Meet the ESG Controller
A Lens on What’s Ahead
PART 1: WHY?
When the SEC issued its proposed climate disclosure regulations in March 2022, the announcement was not unexpected. But it still hit an alarm bell, as many realized for the first time that sustainability data – a new class of non-financial data – would need to be reported. And that in turn meant it must be operationalized across the firm and prepared in a compliant manner. Without focused attention, there were new risks: Reporting, financial and reputational.
Quickly the situation called for an experienced leader, someone who could cut across organizational boundaries in short order. PwC, Deloitte, and others issued the call for an “ESG Controller.”
What is most interesting is not the specific role, but what tasks should be accomplished by the new leader or shared across a broader team. At the intersection of finance and sustainability, and at the crossroads of operations, reporting and compliance, the ESG Controller role encapsulates what every company must do as it addresses the new regulatory and accounting standards mandates.
While the quotes shown on these pages may seem a bit lofty and aspirational, consider these hard-headed facts from BDO and Deloitte:
• Most major banks now screen borrowers against ESG criteria
• 95% of PE funds use ESG criteria in due diligence
• 90% of insurers monitor ESG risk
• 99% of CFOs plan to increase ESG spending in 2023
In short, with capital access, corporate strategy and expenses in play, it is not surprising that CFOs would turn their attention to how to get the job done: Who is going to do it?
“Controllership can play a key role in navigating the nontraditional ESG landscape by spearheading the development of internal controls and governance. We can model an ESG strategy and readiness plan through a Controllership lens – using regulatory operating models, digital enablers, and other strategic levers in the Controllership playbook.”
“Ultimately, to meet the proposed new requirements, many businesses may need to transition to investor-grade and tech-enabled reporting to dramatically accelerate their climate change reporting processes, while implementing effective governance and internal controls.”
THE NEW ORG CHART – INCLUDING THE ESG CONTROLLER
“The ESG Controller understands internal and external controls and processes to help deliver on the company’s ESG objectives. The position runs through the center of the organization, and is part of central reporting function”
“As financial reporting expands to include non-financial ESG metrics, CFOs must help shape ESG disclosures and define how the underlying data is captured and tracked. Finance leaders are best equipped to integrate these non-financial metrics into existing financial reporting processes.”
PART 2: SAMPLE JOB DESCRIPTIONS
PART 3: THE ESG CONTROLLER TASK LIST
Data Management
- Identify and implement actions to improve data collection process and integrity
- Conduct an audit readiness assessment
- Ensure we have the appropriate control processes and procedures in place
External Reporting
- Evaluate requirements and standards
- Conduct gap assessment
- Develop reporting timelines and roadmap
- Prepare and respond to customer requests for sustainability reports and data
- Prepare and respond to sustainability reporting requirements in capital raises
Integrated Financial-Sustainability Reporting
- Partner with Financial Controller and team to develop our annual integrated report
- Ensure that reduction plans are supported by detailed analysis and action plans and integrated into operational and financial planning processes
- Continually benchmark our integrated report vs capital market peers
- dentify/ recommend opportunities to enhance ESG transparency
Impact Metrics
- Develop KPI scorecard for our 2030 sustainability goals and annual targets
- Forecast progress to goals
- Measure and monitor reduction plan for compliance with SBTi targets and customer requirements
Governance
- Partner with our Chain of Certification process and audit committee to institute governance of sustainability reporting
- With attention to segregation of duties and appropriate information summaries at each stage
Climate Risk
- Partner with Risk Management to identify climate risk exposures
- Develop data streams to measure
- Coordinate a menu of risk management and mitigation options
Whether the inspiration for a new role or a lens on the tasks to be done, the ESG Controller encapsulates the operational, strategic and compliance agenda for sustainability within in the finance team. A skilled and experience professional, the ESG Controller needs accurate, actual sustainability data. Ad hoc estimates, data handling without governance and controls and undocumented manual data entry systems simply won’t do. A new era requires sustainability data as rigorously prepared as financial data.
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