Who should own ESG reporting and disclosure: The case for controllership

By Robert Kerr, Audit & Assurance Partner, Accounting and Reporting Advisory, Deloitte & Touche LLP 

Talking points

• With evolving environmental, social, and governance (ESG) disclosure frameworks, there is a compelling argument for controllers to own ESG compliance.
• Companies should design talent structures to address evolving ESG reporting.
• Our professionals can provide guidance on implementing the process.

These are exciting times for those of us who’ve worked on ESG initiatives for many years. Not only are ESG disclosure frameworks evolving and accelerating, but many organizations—from large multinationals to emerging growth companies—seem to be actively engaged in addressing them. The increasing commitment to ESG across industries signals positive strides toward environmental progress.

Evolving progress and complexity

As the European Union’s Corporate Sustainability Reporting Directive (CSRD), the SEC Climate Rule, and other demanding ESG frameworks take hold, the changes they bring have implications for your people, processes, internal controls, and technology. Helping to determine that all these resources work together efficiently requires a centralized oversight function. Without this, confusion and inefficiency can take over, impede progress, and prove costly.  

Who's in charge?

The recent activities in ESG regulations, requiring extensive reporting to government entities and regulators, have led to the evolution of a unique role. This role requires a combination of controllership capabilities and sustainability experience and knowledge that previously hasn’t been required to date. This brings us to an ESG controllership’s role. The ESG controllership responsibilities include overseeing financial activities including disclosures, determining compliance, and providing accurate reporting.

A logical role for controllership

Because many of these activities are accounting and controls-driven, there is a strong case to be made for controllership to be the accountable function. Consider just a few of today’s ESG management and disclosure requirements: credits and incentives management, greenhouse gas emissions monitoring, and the development of internal controls. These areas are often managed by or coordinated with the controllership organization.

Managing the complexity

CSRD alone includes 82 disclosure requirements, both quantitative and qualitative, representing more than 1,000 different data points. This information should be timely orchestrated with appropriate policies, often from a wide variety of systems in different locations.

The complexity of these tasks can be reduced by strategically approaching preparations across four key dimensions: multi-jurisdictional reporting requirements, technical accounting, data collection, and business insights. The controllership role likely has the experience in managing these complexities across systems and departments and would be able to strategically plan and execute on ESG reporting initiatives.

Controllership and corporate sustainability collaboration 

Implementing a controllership model may be strategic, but it may create tensions for companies with an established corporate sustainability function. After all, the sustainability function may have managed many manners of ESG reporting before there were regulatory requirements—while the CFO and controller have likely provided other types of ESG information in a regulated context. Regulations are creating the opportunity for the ESG controller and sustainability functions to team together to advise both the company’s mission and the regulatory reporting.