partner, Accounting and Reporting Advisory, Deloitte & Touche LLP
Talking points
- With evolving sustainability disclosure frameworks, there is a compelling argument for controllers to own sustainability compliance.
- Companies should design talent structures to address evolving sustainability reporting.
- Our professionals can provide advice on implementing the process.
These are exciting times for those of us who’ve worked on sustainability initiatives for many years. Not only are sustainability disclosure frameworks evolving and accelerating, but many organizations—from large multinationals to emerging growth companies—seem to be actively engaged in addressing them. The increasing commitment to sustainability across industries signals positive strides toward environmental progress.
Evolving progress and complexity
As the European Union’s Corporate Sustainability Reporting Directive (CSRD), the SEC Climate Rule, and other sustainability frameworks evolve, the changes they bring have implications for your people, processes, internal controls, and technology. Helping to determine that all these resources work together efficiently generally requires a centralized oversight function. Without this, confusion and inefficiency can take over, impede progress, and prove costly.
Who's in charge?
The recent activities in sustainability regulations, requiring extensive reporting to government entities and regulators, have led to the evolution of a unique role. This role requires a combination of controllership capabilities and sustainability experience and knowledge that previously hasn’t been required to date. This brings us to an sustainability controllership’s role. The sustainability controllership responsibilities typically include overseeing financial activities including disclosures, determining compliance, and providing accurate reporting.
As the European Union’s Corporate Sustainability Reporting Directive (CSRD), the SEC Climate Rule, and other demanding sustainability frameworks take hold, the changes they bring can have implications for your people, processes, internal controls, and technology. Helping to determine that all these resources work together efficiently often requires a centralized oversight function.
A logical role for controllership
Because many of these activities are accounting and controls-driven, there is a strong case to be made for controllership to be the accountable function. Consider just a few of today’s sustainability management and disclosure requirements: credits and incentives management, greenhouse gas emissions monitoring, and the development of internal controls. These areas are often managed by or coordinated with the controllership organization.
Managing the complexity
CSRD alone includes 82 disclosure requirements, both quantitative and qualitative, representing more than 1,000 different data points. This information should be timely orchestrated with appropriate policies, often from a wide variety of systems in different locations.
The complexity of these tasks can be reduced by strategically approaching preparations across four key dimensions: multi-jurisdictional reporting requirements, technical accounting, data collection, and business insights. The controllership role likely has the experience in managing these complexities across systems and departments and would be able to strategically plan and execute on sustainability reporting initiatives.
Controllership and corporate sustainability collaboration
Implementing a controllership model may be strategic, but it may create tensions for companies with an established corporate sustainability function. After all, the sustainability function may have managed many manners of sustainability reporting before there were regulatory requirements—while the CFO and controller have likely provided other types of sustainability information in a regulated context. Regulations are creating the opportunity for the sustainability controller and sustainability functions to team together to advise both the company’s mission and the regulatory reporting.
Global orchestration
The evolving sustainability regulatory environment means that US-headquartered organizations with global operations can view the new sustainability reporting requirements as an opportunity to create a standardized global reporting program, potentially better positioning them to comply with current and future sustainability reporting regulations in addition to voluntary reporting. The decentralized nature of their global operations often heightens this challenge.
Controllership holds an important role in crafting and executing effective responses to sustainability reporting and disclosure requirements across multiple jurisdictions due to their role in the consolidated financial statement reporting process and setting up sustainable, replicable processes and controls.
Even with robust controllership functions in place, local staff may lack sustainability data preparation knowledge. To address this, sustainability reporting responsibilities should be divided and the reporting and data collection strategy driven from the top. Local jurisdictions can handle data collection, while the central headquarters manages sustainability reporting and consolidation of the data. This approach could encourage consistent global data collection and reporting and may help avoid data inconsistencies during the consolidation process.
Want to know more?
These are just a few considerations to keep in mind in the controllership discussion. Deloitte can provide additional advice and insights to help you prepare. For further reading, download our thoughtware piece, “Controllership’s role in building an integrated sustainability reporting strategy.” Please reach out with any questions.
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