Accountants face challenges with ESG reporting

Financial professionals are confronting some big obstacles when it comes to environmental, social and governance reporting, according to a new survey, including competing and sometimes conflicting disclosure frameworks, reporting methodologies and stakeholder demands.

The report, released Thursday by Financial Executives International’s Financial Education & Research Foundation, polled 53 chief accounting officers and controllers from some of the largest U.S. companies, and found that 53% of the respondents indicated they had not yet started to integrate ESG reporting with their financial reporting, while 43% said they had only just started to do so. Data is the biggest single challenge to ESG reporting, with questions related to collection, collation, analysis and control among the biggest ESG-related data questions. The plethora of competing standards and frameworks is also a big challenge, with 85% of companies using multiple ESG reporting frameworks. Finance professionals reported they had a hard time hearing through all the noise and providing relevant, concise ESG metrics in telling their organization’s ESG story.

Standard-setters have come under pressure from investors and financial regulators to harmonize their often competing ESG standards and frameworks. The Sustainability Accounting Standards Board recently merged with the International Integrated Reporting Council to form the Value Reporting Foundation. They have pledged to work together with other groups such as the Global Reporting Initiative, the Carbon Disclosure Project, and the Climate Disclosure Standards Board to align their standards more closely. Meanwhile, the International Financial Reporting Standards Foundation, which oversees the International Accounting Standards Board, is planning to set up an International Sustainability Standards Board, with help from the existing ESG standard-setters as part of a working group (see story). Other accounting groups such as the International Federation of Accountants have been encouraging the creation of such a group and co-hosted a panel discussion on Monday with the Association of Chartered Certified Accountants in conjunction with Climate Week in New York, as the United Nations General Assembly met to discuss the urgency of the accelerating pace of climate change (see story).

.

The finance team’s involvement in ESG reporting is still in its early stages, but 53% of the FEI members surveyed said they participate in broad “reporting oversight” of ESG. “Our members always seek to take a mindful approach to all financial leadership initiatives,” said FEI and FERF president and CEO Andrej Suskavcevic in a statement. “Inarguably, they are hearing more calls for high quality levels of ESG integration into financial reporting. While there are still many questions surrounding exact guidance, our report is designed to help them understand what their peers are considering so they can incorporate this information into their own efforts. We see this report as a useful tool to help all financial professionals deliver high-quality financial reporting,”

In a separate survey released earlier this month by the consulting firm Protiviti, a 58% majority of the more than 475 CFOs and vice presidents of finance polled reported substantial increases organization-wide in the focus and frequency of reporting related to ESG issues, with 68% indicating that measuring and reporting on ESG risks and issues has become part of their finance team’s role within the last year, and 75% saying they are involved in conversations with senior leaders and boards to develop ESG metrics against which their organization should track progress.

“The groundswell of regulatory actions and stakeholder interest that have quickened in the past year have made it undeniably clear that ESG reporting is set to become another one of the finance department’s many responsibilities,” said Christopher Wright, a managing director and global leader of Protiviti’s Business Performance Improvement practice, in a statement. “ESG reporting presents an opportunity for companies to share what they’re doing to deliver sustainable value for their shareholders, while also addressing the interests of their customers, employees and communities.”