The following comments from PwC’s Kevin O’Connell and Ron Kinghorn have been lightly edited for clarity and length.
Want to lead on sustainability?
Whether your plans include building out a full-fledged sustainability function or just developing sustainability capabilities, your sustainability strategy will largely depend on the leadership and vision of two executives. The chief sustainability officer (CSO), or the equivalent in your organization, has traditionally overseen voluntary sustainability reporting and is largely responsible for an organization’s ESG data. But you may not be as familiar with the ESG controller, a rising star in the finance function tasked with producing ESG reporting that complies with an ever-expanding set of disclosure regulations.
The compliance deadlines for resource-intensive regulations such as the European Union’s Corporate Sustainability Reporting Directive (CSRD) are quickly approaching. As a result, many companies have taken a hard look at the operating model needed to comply with these regulations, who in the organization is well-positioned for the task and how to effectively adapt. That’s led to closer collaboration and alignment between the finance, accounting and sustainability functions and more defined and independent roles for the CSO and the ESG controller. They are relying on each other to execute sustainability reporting, achieve decarbonization goals and navigate a path to growth.
Why is it so important for these two leaders to get sustainability right? Because the stakes are high. Our 2024 Global CEO survey found that companies that take more action on climate-related opportunities and risks also have better financial performance. Additionally, a World Economic Forum study done in collaboration with PwC points to the dramatic cost savings that can result from organizations reducing energy demand. And our Voice of the Consumer Survey shows that consumers would be willing to pay 9.7% above the average price for sustainably produced or sourced goods.
As pressure mounts to disclose more and to do more, CSOs and ESG controllers are becoming pivotal in generating ESG reporting, driving decarbonization and aligning sustainability initiatives with long-term strategic planning, capital allocation and operational decisions.
Here are three things your organization can consider as it builds a future-ready sustainability function:
1. The ESG Controller And CSO Should Work Together To Deliver Quality Sustainability Reporting
Sustainability reporting is undergoing a seismic shift, driven by the CSRD and other global regulations that mandate expanded disclosures and impose financial and regulatory risks for noncompliance.
Companies ahead of the game are proactively laying the foundation for compliance by transitioning reporting to the ESG controller. As new regulations emerge, the finance and accounting functions should keep a pulse on their talent pool and resources needed to get the job done well, while coordinating with legal teams on region-specific requirements. They also need to be ready to address inquiries from the audit committee, knowing not just what to say but how to do it confidently to build trust.
The ESG controller’s team excels in financial reporting, internal controls and data collection. However, they should work with the sustainability function to accelerate their understanding of sustainability issues, current processes and where the risks may be in data collection. Plus, the CSO can also demystify complex sustainability questions for the ESG controller, such as how to calculate greenhouse gas emissions.
2. Clean Data, Clear Mind: The Role Tech Plays In Building Confidence In ESG Data
While the sustainability function has carved out a path to sustainability, the finance and technology functions can pave it into a superhighway. The endgame is simple: provide funding for efficient infrastructure that can deliver ESG reporting and insights with the same level of rigor and precision as financial data.
Technology can help build trust across the organization so that the data circulating through its systems is thorough and reliable. As a first step, ESG controllers can work with the technology function to take stock of existing technologies and their capabilities. Together, they can then build out data lakes and data catalogs that can help capture the information needed to comply with the many distinct reporting regulations. Meanwhile, CSOs can focus on performance and achieving sustainability targets. That includes interpreting ESG metrics and communicating those insights to stakeholders so they can make any needed changes required to stay on course for meeting those targets.
With the scope of and demand for sustainability reporting likely to grow, ESG controllers can also proactively define how emerging technologies such as generative AI can advance their ways of doing and thinking. Case in point: Gen AI could help scan for cross-border regulatory requirements, prepare sustainability disclosures, look for anomalies in the data and potentially write the first draft of a CSRD report, which the ESG controller would then refine.
3. Rebalancing The Books: Sustainability For Growth, Savings And Goal-Tracking
As the finance and accounting functions manage ESG reporting, the sustainability function can refocus on driving value across the business. This includes pinpointing strategic insights from their supply chains, spotting methods for reducing a product’s carbon footprint and identifying cost savings. To do this, embed sustainability throughout the business, not just in pockets, and make sure each function has accountability for achieving performance goals.
CSOs can also work closely with the finance function on the selection and sequencing of decarbonization projects, both those with an immediate return and others with longer payback periods but greater abatement potential. This is where the broader finance function and the CFO enter the picture. They can make two moves to help drive success: Develop an internal cost of carbon that establishes a price for emissions generated and tap the tax leader to identify available tax credits and incentives that can defray costs. CFOs can make these moves with confidence because of the work the ESG controller has done to produce thorough and reliable data.
What’s Next?
The path is there for sustainability to be a strategic driver rather than just another compliance requirement. Armed with the right technology, data, resources and skills, CSOs and ESG controllers can help their companies transform and grow, build trust, fuel innovation across the business─and stay a step ahead of the competition.