6 Tips to Maximize Your Accounting Firm for ESG Reporting

If you are a publicly traded company – or have suppliers or clients that are – you need to prepare to report your climate-related data to the SEC, because it will be issuing its final climate-risk disclosure rules soon. If you engage an accounting firm with relevant experience to help you, it will be much easier – and can even be a competitive advantage.

“This is the cost of doing business on a go-forward basis,” Charles Waring, an EisnerAmper audit partner and member of its ESG practice explained on episode 2 of the firm’s “ESG In Focus” podcast recently. “The more that an organization resists, they put themselves at risk for future business with their customers and stakeholders.” Waring also added that it is not just a burden, but a benefit: “…do you want to use it as a best in class, a competitive advantage?”

Since your accountants have your general ledger and other accounting records, they can help you develop the systems to capture, track and report climate, sustainability, and other ESG-related factors in your business.

Accounting firms that have climate, sustainability, and ESG-related expertise can be a pivotal asset for reporting this data, demonstrating its accuracy and using it as a competitive advantage – if you know how to maximize them.

“Even if your company may not… need to consider the SEC's proposed climate rule, you also need to look at your partners and the companies in your value chain and supply chain,“ EisnerAmper’s Director of ESG and Sustainability Solutions EisnerAmper Director emphasized on the podcast. “Because if they need to report this information to the SEC, they're going to be turning around to their partners and other companies within their value chain to get that information,” which means they will ask you for yours. Some lenders require it as well.

Here are six tips for how to maximize your accounting firm for climate-sustainability and ESG reporting, including for the forthcoming SEC rules:

1. Ask your accountants what you need to report: An accounting firm with climate-sustainability-ESG-related expertise can help you more efficiently identify the data you will need to disclose, including from your suppliers or vendors, and the internal controls to capture it in your financials properly.
2. Focus on risks to your business: “ESG… is a risk management tool, first and foremost,” EisnerAmper said, “and an effective ESG program manages these risks and measures the impact that environmental and social issues have on their business and how to create an effective governance to address all of these risks.”
3. Set up climate data-related systems early: “It is important to all companies, big and small, to get this done beforehand. It takes longer than you think,” EisnerAmper emphasized. Acknowledging that, “It can be overwhelming if you've never looked at these things before… environmental, social, governance data,” including things like board diversity, greenhouse gas emissions, and cybersecurity issues. “This is where the ESG program building comes in…(so) it's important for companies to get on board before they need to scramble.”
4. Share your plans for reducing your climate-related risks with your accountants ASAP: The SEC rules and other frameworks require reporting on how you plan to mitigate your climate-related risks and CO2 emissions. On “ESG In Focus,” Waring suggested that executives ask: “If I have to make a transition in my business model because of these climate-related risks, what does that mean from a dollars and cents perspective?” That includes, for example, relocating a plant from an area that’s vulnerable to sea-level rise, and any “assumptions that would impact (your) company's financials.”
5. Have leadership on board: Ultimately, your leadership is responsible for this reporting and for the impact of climate- and other ESG-factors on the business, especially any related risks, so the very top leadership of your organization needs to be making this a priority and forthcoming. They need to sign off on the financial statements, too, so they need to understand and affirm with the disclosures.
6. Ask your ESG-focused accountants for trends and opportunities: ESG- and climate-focused accounting firms will also know about trends in capturing and reporting this data, including in your industry. Therefore, they could make your systems more efficient and accurate, saving you from potentially costly mistakes, while also alerting you to potential opportunities.

“As your accountants, your auditors, we look at ourselves as a trusted business advisor to our clients. We have a holistic, yet also detailed perspective on what's going on with that organization,” Waring explained on the podcast. “We can talk through the trends and the risks that we're seeing in an industry… (and say, for example), ‘These are things to avoid, those risk factors that you want to get ahead of… (and these are) things that are starting to be best in class in the industry.” Working with an ESG-experienced accounting firm can help you avoid being accused of greenwashing too.

Your accountants will need to verify this data as part of your audited financial statements, so that’s another reason to enroll them as early as possible in your process of capturing ESG- and climate-related data about your business.

“Investors, customers, partners, all sorts of stakeholders want to know that companies are doing their due diligence to manage their risk,” EisnerAmper Director said. “Developing a robust ESG program is another way to manage risk at garners trust in your company.”