Insight

ESG reporting – a new opportunity for CAOs

How Chief Accounting Officers can lean into the challenge to enhance their strategic roles

Dean Bell

Dean Bell

Transaction Services Service Line Leader, KPMG US

+1 212-872-5527

Joseph Dineen

Joseph Dineen

Managing Director, Accounting Advisory Services, KPMG US

+1 313-230-3259

Sam Jeffery

Sam Jeffery

Partner, Accounting Advisory Services, KPMG US

+1 415-963-5183

Today, no corporate buzzword seems as ubiquitous as ESG—a catch-all term for a company’s environmental, social, and governance responsibilities. Investors, lenders, consumers and, increasingly, regulators expect companies to produce detailed ESG reports on how they are addressing these hot topics of growing public interest. And as “gatekeepers” of corporate reporting, the chief accounting officer will have a critical role to play in supporting their company’s ESG initiatives.

Indeed, stepping up to the task is another opportunity for CAOs to demonstrate their credibility in business partnering within their organizations. In “The role of finance in environmental, social, and governance reporting,” a new KPMG IMPACT report, we show how CAOs are ideally positioned to help companies carry out ESG measurement and reporting efficiently and weave ESG into strategy and operations.

As the fiduciary leader in the organization, CAOs have the experience compiling and reporting on metrics to stakeholders. And they can present these non-financial metrics in a manner that carries the same weight as financial results. Common ESG metrics include: air quality, such as greenhouse gas emissions; water management, such as total water withdrawn from sources and consumed; and environmental footprint, such as total energy consumed and percentage of renewable energy use.

With visibility into data and a seat at the table for ESG internal controls and processes, CAOs can help drive the ESG agenda with critical insights, metrics on performance, and lead the way in reporting the progress of their organization’s sustainability initiatives. Further, the CAO will play a critical role in transactions with ESG implications, whether assessing target metrics in M&A diligence, supporting metrics for green bond funding, or messaging in IPOs.

The report suggests some key areas in which Finance can help drive an organization’s ESG agenda:

  • Corporate strategy: Incorporating ESG into strategy and value management involves establishing sustainability guiding principles that will steer investment decisions to create value; prioritizing strategic initiatives by incorporating ESG drivers into business cases and quantifying sustainability impacts; and driving ownership, accountability, and organizational influence across the business.
  • Investments: Companies that can demonstrate a commitment to ESG are in a better position to secure capital investments. For example, Goldman Sachs has said it will deploy $750 billion across investing, financing and advisory activities by 2030 “to help our clients accelerate climate transition and advance inclusive growth."1
  • Risk: Since risk management often falls under finance’s oversight, CAOs should understand the financial and non-financial risks around ESG issues but also be aware of the opportunities that come with recognizing and managing ESG risks successfully. ESG should be a part of an organization’s overall enterprise risk management (ERM) strategy, so ESG risk can be monitored, mitigated, and addressed.

CAOs are well aware that other C-suite executives expect them to partner with business functional leaders, leveraging finance for strategic decision making. At KPMG, we are closely following the efforts of CAOs to transform their roles in response to these expectations (see our CAO of the Future reports). With the heightened emphasis on ESG, CAOs have another opportunity to elevate their standing as an effective business partner.

To learn more, please download and read our full report, The role of Finance in environmental, social and governance reporting.

Footnotes

  1. Source: Goldman Sachs to spend $750 billion on climate transition projects and curb fossil fuel lending, CNBC.com, December 16, 2019


Contributing authors

Joseph Dineen

Joseph Dineen

Managing Director, Accounting Advisory Services, KPMG US

Sam Jeffery

Sam Jeffery

Partner, Accounting Advisory Services, KPMG US