What does this mean?
The proposed disclosures are broadly aligned with frameworks such as the Task Force on Climate-Related Financial Disclosures (TCFD). All public companies must now quickly transition to investor-grade reporting. That means accelerating climate change reporting processes while transitioning to an effective controls environment. All businesses are at different points in their ESG journey, but here are five things every company should consider:
- Assemble a cross-functional team to create accountability for ESG performance: The finance function has the experience to oversee accounting, controls and reliability of ESG information while sustainability teams have the deep subject matter experience and context. Companies should address any knowledge gaps through upskilling or hiring to make sure they have the right team in place.
- Make sure you have the data that regulators will expect. It’s critical to clearly define ESG metrics, their scope and boundaries, what systems the information comes from and who the owners are inside the company. To do so, companies should gather baseline data to compare current performance against future goals and milestones.
- Set an overarching strategic approach to ESG. This is not an exercise merely to tick a regulatory box, but to create sustainable advantage and value. Companies should connect ESG strategies, milestones and reporting to the overall business strategy.
- Upskill corporate directors: Boards—especially audit committee members—need to better understand how ESG fits into the overall business strategy to appropriately manage governance oversight responsibilities.
- Prepare for independent assurance: The SEC proposed independent, third-party assurance for Scope 1 and Scope 2 emissions to bolster confidence in climate change information (for accelerated or large accelerated filers).
The time is now and our teams are here to help. Let’s move to action, together.