News analysis
Who is responsible for ESG reporting? Decide now
Who is responsible for ESG reporting? There’s a broad spectrum of responses to these questions right now. Some companies might have it all ironed out; others might not know or care who will take the lead.
But be warned, the hands-off approach might not work for many firms in the near future. This is the decade of increasing responsibilities for ESG. The topic is morphing from an optional extra to a core strategic element mandated by countless laws calling for detailed goals and reports.
Have you decided who in your company will manage all this? If not, the time is now because we’re at a critical juncture.
Why is ESG reporting important?
ESG and its sustainability principles continue to receive considerable pushback and debate. Nations like the US have openly hostile political camps, while recent data shows that the scale of investment in ESG-related products is slumping.
In an atmosphere like this, why would it be so necessary to decide who will lead the movement of compliance with the latest ESG standards?
The answer lies with lawmakers, specifically those in Europe, who have so far been largely immune to the fury debate that seems to engulf ESG elsewhere.
The European Parliament recently passed the Corporate Sustainability Reporting Directive (CSRD), which will radically overhaul the ESG reporting system on the continent and broaden the scope of companies that need to report under it and the information they need to provide.
The thing with CSRD is that it’s not just a European issue; it also applies to supply chains and non-EU companies which meet certain revenue thresholds from their activities inside the bloc. In other words, because the EU is such a globally influential economy, the effects of CSRD will be felt long beyond its borders.
So, like it or not, your company may have to comply in one way or another.
Also
While we continue to see news stories covering drops in ESG investment levels, don’t forget that it’s still a multi-trillion-dollar sector. ESG principles continue to feed the decisions of many investors, and that is not likely to halt completely any time soon.
So, what does my company need to do?
Decide now: who will be responsible for ESG reporting in your organisation?
This person will lead the charge in identifying compliance areas needing attention, collecting data, processing data, reporting, and updating it yearly. It’s a big job in any large, CSRD-compliant company. It needs cohesion between many teams and support from every leadership level, from individual managers to the board of directors.
The board itself also needs to decide what expertise it needs to oversee this properly, ask the right questions, and form committees if necessary.
Is this a new position?
It may be yes, but your board and executives should determine the details based on your company’s needs.
Forbes recently reported that CFOs – with their internal controls and financial statement portfolios – have naturally and necessarily taken the lead role in sustainability reporting. However, the same article suggested that CFOs should consider creating an “ESG controller” position.
This role would zoom in on sustainability, addressing core requirements like sourcing relevant and thorough data and ensuring that it’s presented in a way that makes sense in the context of new rules like CSRD.
Many companies have already taken this route. Many others have neglected it for reasons including short-term prioritising or simply feeling that ESG reporting isn’t a company concern. Such strategies might have worked up until now, but in a decade of increasing responsibilities, boards and executives should question whether they will work in the future.
What’s the risk of not making a call on ESG reporting?
The risk is around your company’s resilience. Not making a call might work fine in the short-term and please investors only concerned about immediate return. But if there’s one thing the last twenty years in business have taught us, it’s that relying exclusively on short-term thinking can land your firm in long-term trouble.
The last thing you want is for your company to enter an era of detailed and structured ESG reporting hierarchies and realise it doesn’t have any of this in place.
This kind of information will spook investors, demotivate employees, and potentially create too great a crisis for executives and boards to handle.
What are the benefits of making a call now?
Internally, you will have put a structure in place to deal with significant responsibilities coming down the tracks. When regulators knock at your door, expecting expanded data, you know who will answer, and they will be supported.
Externally, your preparedness will foster confidence among regulators and investors—the people whose influence can decide your business’s reputational future. Rules like CSRD mean that companies have less room to hide from oversight, which can sometimes cause backlash and negativity. But if you switch the narrative in your mind and play the game, it can easily be the right decision in hindsight.
Who is responsible for ESG reporting
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