What is an ESG Controller?
Despite being unheard of just a few years ago, the ESG Controller now holds a significant position in many companies, helping to manage ESG data, disclosures, and risk.
For those companies committed to robust ESG practices, employing an ESG Controller provides the data accuracy and reliability required by ESG legislation, plus the transparency demanded by today's ESG-minded investors. To achieve this, the role offers dedicated supervision of data collection, developing measurement systems and reporting processes that align with the evolving regulatory landscape.
Inevitably, this is a difficult task for larger companies, some of which are subject to more than one reporting framework. It demands both big picture planning to track shifting regulations and detailed knowledge of company operations to identify and resolve data gaps.
Overall, it signals that sustainability reporting is no longer a corporate citizenship exercise but instead is critical to business outcomes. For those with an existing team of sustainability professionals, it also provides evidence to support their initiatives and prove the success of their sustainability strategy, backing this with audit-ready data.
In some ways then, we can think of the ESG Controller as a CFO for ESG. Just as the Financial Controller provides analysis for strategic decisions and ensures compliance with financial reporting standards, an ESG Controller brings structure to the way that companies disclose their environmental, social and governance impacts and data.
According to research by Deloitte, concerns about accuracy and completeness of ESG data have now eclipsed data availability. More than a third of executives (35%) cite data quality as their greatest challenge while only 25% cite that access to ESG data remains the greatest problem, which is likely why the role of ESG Controller is now taking hold.
Ultimately, in a world where sustainability reporting has sometimes been seen as optional and potentially at risk of 'greenwashing', this new position ensures that ESG metrics receive the same rigor as financial data.
Why does your business need an ESG Controller?
There are two main reasons why businesses might want to hire an ESG controller. The first is the increasing number of regional regulations that require companies to report on their environmental and social impacts. From the EU's Corporate Sustainability Directive (CSRD) to the new climate-related disclosure rules adopted by the Securities and Exchange Commission (SEC), organizations worldwide need to report accurately and transparently to a growing number of ESG standards.
Second, responsible business practices are a must to satisfy your stakeholders, including customers, employees and, crucially, investors. The ESG Controller is vital to collecting and verifying investor-grade data that demonstrates the value of your sustainability practices and the various ways in which they reduce risk. Improving data quality ensures investors are more likely to get on board, increasing your potential for profitability.
But how exactly will an ESG Controller transform your ESG practices and how will your business benefit?
Improved reporting
With control over both internal and external ESG reporting, an ESG Controller is focused on data integrity and accuracy. They oversee the collection, verification, and analysis of ESG data, collating financial and non-financial information and collaborating with teams across the company. To this end, they'll need to partner effectively with teams in all areas (even outside the company), to improve sustainability reporting and prioritize reporting compliance.
As part of their role, the ESG Controller will develop and implement reporting systems that streamline data collection, analysis and reporting, including incorporating software to automate the processes involved. The efficiency gains offered by doing so can help your organisation do more with its data, creating opportunities not just to record emissions, for example, but to dig into your overall sustainability performance, identify trends, and take action to reduce waste or curb emissions.
Enhanced compliance and risk management
Often, the greatest challenge around compliance is to define the scope of your ESG risks. Materiality assessments play a key role in identifying the most relevant ESG factors for your business and an ESG Controller can help, bringing deep knowledge on ESG issues in order to make sound judgments on reporting boundaries and definitions.
Because ESG reporting can be both data-intensive and judgment-based, an ESG Controller must work to develop ESG internal controls and reporting structures, ensuring that reporting focuses on the most important issues for your organization and stakeholders. By combining sustainability, legal, and financial expertise, an ESG Controller can set benchmarks and goals and provide investor-grade data, ensuring your reporting efforts align with both company strategy and legal requirements.
Stronger internal ESG controls
An ESG controller strengthens internal ESG controls by implementing robust data collection and governance practices. In addition to defining processes for collecting, managing, and storing ESG data, they will also implement data validation checks and quality assurance processes to ensure the resulting data is audit-ready.
Where there are potential risks to ESG data and reporting, an ESG Controller will design and implement internal controls to mitigate them, such as ensuring data security or documenting methodologies for estimations. They can assess and manage control gaps and long-term, they will work to foster a culture of continuous improvement, reviewing, and updating procedures to align with evolving ESG requirements.
