ESG

The greenest role in accounting

As reporting requirements rise, finance departments have started adding ESG controllers to their ranks.
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· 4 min read

In March 2022, the Securities and Exchange Commission unveiled its long-awaited climate-risk proposal, which would, among other things, require public companies to share data on their exposure to climate-related risks with investors. Turns out, investors are starting to think a habitable planet might actually be good for future profits.

While the proposal has yet to be finalized as a legal requirement, the SEC has signaled that mandatory ESG reporting will take effect in the coming years. As a result, a new role has begun to take shape in the accounting departments of some US companies over the past year: ESG controller.

“There’s clearly going to be a component of a company’s reporting, which will have to be responsive to the plethora of ESG requirements,” Greg Engel, vice chair of tax at KPMG LLP, told CFO Brew. “The amount of disclosures that are anticipated and the consequences of not having things perfectly lined up and responsive to the needs are pretty high.”

Whether companies decide to have a separate division or to place the role under finance or sustainability will be largely company-specific, Engel believes.

FYI FWIW ICYMI. Public companies currently report climate-related data through standards that areoften regarded as alphabet-soup chaos—such as SASB (Larry Fink’s favorite), TCFD, and CDP disclosures (to name a few).

Finance departments lead the charge on SEC reporting within organizations—quarterly and annual reporting on earnings, 10-K filings, and acting as the main contact with the regulatory body.

ESG controllers could be popping up in part because despite voluntary reporting, some companies seem to be at a loss as to what their data is and how to report it. More than half of decision-makers —63% —across industries said they “feel unprepared to meet their ESG goals and government and regulatory reporting mandates at this moment in time,” Workiva found in a global survey released earlier this year.

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“I think many companies are thinking about an ‘ESG controllership,’” Amie Thuener, VP, chief accounting officer at Alphabet, said at the Baruch College Financial Reporting Conference in August. “At the highest level, what that team is really doing is bringing that finance rigor to a rapidly evolving ESG landscape,” Thuener remarked, adding that ”that system doesn’t exist for ESG reporting, yet we are sort of behaving as if it does.”

Green reporting: Shari Littan, director of corporate reporting policy and research at the Institute of Management Accountants, told CFO Brew that eventually she expects ESG reporting to “be mandatory in some respects, and you need the expertise of oversight, reporting, system, infrastructure, mindset, and experience that the CFO team, a traditional CFO team, brings.”

The approach will be cross-disciplinary, Littan caveated, given the need for sustainability expertise. Either way, she said, “there will be collaboration, whether its formal reporting lines into the CFO or a dotted line reporting into the CFO.”

Controlling confidence: Some of the companies that have created this role have seen benefits, Wes Bricker, PwC US vice chair, trust solutions co-leader, told CFO Brew in an emailed statement. “The ESG controller—a role we’ve seen more companies invest in—has a unique role in creating stakeholder trust and confidence,” according to Bricker.

Bricker told CFO Brew that having an ESG controller who delivers investor-grade information can increase confidence in the quality of ESG data, which can be valuable for investor trust and, in turn, can reduce a company’s cost of capital. —KT

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