ESG reporting is not a one-and-done task. With many countries implementing more stringent regulations and investors increasingly demanding greater detail, organizations around the world are looking to tighten up their ESG reporting capabilities.
But ensuring your organisation has the expertise and ESG internal controls to deliver suitable data management can pose challenges for those new to ESG reporting. As a result, sustainability teams are growing, with one role in particular starting to emerge as a key position: the ESG Controller.
If you're wondering what the role involves and, more importantly, whether your business needs to start recruiting for one, let's take a closer look at the key responsibilities of this new team member.
what is an ESG Controller?
Despite being unheard of just a few years ago, the ESG Controller now holds a significant position in many companies, helping to manage ESG data, disclosures, and risk.
For those companies committed to robust ESG practices, employing an ESG Controller provides the data accuracy and reliability required by ESG legislation, plus the transparency demanded by today's ESG-minded investors. To achieve this, the role offers dedicated supervision of data collection, developing measurement systems and reporting processes that align with the evolving regulatory landscape.
Inevitably, this is a difficult task for larger companies, some of which are subject to more than one reporting framework. It demands both big picture planning to track shifting regulations and detailed knowledge of company operations to identify and resolve data gaps.
Overall, it signals that sustainability reporting is no longer a corporate citizenship exercise but instead is critical to business outcomes. For those with an existing team of sustainability professionals, it also provides evidence to support their initiatives and prove the success of their sustainability strategy, backing this with audit-ready data.
In some ways then, we can think of the ESG Controller as a CFO for ESG. Just as the Financial Controller provides analysis for strategic decisions and ensures compliance with financial reporting standards, an ESG Controller brings structure to the way that companies disclose their environmental, social and governance impacts and data.
According to research by Deloitte, concerns about accuracy and completeness of ESG data have now eclipsed data availability. More than a third of executives (35%) cite data quality as their greatest challenge while only 25% cite that access to ESG data remains the greatest problem, which is likely why the role of ESG Controller is now taking hold.
Ultimately, in a world where sustainability reporting has sometimes been seen as optional and potentially at risk of 'greenwashing', this new position ensures that ESG metrics receive the same rigor as financial data.
why does your business need an ESG Controller?
There are two main reasons why businesses might want to hire an ESG controller. The first is the increasing number of regional regulations that require companies to report on their environmental and social impacts. From the EU's Corporate Sustainability Directive (CSRD) to the new climate-related disclosure rules adopted by the Securities and Exchange Commission (SEC), organizations worldwide need to report accurately and transparently to a growing number of ESG standards.
Second, responsible business practices are a must to satisfy your stakeholders, including customers, employees and, crucially, investors. The ESG Controller is vital to collecting and verifying investor-grade data that demonstrates the value of your sustainability practices and the various ways in which they reduce risk. Improving data quality ensures investors are more likely to get on board, increasing your potential for profitability.
But how exactly will an ESG Controller transform your ESG practices and how will your business benefit?
improved reporting
With control over both internal and external ESG reporting, an ESG Controller is focused on data integrity and accuracy. They oversee the collection, verification, and analysis of ESG data, collating financial and non-financial information and collaborating with teams across the company. To this end, they'll need to partner effectively with teams in all areas (even outside the company), to improve sustainability reporting and prioritize reporting compliance.
As part of their role, the ESG Controller will develop and implement reporting systems that streamline data collection, analysis and reporting, including incorporating software to automate the processes involved. The efficiency gains offered by doing so can help your organisation do more with its data, creating opportunities not just to record emissions, for example, but to dig into your overall sustainability performance, identify trends, and take action to reduce waste or curb emissions.
enhanced compliance and risk management
Often, the greatest challenge around compliance is to define the scope of your ESG risks. Materiality assessments play a key role in identifying the most relevant ESG factors for your business and an ESG Controller can help, bringing deep knowledge on ESG issues in order to make sound judgments on reporting boundaries and definitions.
Because ESG reporting can be both data-intensive and judgment-based, an ESG Controller must work to develop ESG internal controls and reporting structures, ensuring that reporting focuses on the most important issues for your organization and stakeholders. By combining sustainability, legal, and financial expertise, an ESG Controller can set benchmarks and goals and provide investor-grade data, ensuring your reporting efforts align with both company strategy and legal requirements.
stronger internal ESG controls
An ESG controller strengthens internal ESG controls by implementing robust data collection and governance practices. In addition to defining processes for collecting, managing, and storing ESG data, they will also implement data validation checks and quality assurance processes to ensure the resulting data is audit-ready.
Where there are potential risks to ESG data and reporting, an ESG Controller will design and implement internal controls to mitigate them, such as ensuring data security or documenting methodologies for estimations. They can assess and manage control gaps and long-term, they will work to foster a culture of continuous improvement, reviewing, and updating procedures to align with evolving ESG requirements.
key responsibilities of an ESG Controller
If you decide to advertise for an ESG Controller, they may be the first person to hold that position in your organization. To some extent, they will set their own focus, but there are some key responsibilities they should fulfill.
- Monitor the ESG reporting landscape and understand compliance requirements.
- Conduct regular assessments to determine the materiality of ESG topics.
- Provide guidance to leadership to align sustainability strategy with business objectives.
- Determine which ESG metrics need to be tracked.
- Devise suitable procedures to collect and report data from across your organization.
- Establish internal controls to minimize risk and ensure audit readiness.
- Source necessary software to standardize work processes, procedures, and controls.
- Co-ordinate across different business functions to collate ESG data.
- Maintain relationships with external auditors to ensure ESG reporting transparency.
signs your business is ready for an ESG Controller
If yours is not one of the Fortune 500 companies that already employ an ESG Controller to oversee sustainability reporting, perhaps you're wondering whether now is the time to appoint one. Well, if your CFO is regularly fielding questions about who is responsible for sustainability reporting and where the data is coming from, then the answer is probably yes. In fact, companies of all sizes can benefit from establishing an ESG Controller role and there are several signs that your business might be ready for one.
If, for example, your organization is relatively new to ESG reporting and you are yet to establish an effective and audit-ready ESG program, then working with an ESG Controller could help you to understand, manage, and report on ESG risks.
This is particularly pertinent for those companies subject to new or extended compliance requirements, or those who see increased reporting on the horizon such as those with EU ties who will be impacted by the CSRD.
And while no-one knows exactly what the future of ESG legislation will bring, attracting investment will always be key. Here, an ESG Controller can play a crucial role in delivering high-quality, investor-grade data able to withstand external scrutiny.
By combining financial acumen with sustainability expertise, an ESG Controller can play a key role in integrating sustainability into your organization's financial planning and decision-making processes, ultimately decreasing risk, reducing the cost of capital and improving your company's bottom line.
Finally, if your organization is looking to transition from short-term focus to long-term strategy, then beginning your search for an ESG Controller is a good place to start. Robust ESG reporting is essential to push sustainability strategy beyond regulatory compliance towards value creation. Without it, it's hard to assess future risks and opportunities - which places the ESG Controller centre-stage for forward-thinking companies.
AMCS delivers data integrity
Sustainability reporting is evolving rapidly, however, scrutiny of companies' environmental and social impacts is only set to increase.
As the role of ESG Controller gains traction, AMCS stands ready to support your company with technology solutions purpose-built to deliver data integrity. Our ESG management software helps you capture operational and supplier data in a central, cloud-based platform, delivering audit-ready ESG data to simplify reporting and provide actionable insights to guide your strategy and engage stakeholders.
Find out how AMCS can help your organization (and your ESG Controller) to oversee your sustainability journey by contacting one of our experts today.