Critical issues of corporate sustainability and compliance with ESG initiatives are increasingly the responsibility of C-level executives
Environmental, social and governance (ESG) issues are increasingly emerging as cross-functional areas of responsibility for C-level leaders. In fact, the Chief Sustainability Officer, Chief Legal Officer (CLO) and Chief Financial Officer (CFO) are seeing the biggest expansions in their corporate roles as the increase in ESG duties begins to impact these roles.
The creation of chief sustainability officer positions has increased in recent years, although corporate responsibility and ESG have become mainstream issues over the past decade. The primary responsibility for individuals in these sustainability roles was communication and change management. With the multitude of ESG frameworks, the new responsibilities of sustainability officers will likely also include greater data provision.
“Sustainability is becoming a delivery task,” said Olivia Whitman, Head of Sustainability at Siemens. “We’ve spent a decade being changemakers and now we suddenly have to implement processes and think about strategies.”
In fact, ESG data resides in many corporate functions, while the development of processes and procedures to specialize and govern important parts of data analysis resides in corporate finance and legal. In fact, accountants and financial analysts use their expertise to rigorously review and prepare financial information for disclosure. Likewise, legal action by companies is usually the final step in approving such information for release.
CFO sees biggest increase in ESG accountability
A rule proposed by the Securities Exchange Commission (SEC) to include climate documents in financial documents is one of the recent key drivers of the growth of ESG data and reporting requirements from corporate finance functions. According to Jennifer Cantero, head of accounting firm Sensiba San Filippo’s multidisciplinary ESG advisory practice, this has led to CFOs turning outward and enlisting external support to deliver multidisciplinary ESG advisory services. Hm. “Accountants have long measured financial data, and it only makes sense that with new climate compliance requirements coming up, we would also measure non-financial data,” says Cantero.
Another key element that drives CFOs to lead companies’ ESG efforts is the effort required to clean ESG-related data. Since ESG information resides in an silent information system and needs to be analyzed and aggregated for reporting, accountants and financial analysts will play an important role in this process.
Also, a lot of ESG data integrity requires a CFO when it comes to setting up internal controls and verification processes for key performance indicators (KPIs) for reporting. The proposed SEC rules would certainly increase the priority of ESGs within internal audit teams, which are typically based in the corporate finance function.
CLOs are playing an increasingly important role in ESG
General Counselors are also heavily involved in developing the ESG strategy. More specifically, nearly half of attorneys (47%) said that “they personally lead some physical portion of their organization’s ESG initiatives,” according to a recent research report, which also showed that 90% of legal departments lead ESG initiatives.
In addition, in-house counsel have always been the primary individuals responsible for corporate governance and engaged in activities such as risk assessment, training, reporting, monitoring and investigation.
CLO was created in the last 24 months Yes, really Chief ESG Officers for most companies, particularly in relation to key reputational risk issues, mainly due to the increased risk of litigation. In fact, both consumer and shareholder plaintiffs are expanding their legal claims to include information about the stability of companies and even allegations of misstatement or omissions. green laundryThis is misleading advertising or marketing spin used to convince the public that an organization’s products and policies are more environmentally friendly than they really are.
Another relatively recent development expanding CLOs’ ESG responsibilities is that corporate boards are the target of litigation regarding their alleged violations or failure to perform their fiduciary duty, which is typically the case with underlying ESG lawsuits. based on allegations of lack of oversight. It is all the more important that the CLO has corporate secretary tasks to ensure quality documentation in the supervisory mechanism of the board of directors.
The main motivator behind the increasing preference for ESG in companies was and is a marketing and branding game. In fact, most lawyers pointed to image, competition and investor concerns as factors that prompted their organization to pursue environmental goals that required compliance with environmental laws.
While this concern started with the environment, it is increasingly focused on social elements. This clearly underscores that the importance of ESG and the need for transparency and accountability remain here.