ESG regulations and your company

With the SEC climate disclosure rule on hold, turn your attention to Europe’s CSRD and California’s reporting requirements

As the material impacts of environmental, social and governance issues have come into sharper focus, regulators and policymakers in markets around the world have enacted or proposed disclosure requirements that focus on a range of key issues such as climate change, greenhouse gas emissions, the workforce, and a company’s impact on the communities where it operates. 

Companies that set out to tackle this reporting challenge can be overwhelmed by a veritable alphabet soup of regulations and reporting frameworks (CSRD, SEC, ISSB, CA) that vary by country and region and impact some sectors more than others. It’s imperative that companies are able to gain clarity from the regulatory clutter.

Understanding the impacts of global ESG regulations: Steps to begin the compliance process

PwC is here to help you understand how these global ESG regulations will impact your business and begin the process for compliance now. Regardless of the regulation, companies can use these three steps to begin the process of meeting this challenge head on: 

  • Strategize: If they haven’t already, your company’s leaders need to develop an ESG data reporting strategy. That means understanding the appropriate regulations, selecting a framework and agreeing on the metrics to be reported and the timelines for any emissions reduction targets. This strategy should be aligned to the company’s broader corporate strategy and it should clearly define who is accountable for ESG data. For example, it could include appointing an ESG controller.
  • Mobilize: Over the next few years, companies will be disclosing more ESG data than ever and they will come under regulatory and stakeholder pressure to have those expanded disclosures assured by an independent auditor. Given that, your ESG data strategy will need to include processes, policies and risk controls that put your company on a sustainable path to clean ESG data. Companies should consider tech-enabling their ESG reporting strategy as a way to ground decision-making in data that can be analyzed throughout the year.  
  • Communicate: Consider reporting as a way to build trust with key stakeholders. In PwC’s 2022 Global Investor Survey, 87% of respondents said they believed corporate reporting contained unsubstantiated sustainability claims. However, that same survey found confidence in ESG reporting surged when it received independent assurance.

ESG disclosure key dates at a glance

What does this mean?

All companies are at different points in their sustainability journey, and enacted or proposed ESG disclosure rules such as the CSRD requirements should ignite a new sense of urgency across the enterprise. Companies will need to quickly transition to investor-grade reporting by developing an effective controls environment and accelerating their ability to collect, manage and measure ESG data.

Here are three things to consider:

  1. Assess sustainability risk across the business: Make sure everyone involved understands how various climate change scenarios can affect your company’s financial performance and operations. What if global average temperatures are held in check, rising less than two degrees Celsius? What changes if they rise more? This is an area in which it’s particularly important to break down silos and bring a cross-functional approach. It’s no longer sufficient for one function to have a monopoly on climate risk.
  2. Determine impact to the financial footnotes: Companies may need to describe how climate risks impact their financial statements — or are reasonably likely to do so in the future. To meet that mandate, your company should develop “impact pathways” to connect those events to likely accounting entries. From there, it will be important to identify the financial statement line items most likely to be affected.
  3. Get stakeholders aligned and educated: The organizational shifts companies will face to comply with global ESG disclosure rules will entail a lot of change. This may include employees taking on new roles, responsibilities moving between functions, new systems and processes and, not least of all, higher stakes and increased expectations around how companies tell their climate stories. Some employees may need upskilling. Others may simply need clear communication about what’s different and why. No matter what, effective communications and change management rooted in trust are critical.

How roles and responsibilities of the board of directors and senior leaders could be impacted by the new ESG regulations


This business function’s traditional experience in overseeing accounting and controls will be required to help prepare the organization for investor-grade ESG reporting. Working closely with the sustainability group, finance should work to confirm ESG data is robust, complete and auditable. Companies should consider a controllership-led approach that works closely with the sustainability, legal and risk functions, as well as integrating many other facets of your organization. Giving the reins to those in charge of financing reporting will help your company be ready for global ESG reporting requirements.


Global disclosure regulations require organizations to clearly articulate their strategic approach and process to identify risks and opportunities. The sustainability function likely has the most historical knowledge of how your company has collected, measured and managed climate data and the progress it has made towards any goals. Now, the Chief Sustainability Officer (CSO) should drive collaboration throughout the company and work closely with various stakeholders to create sustainable advantage and value. They should also lead efforts to address any knowledge gaps through upskilling or hiring to make sure they have the right team in place.


The complexity of collecting and analyzing ESG data will present new challenges for the risk function. It will be tasked with leading efforts to determine and quantify the physical risks of climate change-related weather events, both acute (floods, storms, wildfires) and chronic (drought and extreme heat), and the potential for physical damage to assets that could lead to business interruptions. The risk function will likely also need to assess transition risks inherent in the large-scale transformation required to shift to a low-carbon economy. Companies should establish effective frameworks and operating models to track and act on diverse data sources both for better risk management as well as a potential competitive advantage.

Internal audit

This function will be tasked with assessing the effectiveness of your company’s internal controls and risk management systems around climate change and other ESG issues. With the possibility of mandatory assurance requirements, it will be important to thoroughly test existing controls and processes and help the organization prepare for third party independent assurance.


Disclosure regulations put boards’ oversight role in the spotlight. Boards need to determine how to provide effective oversight of the company's ESG strategy and reporting. Some of these responsibilities may fall to the nominating/governance committee, a standalone ESG committee or the full board. Others, like overseeing the policies, procedures, and controls to ensure accurate public communications is a core competency of the audit committee. Boards should have regular access to company leaders responsible for executing the ESG strategy, an understanding of the internal controls in place for both qualitative information and quantitative ESG metrics, and establish accountability for the accuracy of what the company is reporting.

Considerations for ESG regulations by industry

Banking and capital markets

Financial services firms need to transition to investor-grade ESG reporting and upgrade current processes and controls that fall short.

Particularly thorny is the question of how to measure financed emissions. If Scope 3 emissions are deemed “material” by the firm, or if the company has already set an emissions reduction target that includes Scope 3 emissions, financed emissions will likely need to be included in regulatory filings. Other Scope 3 challenges are that institutions are taking different approaches to measure financed emissions and existing standards don’t cover all asset classes.

Financial firms should expect to have little comparable reporting data from their counter-parties about climate risks and emissions. Some private market clients will not be subject to some global reporting requirements presenting an additional data collection challenge. This is an evolving area and standardization will take time.

Medium-size banks that may have sidestepped climate reporting now find themselves in the same regulatory bucket as GSIBs. They face a daunting challenge of quickly ramping up the collection, verification and reporting of climate data—plus any methodology used in their simulations—within a limited window of time.

Consumer markets

Consumer markets companies function within a value chain ecosystem that may include thousands of suppliers. That supply chain adds complexity to reporting on Scope 3 emissions, and companies subject to the new rules will need to use a combination of estimation approaches and actual data collection. This could be especially challenging because many private sector companies in the supply chain won’t be subject to the disclosure rules and may not be as prepared to respond to customer requests.

PwC research finds that a compelling sustainability story can be a competitive advantage. Consumers have told us they make purchasing decisions based on a company’s sustainability metrics.

Learn more

Energy and utilities

The industry continually invests in its infrastructure to improve asset resilience and operational reliability. It’s unclear how companies should delineate between routine costs associated with reliably supplying energy to customers or recovering from typical weather events versus the climate-related disclosures required under many global disclosure rules.

Global proposed or enacted regulations typically require companies to disclose emissions from upstream and downstream activities indirectly connected to their assets (Scope 3), if material, or if its greenhouse gas targets or goals include Scope 3 emissions. Scope 3 will likely be material for energy and utilities regardless of decarbonization commitments in industry-specific, high-emitting categories such as “fuel and energy-related activities” and “use of sold products.” Other Scope 3 categories could also be material for these companies.

The need for accurate and reliable data may provide unique challenges for companies with assets like pipelines, transmission lines, drilling rigs or offshore wind turbines. The expanded global disclosure rules beyond the industry’s already extensive reporting requirements, as well as an accelerated timeline for sustainability reporting, will likely require increased investments and enhancements of existing processes and systems

Learn more

Health services

Recent studies indicate that the US healthcare system is responsible for about a quarter of all global healthcare greenhouse gas emissions. Enacted and proposed global disclosure requirements will increase pressure on both public and private healthcare organizations to address the effects of climate change. Executives will need to consider where they’re focusing. For example, has their organization adjusted its clinical service line, growth and population health strategies to incorporate the specific climate health effects on the communities it serves? Once an organization has reprioritized its healthcare services accordingly, how does that impact capital plans, clinician recruitment plans and the research portfolio?

Patients, communities, regulators and other stakeholders expect healthcare organizations to not only help individuals recover from the health effects of climate change, but to help solve this urgent problem and not add to it. While addressing regulatory requirements is important, the ability to differentiate as a healthcare organization through decarbonization strategies to transform health facilities, supporting operations and the healthcare supply chain can engender trust among all stakeholders and create a sustainable competitive advantage.

Industrial products

Industrial products companies will need to consider physical risks posed by climate change to their infrastructure, especially those at risk for flooding, wildfires and hurricanes, and ensure these are managed with the same rigor as other enterprise risks. The quantitative impacts of climate-related risks will soon need to be disclosed in the financials, making scenario-based risk analysis an invaluable tool.

Industrial products companies should begin (or accelerate) efforts to track GHG emissions not only for their operations (Scope 1 and 2) but also for the upstream raw materials and intermediary finished goods they source, and the downstream impact from their products (Scope 3).

Reporting Scope 3 emissions may prove to be the most challenging task for manufacturers that source from vast networks of suppliers, as many private sector suppliers won’t be subject to the disclosure rules and may not be as prepared to respond to customer requests.

For some industrial sectors, such as engineering and construction, net-zero-as-service may open new revenue streams as customer demand for GHG emissions reduction heats up.


Insurers, as with all sectors, may need to enhance climate reporting to investor-grade climate reporting, which likely means upgrades to current processes and controls.

Of specific relevance to insurers is how to measure financed greenhouse gas emissions. Further challenges include differing approaches to measuring financed emissions and the fact that existing standards don’t cover all asset classes.

Global reporting requirements likely mean that any insurer that has set a net-zero target which includes its underwriting portfolio will need to report insurance-associated Scope 3 emissions. The Partnership for Carbon Accounting Financials has developed a standard methodology and carriers should keep abreast of developments.

Pharmaceutical and life sciences

Given the prevalence of climate action commitments in the pharmaceutical and life sciences sector, many companies will be subject to global reporting requirements of plans and progress for meeting those commitments, including for Scope 3 emissions.

Reporting Scope 3 emissions may prove to be the most challenging task for pharma companies that source from a complex, international network of suppliers. That will likely mean rethinking suppliers based on the size of their carbon footprints.

Providers also need to consider the physical risks posed by climate change to their infrastructure as well as their operations (for example, pharmaceutical production is a water-intensive process, greatly contributing to a company’s carbon footprint). The quantitative impacts of climate-related risks will soon need to be disclosed in financials, making scenario-based risk analysis an invaluable tool.

Private equity

The first step for portcos and funds is to determine the applicability of guidance (filing requirements, exit plans and strategies in the public market, etc.), and focus on those where applicable. 

Many portcos that are (or may be) subject to the global disclosure requirements are likely in the process of collecting data that would satisfy Scope 1 and 2 requirements. Fewer, though, are working on assessing their Scope 3 emissions requirements. They may find their banks and larger investors (who would be subject to the global requirements) requesting this data from them.

For many funds, Scope 3 is a relatively new concept as few have tried to calculate downstream emissions. Leaders in this space are coordinating their efforts across their portfolio companies by baselining Scope 1 and 2. We would expect the change in the disclosure rules to accelerate this process.

We encourage both funds and portcos to determine which data the company can consistently receive and from there conduct a diagnostic to target priority issues.

Technology, media and telecommunications

Given the prevalence of climate action commitments in the technology, media and telecommunications sector, many companies will be subject to global reporting requirements requiring disclosure of supporting plans and progress for meeting those commitments, including for Scope 3 emissions.

Telecommunications providers will need to consider physical risks posed by climate change to their infrastructure, especially those at risk for flooding, wildfires and hurricanes, and ensure these are managed with the same rigor as other enterprise risks. The quantitative impacts of climate-related risks will soon need to be disclosed, making scenario-based risk analysis an invaluable tool.

Many technology companies are leading the way in the transition to a low carbon future. From smart buildings to smart grids, the path to decarbonization is digital. However, the growing demand for cloud computing and cloud services also places a burden on tech companies to manage their data centers’ energy efficiency and power their operations with renewable energy.

Technology providers have a critical role to play in the climate transition, from carbon accounting solutions to enabling smarter supply chains, factories, cities and energy grids. The global requirements represent an opportunity for providers to double-down on developing these technologies to support ESG reporting requirements.

Six steps to transition to investor-grade, tech-enabled reporting

How can you prepare for the new ESG regulations?

Determine climate reporting strategy

What will you report? How does it relate to your company narrative? How will you resource it? 

  • Understand global reporting requirements for climate change disclosures
  • Begin preparing your climate strategy. Assess potential risks from climate change including physical climate risks, transition risks, and Scope 1 and 2 and potentially Scope 3 emissions
  • Understand what process and organizational changes can be made in order to help increase the speed, quality and reliability of climate reporting in order to include these metrics in your filings
  • Consider the resources needed to execute on your strategy 
  • Develop an operating model to sustain executive engagement and create accountability
  • Assess ongoing progress and solicit investor and stakeholder feedback

Choose standards and metrics

What’s the current guidance? How will you disclose?

  • Align on standard(s) and framework(s) to use in reporting and what that includes - e.g., TCFD recommends a broad analysis encompassing both physical and transition risks of climate change
  • Identify the climate measures that are most relevant for your organization
  • Link your strategy, metrics and stakeholder communications across multiple channels (e.g. 10-K, ESG report, Carbon Disclosure Project response)
  • Conduct a gap assessment on current disclosures and whether processes are global regulation-ready to identify focus areas

Collect the data

How will you collect the data? How will you optimize processes?

  • Start gathering data on what is in global reporting requirements.
  • Align data collection with stakeholder expectations and reporting standards
  • Consider enhancing the underlying data and process infrastructure for your climate data
  • Refine data collection templates, instructions and analysis
  • Collect data with robust controls and confirm it is complete, accurate and timely
  • Implement or use an existing certification process to confirm trust in the data

Address risk, controls and information governance

How will you handle risk assessments, controls and data quality? What information governance will you put in place?  

  • Consider the overall control environment, including, designing and implementing appropriate controls to to support timely and reliable reporting
  • Identify key controls for data quality and disclosure
  • Create and document program-level information governance standards
  • Set formal policies and procedures to enable consistency

Tech-enable and automate

How will you tech-enable reporting to streamline and get insights faster? How will you use a digital platform? 

  • Understand that accelerated ESG reporting timelines will require automation to improve process efficiency
  • Select tools and technology for non-financial data with the same rigor as for your financial reporting
  • Consider how to collect and report data using a trusted, controlled technology platform
  • Engage finance and finance technology in ESG reporting planning

Publish investor-grade reporting

How will you confirm your reporting can stand up to regulatory scrutiny? 

  • Make company narrative and metrics readily available for investors 
  • Integrate ESG reporting through the enterprise reporting system architecture and process
  • Consider/obtain independent third-party assurance to provide investors with additional confidence in the quality of climate information and enhance its credibility
  • Provide real-time reporting of public disclosures to help inform decision-making and consumer choices

Contact us

Kevin O’Connell

Kevin O’Connell

Trust Solutions Sustainability Leader, PwC US

Brigham McNaughton

Brigham McNaughton

Sustainability Partner, PwC US

Heather Horn

Heather Horn

National Professional Services Partner, PwC US

Follow us

Required fields are marked with an asterisk(*)

By submitting your email address, you acknowledge that you have read the Privacy Statement and that you consent to our processing data in accordance with the Privacy Statement (including international transfers). If you change your mind at any time about wishing to receive the information from us, you can send us an email message using the Contact Us page.