Finance Leaders Own ESG Reporting. Here’s Why That’s A Good Thing.

by Wes Bricker

Businesses need to understand the maturity of their ESG disclosure process and pinpoint opportunities for reporting improvements.

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An increasing focus on environmental, social and governance (ESG) issues from investors, regulators and stakeholders is creating new demands for companies to meet higher levels of transparency in ESG reporting. And finance leaders are feeling the pressure to rise to the occasion. I’ve led a series of CFO roundtable discussions, and during this unique and valuable forum over the past few weeks, leaders reported integration within finance of ESG reporting and data quality, as well as indicating some trepidation about how to best pursue this effort.

First and foremost, it’s important to understand why ESG reporting should fall under the finance function’s purview. After all, ESG data—on sustainability efforts, diversity and inclusion initiatives, employee investments and more—comes from different departments within a company, but can be tied to public disclosures. Finance leaders are uniquely positioned to own the ESG reporting process and with a focus from the Biden Administration, now is the time to act.

Writing off ESG as being completely separate from a company’s bottom line is short-sighted.

ESG efforts are understandably good for a company’s stakeholders, its community and our larger society, but a strategic focus on ESG can also be good for business. The value of advancing these initiatives are both financial and non-financial, and ultimately, it’s management teams’ responsibility to drive near and long-term value for their companies. 

ESG issues are increasingly informing investor decisions.

Simply, investment decisions are already being made off this information, so building an environment to foster quality, investor-grade ESG data is more important than ever, and that trend is expected to continue well into the future. And we’ve already seen over the past several years and more so months, major investors committed to engaging companies on ESG considerations and supporting shareholder resolutions on ESG issues, including climate change.

Take cues from financial reporting.

When it comes to aggregating data and ensuring that it meets specific quality standards, CFOs and the finance function are the most mature and seasoned professionals in managing corporate reporting. Financial disclosures are regulated, and companies should approach ESG reporting with a similar level of rigor, which aligns with the skills and responsibilities with those in the finance function. And while some ESG disclosures are optional right now, it may not be that way for long. In August 2020, the SEC released new disclosure requirements designed to provide insight into human capital, and additional ESG reporting regulations could come down the road. Smart companies will invest in ESG efforts and reporting now, and CFOs can start by going back to basics.

Understand where you are.

To effectively leverage ESG data to inform a company’s strategy and track progress against its purpose and initiatives, businesses need to understand the maturity of their ESG disclosure process and pinpoint opportunities for reporting improvements. Tech-enabled solutions can quickly consolidate information to get faster insights, provide benchmarking against competitors, and visualize businesses’ current state against several ESG disclosure frameworks.

Ultimately, everyone in the C-Suite and on the board of directors has a role to play in defining a business’ purpose and turning that purpose into action. But with stakeholder needs and expectations on the rise, corporate reporting must demonstrate that a company’s purpose is not just words, but actions that benefit all their stakeholders, not just shareholders. ESG issues are material to a company’s core strategy and long-term value creation, and understanding how ESG helps drive a business’ purpose will help CFOs and other leaders better position their companies for a more sustainable tomorrow.

Wes Bricker is PwC US Vice Chair & Assurance Leader.