This article is based on a presentation at IBA’s Fall 2022 Forum on Accounting and Finance Analytics: Perspectives on ESG Reporting by Makayla Bonney and Mary Rolfsen, who are both Sustainability Managers for Deloitte Consulting.
Environmental, social, and governance (ESG) reporting is becoming an important aspect of corporate reporting as a result of increasing stakeholder demand for transparency around ESG matters and pending regulations which could require companies to integrate ESG data into their financial statements. This has opened up potential opportunities for individuals with experience in analytics and accounting to develop their careers in ESG reporting. Deloitte, one of the top professional services firms globally, has taken a leading role in the field of ESG accounting.
Climate change is considered by many to be one of the most significant issues facing this generation. Some experts have even commented the impact of climate change on human health will dwarf that of COVID-19. The Indiana Climate Change Impacts Assessment, led by faculty from Indiana University, Notre Dame, Purdue, and other institutions, examines climate change as it relates to agriculture, tourism, health, and other local issues.
In the United States, the Securities and Exchange Commission (SEC) has proposed a climate-related disclosure that would require publicly listed companies to provide investors with more transparent and decision-useful information. Specifically, the SEC’s proposal involves disclosing the following: 1) GHG emissions, both direct and indirect; 2) climate-related financial statement impacts; 3) climate-related risks and opportunities; 4) management, governance, and oversight of these risks; and 5) company climate-related targets and goals. These proposed regulations would also require companies to enhance their data processes and controls around the corresponding metrics for reporting purposes.
Companies beginning their journey into ESG reporting typically undergo a materiality assessment to determine which elements of ESG reporting are most important to their business practices and stakeholders. They then assign governance to each of the material topics to help define data processes and controls. Finally, many corporations have defined KPIs and set goals, many of which may include becoming net-zero in the future. Customers and investors are pressuring organizations to be transparent with information related to various ESG factors.
Emerging ESG disclosure regulations, such as that by the SEC, are leading to companies to seek guidance on how to integrate ESG data into their financial statements. She added that companies that prioritize ESG reporting can position themselves to succeed in the future, as they are better able to manage potential risks and take advantage of potential opportunities.
The importance of ESG reporting and noted that it is becoming a top priority for companies globally.
In conclusion, the importance of ESG reporting is rapidly increasing, with companies and investors alike recognizing the significance of ESG data in decision-making. Deloitte is at the forefront of this field, helping companies integrate ESG data into their financial statements and stay ahead of the curve in ESG reporting. As ESG reporting becomes more prevalent, companies that prioritize ESG reporting will likely be better able to manage potential risks and take advantage of potential opportunities, positioning themselves for success in the future.
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