The ESG Controller’s Emerging Role

In the wake of the SEC's recent finalization of climate disclosure rules on March 6 and the proliferation of ESG
regulations globally, the demand for accurate, audit-ready ESG data has never been more pressing. Join us for a
comprehensive webinar where we'll explore the emerging responsibilities of ESG controllers and the challenges they
face in ensuring compliance and transparency amidst evolving regulatory landscapes.
We'll provide insights into the intricacies of this evolving role, shedding light on the regulations driving the need for
precise ESG data and the implications for organizations worldwide. We'll delve into the role of internal controls in
improving data quality and preparing companies for assurance processes, equipping attendees with practical
strategies to enhance compliance and mitigate risks.
The webinar will also examine the collaborative dynamics between internal audit, finance, risk, and sustainability
teams, emphasizing the importance of cohesive teamwork in navigating the complexities of ESG reporting.
Attendees will gain a deeper understanding of team structures where an ESG controller serves as an individual role
or shares responsibilities within a committee, along with the common background and expertise ideal for this
pivotal role.
LEARNING OBJECTIVES:
By attending this session, you will learn:
● The regulatory drivers necessitating accurate, audit-ready ESG data
● Strategies for implementing effective internal controls to enhance data quality and compliance
● The collaborative dynamics between internal audit, finance, risk, and sustainability teams in ESG reporting
● Insights into team structures and ideal backgrounds for ESG controllers, whether as individuals or part of a
committee
 The ESG Controller’s Emerging Role

The ESG Controller’s

Emerging Role
 SEC: Final Climate-Related Disclosure Rule

Controls & Governance

Agenda
The ESG Controller
The ESG Controller’s Emerging Role

Keys to Success

Q&A
The ESG Landscape

Evolving New Requirements ESG Emerging as

Stakeholder for Audit-Ready a Key Part of Risk
Expectations ESG Reporting Management

57% of executives report that data

83% of consumers Regarding top strategic business
availability (access) and data
think companies should priorities for this year, boards report
quality (accuracy or
be actively shaping a 100% increase in prioritizing for
completeness) remain their
ESG best practices. “ESG, Health, and Sustainability”
greatest challenges with respect
to ESG data.

Source: PWC, Beyond compliance: Consumers and employees want business to do more on ESG: How
business can close the expectations gap,
SEC: Final
Climate-Related
Disclosure Rule
“The rules will provide investors with consistent,
comparable, and decision-useful information, and
issuers with clear reporting requirements.”

Gary Gensler
SEC Chair
The Enhancement and Standardization of
Climate-Related Disclosures for Investors
APPLIES TO
Public companies (and in public offerings)

REPORTING
Regulation S-K climate-related disclosures
Regulation S-X financial statement footnote disclosures

DATES FOR COMPLIANCE

Earliest reporting required pertains only to large accelerated filers
(LAFs) for fiscal years beginning (FYB) in calendar year 2025
What’s Required?
Climate-Related Risks

Risk Management

Governance & Oversight

Financial Disclosures

Goals & Targets

GHG Emissions +Assurance

Source: SEC Fact Sheet, The Enhancement and Standardization of Climate-Related Disclosures: Final Rules.
Poll Question #1

How prepared is your organization to comply

with the new SEC climate disclosure rules?
a. We don't think they will apply to us

b. We are not prepared at all to comply with the new rules

c. We are working on compliance with the new rules and hope to be ready when
they take effect

d. We already have a program in place and will have no problem complying

with the new rules
 Which of the following laws/regulations do you comply with
(or will comply with when enacted)?
Source: AuditBoard; 2023 ESG Maturity Benchmarking Report
Controls & Governance
“Sustainability and ESG reporting now seem to have
become a permanent expansion of corporate
reporting all over the world to better meet the needs
of multiple stakeholders in understanding the
sources of enterprise value.”

ACHIEVING EFFECTIVE INTERNAL CONTROL OVER SUSTAINABILITY REPORTING (ICSR):

Building Trust and Confidence through the COSO Internal Control—Integrated Framework
 98%
of the S&P 500 issued sustainability reports in 2022.
Internal Control Over Sustainability Reporting (ICSR):
Expansion of Audit Committee examples
● Revising charters to include oversight of external reporting of sustainability information.
● Revising charters to include oversight of disclosures regarding the effectiveness of the organization’s system of ICSR.
● Conducting educational sessions on recent developments regarding sustainable business.
● Overseeing the internal audit function and review of sustainable business information.
● Developing processes to operationalize oversight of external reporting, such as determining:
○ The frameworks, standards, and guidelines to follow for external ESG reporting.
○ The means for delivering ESG information externally.
○ A proposed timeline for review and delivery of ESG reports.
○ The person(s) who will be responsible for the process.
○ Processes that will be utilized to review disclosure prior to release.
● Evaluating the effectiveness of the reporting process as designed.
● Reviewing external ESG reports before issuance.
● Determining the extent to which ESG information is subject to independent assurance or verification.
● Determining the appropriate outside firm to perform independent assurance or verification.
 How large is the team responsible for ESG?
Which team or group is responsible for ESG at your organization?
Source: AuditBoard; 2023 ESG Maturity Benchmarking Report
 Do you perform internal ESG audits?
Source: AuditBoard; 2023 ESG Maturity Benchmarking Report
 Do you collect evidence to support your data metrics?
Source: AuditBoard; 2023 ESG Maturity Benchmarking Report
 Do you have third-party assurance for any of your ESG data?
Source: AuditBoard; 2023 ESG Maturity Benchmarking Report
Poll Question #2

How mature would you say your organization's

ESG program is?
a. We have not started an ESG program of any kind

b. We are just getting started on building an ESG program

c. We have a moderately robust ESG program

d. We have a very robust ESG program

 Have you implemented any controls for ESG?
Source: AuditBoard; 2023 ESG Maturity Benchmarking Report
 If applicable, who is testing controls for ESG?
Source: AuditBoard; 2023 ESG Maturity Benchmarking Report
The ESG Controller
“The sustainability controller is a job title that is
increasingly being requested and filled. A
greenhouse gas account is a specific skill set, and
that’s not a financial accountant. That’s somebody
who knows how to account for greenhouse gasses…”

Christopher Wright
Global Leader, Business Performance Improvement
Protiviti
 What is an ESG
Controller?

Oversee sustainable business

information processes, manage
sustainable business activities, and
produce external ESG reporting

Source: COSO; ACHIEVING EFFECTIVE INTERNAL CONTROL OVER SUSTAINABILITY REPORTING (ICSR):
Building Trust and Confidence through the COSO Internal Control—Integrated Framework
ESG Controller Responsibilities
Lead the development of implementation and readiness plans for various global ESG reporting-related
initiatives, such as the CSRD, SEC, state, and other global requirements

Maintain strong relationships with internal and external auditors to coordinate their roles in the review,
oversight, and assurance to certain aspects of ESG reporting

Ensure reliable data and supporting work processes, policies, etc.

Manages annual materiality assessments

Present information to the Executive Leadership Team, and the Board of Directors, as appropriate, around
all ESG items

Co-own and lead the Company’s ESG data and technology strategy, in collaboration with IT
ESG Controller Qualifications
● Minimum of 10 years of progressive accounting/finance AND ESG experience.
● Experience with, and knowledge of, U.S. GAAP and SEC reporting, corporate governance, internal
controls, and other statutory requirements, including Sarbanes-Oxley compliance
● Strong grasp of the ESG regulatory and data landscape
● Knowledgeable in ESG-related disclosures and industry trends
● Familiarity with key sustainability frameworks and disclosures, including CSRD, TCFD, SASB, CDP, GRI,
and the UN Sustainable Development Goals
● Experience with sustainability software implementations and solutions preferred
● Experience with multinational, public companies preferred
● Experience working with cross-functional teams and engaging with diverse stakeholders
● Chemicals/Manufacturing industry experience a plus (and other industry-specific preferences)
Poll Question #3

How involved is Internal Audit in verifying your

organization's ESG data?
a. Not involved at all

b. Somewhat involved

c. Moderately involved

d. Very involved
 Which team is responsible for ESG data verification?
Source: AuditBoard; 2023 ESG Maturity Benchmarking Report
Team Collaboration
for Success
“The greater integration of climate and financial
information and their supporting processes and
systems under the stewardship of finance teams and
accountants should lead to better reporting in the
years to come.”

Kevin Dancey
CEO, International Federation of Accountants
Climate-Related Risks
Climate-related risks and their actual or likely material impacts on the registrant’s
business strategy, results of operations, financial condition, business model, and outlook.

Recommendations
● Determine where relevant climate-related risk and financial data reside within the
organization.
● Conduct a climate-focused SWOT analysis to assess potential impacts and
vulnerabilities.
● Align business objectives with established climate resilience and sustainability targets.
● Incorporate identified climate-related risks into existing financial models, focusing on
potential short-, medium-, and long-term impacts.
● AND MORE…
Risk Management
The registrant’s governance of climate-related risks and relevant risk management
processes, as well as whether and how those processes are integrated into the
registrant’s overall risk management system or processes.

Recommendations
● Perform comprehensive climate-related risk assessments.
● Integrate climate-related risks into broader risk management programs and
enterprise risk assessments.
● Develop actionable Mitigation Plans with specific ownership, timelines, and
completion criteria.
● Develop climate-related and other ESG-specific key risk indicators that align with
financial KRIs.
● AND MORE…
Governance & Oversight
Oversight by the board of directors of climate-related risks and any role by
management in assessing and managing the registrant’s material climate-related
risks

Recommendations
● Establish or refine board-level ESG committees.
● Review current governance structures to integrate climate-related risk.
● Form a cross-functional committee to oversee ESG integration. Include finance,
compliance, risk management, and sustainability.
● Assign ESG champions, designating individuals in each department responsible for
ESG data collection/reporting.
● Develop an ESG strategy that aligns with the organization’s financial objectives and
meets key stakeholder expectations.
Financial Disclosures
The capitalized costs, expenditures expensed, or losses related to carbon offsets and
renewable energy credits or certificates (RECs) if material to achieving climate-related
targets and goals.

Recommendations
● Ensure finance and accounting collaborate to document and assess the climate
impact of a complete population of all estimates and relevant expenses.
● Implement enabling technology to adequately document all risk events or climate
events to ensure appropriate documentation is easily accessible throughout the year.
● Engage an external auditor to provide independent third-party limited and/or
reasonable assurance.
● AND MORE…
Goals and Targets
Certain disclosures about such target or goal, including material
expenditures and material impacts on financial estimates

Recommendations
● Leverage Board of Directors, peer working groups, and key stakeholder feedback to
identify relevant and appropriate targets.
● Invest in an ESG program management solution to give you a single system of record
to manage all of your material ESG metrics and targets, including tracking progress
towards those targets.
● Identify which targets should be public vs. internal, and build reporting timelines to
provide regular updates on progress.
● AND MORE…
GHG Emissions
Scope 1 and Scope 2 GHG emissions metrics (if deemed material)

Recommendations
● Implement robust data collection, analysis, and verification procedures, integrating
with existing systems if possible. To simplify analysis and reporting, ensure collected
data adheres to a standardized format. Consider implementing technology that
centralizes financial and ESG data.
● Align with reporting frameworks (e.g., TCFD, SASB, GRI, CDP) appropriate for Scope 1
and Scope 2 reporting.
● Create climate-related risk disclosure report templates that align with financial
reporting structures.
● AND MORE…
GHG Emissions - Assurance
Disclosed material Scope 1 and Scope 2 GHG emissions for LAFs and AFs will be subject to
mandatory limited assurance followed by mandatory reasonable assurance.

Recommendations
● Conduct a comprehensive emissions audit.
● Ensure audit readiness by having internal audit review financial, climate-related risk,
and ESG reporting, document findings, and offer recommendations for upgrading
processes/reporting. Make sure you have evidentiary support for all claims.
● Engage an external auditor to provide independent third-party limited and/or
reasonable assurance.
● AND MORE…
Poll Question #4

How well would you say various departments in

your org. collaborate on ESG issues?
a. Not very well: We have siloed programs

b. Somewhat well: We have some collaboration but not enough

c. Moderately well: We are finding some success collaborating on ESG

d. Very well: We have an integrated ESG program

1 2 3 4 5
Data Data Review Internal External
Disclosures
Collection And Certification Auditing Assurance

ESG Managers Multiple stakeholders As needed, internal As needed, external Financial reporting
gather specific data (e.g., data owners, audit performs auditors provide team incorporates
in alignment with managers, walkthroughs and assurance regarding certified data into
SEC requirements department heads, controls testing. the accuracy of Form 10-K and other
(e.g., materiality to ESG managers) Process Scope 1 and 2 financial reports as
business, strategy, review data for documentation may emissions reporting required.
and outlook; GHG accuracy and be required. and internal controls
emissions data). completeness. over climate
Controls testing is disclosures.
Upon approval, only necessary if
metrics are marked there is a risk of
“Certified.” material
misstatement.

Cross-Functional Engagement and Coordination

Targeted Education and Training — ESG Risk, Controls, Reporting,

Compliance, and Assurance
Q&A
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Thank You

Claire Feeney
[email protected]
www.auditboard.com
Trends
SOX comparisons

ICFR for financial reporting

Carbon acct / financial reporting

Materiality
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