Deloitte: Are companies reporting enough on ESG finances?

Across the globe, reporting on environmental, social and governance (ESG) matters is fast becoming commonplace. 

And with that, from the perspective of regulatory compliance, there is a growing need for companies’ financial functions to efficiently report their ESG financials. 

Evidently, the conversation around this has been growing in the US in recent months as the SEC prepares to introduce new climate disclosure reporting requirements.  

But, according to a recent poll from Deloitte, less than half (45.7%) of professionals say they are confident in the ability of their organisations’ financial reporting teams to effectively report their ESG financial metrics.

Dina Trainor, Managing Director at Deloitte’s Risk and Financial Advisory function, has called the findings “concerning”.

Trainor, who specialises in helping businesses implement new accounting and regulatory reporting regulations, adds: “Now is the time to take a close look at your organisation's current ESG reporting capabilities and protocols, and undertake improvements if needed.

“The good news is that there are clear actions organisations can pursue that have a strong correlation to building trust in ESG reporting.”

ESG controller role may build confidence

A small minority of professionals (16.4%) report that their organisation has an ESG controller, an individual focused on the financial reporting and controls aspects of reporting on environmental, social and governance.

However, Deloitte’s data suggests there is a clear benefit to having an ESG controller. Professionals from companies that have an ESG controller report far higher confidence in their ESG financial reporting (75.5%) than those whose companies do not have an equivalent employee (45.3%).

When the poll was conducted, more than two-fifths of respondents said their organisations had no plans to hire a dedicated controller, while 7.2% intended to hire one in the year ahead. 

“Naming a leader, such as an ESG controller, to spearhead ESG finance and accounting efforts is one of several ways to raise confidence and trust levels in related reporting, no matter organisational scale,” says Matt Hurley, a Deloitte Risk and Financial Advisory partner.

“Organisations of any size, geographic footprint and complexity can take advantage of such roles – whether temporary or more permanent – to establish, hone and maintain ESG reporting programmes. Ensuring finance or accounting leaders are involved in ESG matters is similarly important.

ESG data collection remains a top concern

Data collection in support of ESG efforts remains a big challenge and was reported by more than a quarter (26.3%) of Deloitte’s respondents. 

But interestingly, professionals from organisations with an ESG controller were more likely to report data collection as their company’s top challenge (39.6%).

Hurley adds: “The basics of ESG reporting are universally challenging. Surprisingly, those that have ESG controllers in place report data collection challenges at a higher rate, possibly because that individual is more in tune with the unique challenges that ESG data aggregation and controls can pose.

“It's important that organisations focus on building the foundation – including sourcing, cleaning and assuring data – to support successful, confident reporting on the back end.”