The environmental, social, and governance (ESG) landscape has evolved immensely in recent years. It has moved from being just buzzwords that many global businesses largely ignored to a new business practice that’s the centre of a growing number of organisation’s strategies. Thanks to this rapid transformation, companies worldwide are now attempting to wrestle with a growing body of regulations and new stakeholder expectations regarding ESG performance.
As a result, a new role has emerged in the form of the ESG controller. This position was near enough non-existent only a few years ago, but nowadays a significant percentage (over half) of the Fortune 100 companies have a dedicated ESG controller in place, to help them reshape their approach and manage ESG data, risks, and disclosures.
An ESG controller spearheads the management of sustainable business information processes and activities. They are accountable for data verification and the integrated reporting of financial and non-financial information as mandated by applicable ESG disclosure requirements.
What are the core responsibilities of an ESG controller? To whom do they report? What competencies are essential for their success? This analysis delves into the growing demand for ESG controllers, how they fulfil organisational needs, and whether your organisation might benefit from this role.
Drivers of Demand for an ESG Controller
Several key factors are driving the need for ESG controllers,. They combine financial and accounting rigor with a deep understanding of ESG regulations and reporting.
Shifting Stakeholder Expectations
ESG factors can significantly impact a company’s operational performance, financial outlooks, and overall business strategies. Investors, regulators, other stakeholders, and even customers, are increasingly demanding consistent, comparable, and reliable information on how organisations manage ESG-related risks to inform their decision-making processes.
Evolving Regulatory Landscape
The ESG disclosure landscape is rapidly transforming, with new requirements being implemented around the world.
ESG disclosures are now integrated with financial reporting, subjecting them to high levels of scrutiny and liability, so organisations must stay abreast of all changes to ensure compliance.
Challenges in ESG Reporting Maturity
While many leading organisations already report on ESG, they often face challenges with data availability and quality leading to insufficient maturity in reporting and disclosures. ESG data collection is frequently dependent on different internal and external sources and manual processes.
ESG reporting involves cross-functional and inter-organizational collaboration that may be different across various organisations. Having a dedicated leader, the ESG controller, means there is someone in each company who possesses the skills to ensure effective compliance, collaboration, governance, and data verification.
Core Responsibilities of an ESG Controller
A recent LinkedIn job search for “ESG controller” identified nearly 70 listings across various industries. Common responsibilities, aside from the various titles and responsibilities each ESG controller has in their own particular job role, included:
- Readiness, reporting, and compliance planning: Oversee the development of implementation and readiness plans for applicable ESG reporting-related initiatives (e.g., CSRD, SEC’s climate rule, GHG, IFRS S1/S2, California SB 253/261).
- ESG reporting landscape monitoring and strategy: Stay apprised of evolving ESG disclosure requirements and voluntary frameworks. Provide guidance to help leadership align reporting efforts with compliance needs and overall business strategy.
- Audit relationships and coordination: Maintain relationships with internal and external auditors to coordinate their review, oversight, and assurance of ESG reporting.
- Cross-functional relationships and coordination: Build relationships and coordinate efforts to educate and support internal stakeholders and gain buy-in.
- Data quality, accuracy, validation, and controls: Ensure reliable data and standardised supporting work processes, policies, procedures, and controls. Assist teams in optimising the same.
- Materiality assessments: Manage annual assessments to determine the materiality of ESG topics based on relevant standards.
- Executive and board reporting: Present all ESG items and ESG-related matters to leadership and the board, as necessary.
- ESG data and technology strategy: Lead the organisation’s ESG data and technology strategy in collaboration with IT.
Who do ESG Controllers Typically Report To …
ESG controllers are distinct from any sustainability team. Traditional controllers focus on the accuracy, efficiency, and security of the financials, and optimising related processes and controls. In contrast, sustainability teams focus on assessing, benchmarking, and improving ESG practices, goals, and ROI. This means that ESG controllers often report to whoever their organisations’ controllership functions fall under, be it the CFO, CSO, or another C-level executive altogether.
Desired Qualifications for ESG Controllers
As a bare minimum, ESG controllers are expected to have experience in:
- ESG and accounting/finance, with roughly 10 years of progressive experience in both areas.
- Regulatory compliance, including the ESG regulatory landscape and related industry trends, as well as key frameworks and disclosure requirements (e.g., GHG, CSRD, ESRS, TCFD, SASB, CDP, GRI, IFRS S1/S2).
- ESG technology implementations.
- Delivering executive- and board-level presentations.
- Cross-functional collaboration.
- Relevant industries or company types (e.g. public multinationals).
Does Your Organisation Need an ESG Controller?
The effort required to establish a healthy, sustainable, and audit-ready ESG programme shouldn’t be underestimated. So, if, like most, your organisation still lacks ESG reporting maturity, then the answer to this question is, without a doubt, yes. Depending on your company’s size and reporting requirements, it may be appropriate to have a dedicated ESG controller role or consider allocating those responsibilities to an existing team member.
Organisations must not underestimate the effort needed to build and integrate the controls, data metrics, processes, communications, and change management that’s needed to establish an effective, sustainable, audit-ready ESG programme. ESG risk is simply business risk, and there’s no better time to ensure you’re on track to understanding, managing, and reporting any potential ESG risks that could impact your organisation.
The role of an ESG controller is essential for organisations striving to meet today’s ever-more stringent requirements of ESG reporting and compliance. By integrating financial acumen with a deep understanding of ESG principles, ESG controllers play a crucial role in navigating the complexities of modern regulatory landscapes. In summary, an ESG controller can play a critical role in the accountability and cross-functional collaboration needed for your organisation to have a sustainable ESG programme. One that can be relied upon to meet changing regulations and compliance requirements.
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