In 75% of organizations, the finance team has taken on ESG risks and issues as part of its role. With their unique blend of financial management fundamentals, risk intelligence and access to forward-looking, data-driven insights, CFOs continue to extend their value to organizations beyond the boundaries of traditional finance and accounting activities.

Given their experience in complying with various human capital disclosure requirements, CFOs should take a prominent role in tracking, reporting and improving performance against their company’s ESG goals.

Providing a strong foundation for ESG initiatives

Today, nearly every strategy and planning session among board members and C-suite leaders addresses ESG. Yet many companies – 34% of publicly held organizations and 22% of privately held organizations, according to our research – feel they are not ready for potential new required ESG disclosures and need additional resources, necessary internal data and more time. Finance leaders' strong foundational knowledge in financial reporting and data management positions them well to lead ESG-related reporting requirements and help their organizations with challenges like:

• Selecting the best option from the multitude of available frameworks for ESG reporting needs.
• Collecting new ESG data while fine-tuning the data collection process.
• Utilizing existing historical data.
• Helping producers of climate data and other ESG measures embrace rigorous controls.

Nine key ESG actions to take

When implementing formal ESG strategies in accordance with best practices, financial leaders can take the following actions:

1. Make a plan. Consider where the organization is, where it wants to be and what initiatives or actions are needed to bridge the gap.
2. Be flexible. ESG operating and reporting rules and regulations are in flux, as are stakeholder demands, leading to likely shifts in needs. Ongoing programs and lean managing can help organizations stay flexible to respond to changing demands.
3. Know the landscape. Understand ESG ratings, rankings and metrics so you can choose knowledgeably which framework and/or methodology the organization should follow.
4. Prepare to be audited. Establish management controls and ensure the organization’s relevant ESG data is of high quality and is as reliable as the financial data that auditors are accustomed to reviewing. Engaging internal audit or working with independent auditors can be especially helpful to ensure data and reporting are accurate.
5. Designate your ESG data resources. Identify who (inside or outside the company) will be able to access and provide the necessary ESG data, some of which involves complicated calculations and the use of data from sources that are not familiar to the CFO, FP&A group and other financial reporting teams that will be responsible for the filings.
6. Anticipate scrutiny. Expect all stakeholders – regulators, shareholders, investors, customers and employees – to intensify their reviews of corporate ESG reporting. The organization’s reporting should tell the company’s story clearly and be supported by data and metrics. But, be diligent about avoiding greenwashing. Ensure that the organization’s efforts are truly targeted toward sustainability – not just words or activities intended to make the company look good.
7. Engage a broad group of stakeholders. Involve the audit committee, internal audit and SEC counsel in the climate reporting conversation during the planning phases so that resources and priorities are aligned. Make sure ESG planning, strategy and reporting takes a multidisciplinary approach in your organization. Ensure all the right people are at the table, including internal audit, finance, other functional leaders and the board, enabling the organization to adopt a holistic approach to its ESG reporting.
8. Assess gaps. Evaluate the company’s existing ESG reporting capability and skills against ESG objectives and identify where the partners in your professional services ecosystem can be complementary and fill in the gaps. Consider the talent and bandwidth of your internal teams and whether it will be necessary to look at other resources.
9. Don’t forget the big picture. ESG is not just about data and what you are reporting to the outside world – it’s about building an inclusive internal culture. Make ESG a critical part of your organization’s mission, purpose and strategy and link your ESG initiatives with financial performance and KPIs. A strong ESG program will keep employees engaged, informed and help the organization attract new talent while reducing attrition.

Interested in learning more? Read our research report, Reimagine: From automation and cloud to ESG and talent management, CFOs are reimagining their long-term roles, available at https://www.protiviti.com/us-en/survey/2022-global-finance-trends-survey.