Best practices in building an ESG offering

January 31, 2023 9:00 AM

As with any new practice area — and while there are firms that have been focusing on sustainability and ESG for two decades, it's still very much a new area — the accounting firms that are pioneering ESG reporting services are feeling their way, and identifying best practices and success strategies as they go.

We asked some of the most experienced practitioners in the field to share their tips for firms that are looking to get into ESG.

(For more on the role of accountants in ESG, see "The ESG Opportunity.")

Get some certifications

"As they dive in, I would say start with getting somebody or a couple of people FSA-certified, and work your way through learning SASB standards, because that's what's predominantly going to be in the accounting world most at first," suggested Jennifer Cantero, director of the Sensiba Center for Sustainability at California CPA firm Sensiba San Filippo. "Also, get some of your folks in carbon accounting classes, so you can actually do carbon footprinting inhouse, because you're going to have to do it."

Be passionate about learning

"There are a million frameworks out there and a lot of different ways you could go to this, so it requires a lot of staying on top of things, going to trainings and attending conferences," explained Justin Neff, an assurance partner and leader of ESG assurance practice at Top 25 Firm Moss Adams. "I think having an interest in it is so important because of the amount of time that you spend just making sure that you're up to date on all the developments."

Stay humble

In the early days, accountants need to realize that they won't always know everything.

"A lot of folks get into client service and particularly accounting because we love to be the expert, right?" said Colleen Rozillis, a consulting partner and leader of the ESG consulting practice at Moss Adams. "And this is an area where you cannot be the expert. You may have been the expert yesterday and then something new comes out tomorrow. And you also have to very much be responsive to what your clients' organizations need or what might potentially be on the horizon."

"So the biggest place where I see folks fail — or trip up, might be a better word — is in wanting to know everything and be that expert and not having the humility to say, 'I don't know the answer. So let's figure it out together,' or, 'Let's find the right person to figure it out,'" she continued. "And while that might feel uncomfortable, it helps you to build trust with your client…. The most successful folks in our organization are absolutely those who are willing to take that step back and continue to learn."

Keep an eye on market needs

In addition to staying humble, the rapid changes and developments in ESG require accountants to keep their skills up to date in response.

"Any approach to enhancing skills, acquiring skills, or upskilling existing capabilities really needs to be grounded in the direction of travel in the market," said Kristen Sullivan, the global audit and assurance sustainability and climate services leader at Big Four firm Deloitte. "So looking to your capabilities in the audit and assurance business … [you need to] lean into and upskill around the expectations in the role that auditors will have to be delivering, and really being very focused on market developments and client needs."

The price isn’t right — yet

"Don't freak out when you hit the market and the market isn't ready to bear the price," warned Cantero. "Right now, this is not a need-to-have, it's a nice-to-have service, until the mandatory regulations hit and then it's going to become more of a need-to-have, so the market isn't really ready for them. … When we hit mandatory regulation stage, that's when the market is really going to take off and that's where you're going to be able to come in and charge accounting-level fees."

"That's where we had the biggest challenge in the beginning," Cantero continued. "We'd go to our clients with our hourly consulting fee, and they would say, 'I'm not paying that for this,' and then later they would come back to us and say, 'OK, now we see the value.' It's a lot of talking about the value of this work and making sure that your client and the market are ready for your services, because we're very much ahead of the curve right now."

Accept the gray

"As accountants, we're used to having very black and white rules," said Neff. "You know, there's one universally accepted framework that we're following, and it can be a challenge to shift from that mindset of, 'This is a very black and white area.' You have to be able to think creatively, and understand that there is some flexibility in some of these areas, and just understanding the different frameworks and criteria, and knowing that it's not so black and white. If you can get past that, you can be very successful."

Recognize your own skills …

"The biggest thing that I always say is you have a lot of skills to offer that are really important to bring to the conversation around ESG reporting," said Maura Hodge, the ESG audit leader at Big Four firm KPMG. "There certainly is education that needs to happen … upskilling of yourself is critical, but I think this is squarely moving into the realm of accountants. … Even if you're not dealing with things like greenhouse gas emissions, understanding how climate risk impacts the business, and how it impacts your financial statements in each line item on the financial statements is going to be critical."

… but be ready to look for others

"This is definitely one of the consulting areas where you're going to be hiring a lot of non-CPAs," said Cantero. "We have on staff a marine biogeochemist to help us with our soil samples and carbon footprinting. That's not something I would ever have thought to have had at an accounting firm — a marine biogeochemist. We have quite a few people with MBAs in environmental science, and we've got a couple of accountants who are SASB-savvy and certified."

Many of the Big Four firms that have been in the field for a while noted that they had built up stables of engineers, analysts, environmental experts and more to bolster and support their core skills in reporting and auditing.

Stay flexible

"I think the most important thing about being in client service is being flexible, so while I don't necessarily see a huge change on the horizon, everything changes all the time, right?" said Rozillis. "Our clients' organizations change, the external factors change. government regulations change, what our priorities are and how we respond to the economy change — so we have to be able to do that. If we're not flexible, then we're going to get left in the dust. So we're open to anything."