PwC | ESG Regulations and your Company – Actions you can Take Now to Transform your ESG Reporting Strategy

On March 6, 2024, the SEC adopted new climate disclosure rules. These rules require companies to publish information that describes the climate-related risks that are reasonably likely to have a material impact on a company’s business or consolidated financial statements. The new rules call for a dramatic change in the nature and extent of disclosures US companies are required to make about the impact of climate change. The gathering and reporting of these incremental disclosures may require significant changes to a registrant’s systems, processes and controls.

The new SEC climate disclosure rules join existing regulations, including Europe’s Corporate Sustainability Reporting Directive (CSRD) and California’s disclosure requirements. Each of these regulations detail expansive sustainability disclosure requirements that address increasingly vocal demands for enhanced transparency about ESG matters.

As companies assess how the SEC climate disclosure rules and other regulations impact their broader ESG reporting strategy, there are several fundamental actions they can take to progress along their journey. Regardless of where you are on that journey we’re here to help.  Let’s get started.

Three things your company can be doing now to comply with ESG regulations

Global ESG disclosure regulations vary in scope, detail and timelines for compliance. Many also outline requirements to obtain attestation performed by an independent attest provider. Companies will need to develop an effective controls environment and accelerate their ability to collect, manage and measure ESG data. While the SEC rule may be top of mind, these steps may also help you with other global regulations.

Determine scope: While there is some overlap between ESG regulations, the sustainability disclosures, the companies in scope and the timelines for compliance can be different depending on which set of rules your company is assessing. As your company evaluates these regulations, it will need to consider applicability at multiple levels of the organization to determine if all reporting obligations have been identified.

Assess sustainability risks across the business: While the topics addressed by ESG regulations vary, many include a focus on greenhouse gas emissions and other climate-related matters. But understand that many ESG regulations require reporting beyond climate topics, such as biodiversity, pollution, and certain workforce metrics. Most frameworks also require a description of how risks are identified and managed and board oversight of identified risks. The identification of the applicable risks is fundamental and is an area in which it’s particularly important to break down silos and bring a cross-functional approach.

Get stakeholders aligned and educated: The organizational shifts companies will face to comply with global regulations will entail a lot of change. This may include employees taking on new roles, responsibilities moving between functions, new systems and processes and, not least of all, higher stakes and increased expectations around how companies tell their climate stories. Some employees may need upskilling. Others may simply need clear communication about what’s different and why. No matter what, effective communications and change management rooted in trust are critical.