The Securities and Exchange Commission, while revising its proposed climate risk disclosure rule, is carefully poring over a record 15,000 public comments, including concerns that a mandate for reporting on carbon emissions may harm small business or squeeze bank lending, SEC Corporation Finance Director Erik Gerding said Tuesday.

“We’ve received comments expressing a lot of the concerns that you’ve mentioned today and we are very carefully considering those comments and taking them very, very seriously,” Gerding said in reply to questions from Rep. David Scott, D-Ga., while testifying before a subcommittee under the House Financial Services Committee.

Gerding faced especially sharp criticism from Republican lawmakers. The SEC is “pushing an unconventional and partisan agenda that hampers the free market system,” Rep. Ann Wagner, a Missouri Republican and capital markets subcommittee chair, said at the start of the hearing. “The burden of excessive regulations and politically motivated disclosures requirements falls heavily on small- and medium-sized companies, impeding their growth.”

The SEC, seeking to achieve uniformity and consistency in corporate reporting, released a proposed rule in March 2022 mandating that companies describe on Form 10-K their levels of greenhouse gas emissions and strategy toward reducing climate risk.

The agency has twice postponed a final rule as it reviews a record number of public comments. While the SEC recently indicated that it plans to release the regulation later this year, SEC Chair Gary Gensler on Monday declined to set a completion date.

“I don't have a time — it's really when the staff is ready and when the commission is ready to put something out and adopt it,” Gensler said in response to questions after a speech.

The SEC has come under fire for planning to require companies to disclose so-called Scope 3 carbon emissions by suppliers and vendors across their supply chains.

The requirement “could have a significantly costly and adverse effect on thousands of small farmers and ranchers,” Scott told Gerding. Scott also expressed concern that financial institutions, as they comply with Scope 3 requirements, may eventually curtail loans to small businesses.

GOP lawmakers on the subcommittee were more pointed in their criticism toward Gerding and the SEC.

“Your 500-page mandatory climate disclosure rule would be in violation not just of what I think is common sense, but could be considered anti-capitalist and against the ability to grow our economy,” Rep. Pete Sessions, R-Texas, told Gerding. “We believe that this SEC are activists, trying to take a perspective of destroying market gains that might be made, employment by companies, the opportunity to stay afloat and to be competitive with the world.”

Under the SEC’s proposed regulation, companies would need to disclose data on greenhouse gas emissions from their facilities (so-called Scope 1) and through their energy purchases (Scope 2). They would also need to obtain independent attestation of their data.

Republicans on the House Financial Services Committee this month have stepped up their opposition to the proposed rule and to efforts by shareholders, Democratic lawmakers and other stakeholders to promote environmental, social and governance best practices.

Republicans in a series of hearings have said ESG activism harms Main Street investors and thwarts company efforts to increase shareholder value.

Democratic lawmakers pushed back on Tuesday, defending the SEC’s proposed disclosure rule and accusing Republicans of attempting to deny investors information on climate risk.

“The Republicans are waging war against the capitalist market,” said Rep. Brad Sherman of California, the subcommittee’s ranking Democrat. “Shareholders are literally the capitalists — they should be given the information so that they can decide where to invest their money.”

“It seems like the purpose of these hearings is to tell climate investors to go to hell, or go to Europe, where they can get the information should they choose to invest in European companies,” Sherman said.

Companies such as Microsoft and Walmart could gain billions dollars in value by more effectively promoting their devotion to sustainability to consumers and investors, Brand Finance found in a study.

“Even for individual businesses, there can be billions of dollars of financial value to be gained from enhanced actions and associated communication” on environmental, social and governance practices, according to Robert Haigh, strategy and sustainability director at Brand Finance.

“Equally there can be billions at risk from insufficient action that leads to accusations of greenwashing, or even mis-allocated or excessive investment in sustainability greenwashing that doesn’t cut through,” Haigh said in a report. Brand Finance, a London-based brand consultant, analyzed the perceptions of more than 150,000 consumers in 36 countries toward sustainability at 4,000 companies.

Investors for several years have rewarded companies that embrace ESG principles. During the first quarter of 2023, funds that focus on sustainable investing, although “battered by high inflation, rising interest rates, and recession fears,” gained nearly $29 billion of net new money worldwide, according to Morningstar.

Under increasing scrutiny for their ESG practices, several companies — including Tesla, Aramco, and Lamborghini — risk losing hundreds of millions of dollars in value by not increasing their sustainability performance to match the perceptions of consumers, Brand Finance said.

“There are many brands where value is indeed at imminent risk,” Brand Finance said. When public perceptions of companies’ sustainability exceeds performance, “brands leave themselves open to public backlash and a ‘correction’ of their sustainability perceptions value.”

For example, Tesla, a leader in electric vehicles and battery technology, has generated a sustainability perceptions value of $17.8 billion, according to Brand Finance.

Yet the company’s comparatively low performance on governance and measures of social sustainability put $4.1 billion of that value at risk, or more than any other brand in the study, Brand Finance said. It noted that Standard & Poor’s last year removed Tesla from its ESG Index because of concerns over labor relations.

In contrast, the sustainability performance at Microsoft exceeds its sustainability perception among consumers, leaving it with $1.5 billion in brand value that it could tap through “enhanced communication of its sustainability initiatives and services,” Brand Finance said.

Similarly, Walmart has achieved a high sustainability rating by promoting ESG practices across its supply chain, committing to powering all of its facilities by renewable energy by 2035 and “zeroing out” carbon emissions for its vehicles by 2040, according to Brand Finance.

“Like Microsoft, while Walmart’s sustainability performance is relatively strong, its sustainability perception lags significantly behind,” leaving a “value gap” of $1.1 billion, Brand Finance said.

Brand Finance determined a positive or negative “value gap” by comparing how consumers perceive a company’s sustainability to the company’s sustainability performance as measured by CSRHub.

CSRHub generates a company’s “consensus ESG rating” by compiling 13,000 sets of data from more than 850 sources.

The Brand Finance study is intended as “a useful first step in understanding the financial significance of sustainability perceptions to your business, including the value that you may stand to lose!” Haigh said.

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When historians depict the evolution of organizational ESG capabilities, 2023 will feature as a major milestone: the year when ESG programs officially transitioned from narratives to numbers.   

This transformation is unfolding in real-time as global regulators and tax jurisdictions implement a rapidly growing, and highly varied, assortment of ESG requirements and taxes that corporate finance, tax, ESG, legal and compliance groups must monitor, understand, align on and adhere to.  

Many of these new taxes relate to the “E” in ESG – which tax groups are quickly discovering as their more policy-focused colleagues from ESG/sustainability functions pepper them with requests to address the nuts and bolts of tax compliance.  

A successful response to ESG taxes requires new collaborations, processes and tax-technology capabilities. Tax leaders and their teams should get these enablers in place so that they to mitigate compliance risks and help their organizations maximize the upside – lucrative tax incentives – of the brave new world of ESG taxation. By quickly assessing and fortifying existing compliance processes, tax teams can also help their organizations manage the ripple effects of new ESG taxes (including questions regarding the pros and cons of passing on the cost of new ESG taxes to customers and suppliers via pricing adjustments). 

IRA, CBAM and (many) other ESG taxes 

In the U.S., the Inflation Reduction Act (IRA) offers hundreds of billions of dollars in federal tax credits and discretionary incentives (e.g., cash grants, forgivable loans, income tax credits and job-related credits). The IRA’s clean energy credits and new incentives cover hydrogen production, the manufacturing of clean energy components, electric vehicles (EVs) and many other areas. Besides those carrots, the IRA also reinstated three excise taxes -- the Chemicals Superfund Tax, the Hazardous Substances Tax and a petroleum tax (which applies to a range of petroleum and crude oil products). At the state-level, renewable energy systems (e.g., in Wisconsin) and clean fuel vehicle property (e.g., in Colorado) are so far exempt from sales tax, with other states considering similar types of exemptions.  

Those taxes and incentives notwithstanding, the U.S. generally lags behind the EU and UK on ESG policymaking and tax implementation. The EU’s Fit for 55 package consists of sweeping proposals and initiatives designed to reduce EU greenhouse emissions by at least 55% by 2030. The EU’s Carbon Border Adjustment Mechanism (CBAM) reporting requirements took effect in January. CBAM’s new carbon tax (on imports of products made from processes that are not environmentally sustainable) is set to take effect in 2026.  

Additionally, extended producer responsibility (EPR) requirements, which often include taxes and fees on non-green packaging materials, continue to evolve in the UK, Spain, Hungary and other countries.   

ESG tax technology 

The volume and complexity of those and other types of ESG taxes requires tax groups to manage compliance in a proactive and methodical manner. Supporting tax technology can help on that count. An effective ESG tax compliance solution consists of an easy-to-use workspace that collects, stores and works with all relevant regulatory data in a single location. This digital workspace features four core functionality areas: 

• A watchlist: The speed and frequency with which new ESG taxes materialize require tax teams to monitor new and emerging ESG laws and tax rules; a technology tool can assist with this tracking. 

• Law summaries: When new legislation and ESG tax rules are finalized, summaries of their requirements and implications should be clearly detailed (a process that often requires language translation and hashing out legal termination) and stored in the tool.  

• Tax calculation: ESG tax calculations tend to be complicated thanks to their use of contingent exclusions and exemptions (e.g., a plastic-packaging tax may contain exclusions for certain types of recycled plastic.) Despite this complexity, taxes must be accurately calculated and modeled to sustain compliance.  

• Reporting: The tool should provide compliance reports that streamline filing processes. In many cases, this tax compliance data will also be used to complete annual financial reports. 

Of course those reports must be filed in accordance with financial reporting rules – which also are evolving to address ESG requirements. The EU’s Corporate Sustainability Reporting Directive (CSRD) took effect in January, and the U.S. Securities and Exchange Commission is expected to unveil its final climate disclosure requirements this fall. Both rules reflect the high stakes of getting ESG tax compliance and reporting right. 

All the more reason for tax groups to quickly get in place the collaborations, processes and supporting technology ESG taxes require. Your future legacy may depend on doing so.   

A controversial proposal from the Financial Accounting Standards Board that would require companies to provide more explicit accounting breakdowns on the taxes they pay and where they pay them drew some heated criticism from all sides during the public comment period that closed this week. 

This is the third time in recent years that the U.S. accounting standard setter has sought to tackle the thorny issue of requiring more transparent tax disclosures, and some accounting professionals believe the recent rise in corporate environmental, social and governance initiatives may be the charm that enables the GAAP standards update to sail through to finalization. 

But the volume and range of concerns elicited by the plan outlined in the 54 comment letters received by the FASB suggest the road to consensus on the new standards might still be rocky. 

The feedback from companies and business and investor groups revealed many stakeholders are still grappling with major changes that will be needed for companies to be able to detail the income taxes paid to federal, state and foreign entities and to identify any jurisdiction — such as a country or state — that receives more than 5% of the company’s total tax payments. Companies currently aren’t required to provide this information, CFO Dive previously reported.

Even businesses that extended their general support for the plan called for tweaks to effectively rein in some of the new demands. For example, the New York City-based credit card giant American Express raised concerns about more frequent disclosures being required related to an estimated annual effective tax rate. Amex also expressed concerns about the need for ample time to accommodate the substantive new disclosures.

“The proposed amendments will require updates to registrants' policies, systems, processes, and controls, including income tax software, data mapping, and disclosure templates. As such, we encourage the Board to consider providing entities sufficient time to permit for these changes to occur and recommend an effective date for periods beginning after December 15, 2024, with early adoption permitted,” American Express wrote in its May 30 comment letter signed by Joe Gagliano, executive vice president, global head of tax at Amex. 

In contrast, other groups looked at it through the investor lens, such as the Financial Accountability & Corporate Transparency organization that said it was “encouraged” by the proposal even as the requirements would fall “short of providing a clear, complete picture of a given multinational’s enterprises tax activities.”   

Among the entities with more hardened stances was the U.S. Chamber of Commerce, which called for the proposal’s “immediate withdrawal and reconsideration,” and asserted that there was “no compelling need for the information beyond what companies already provide.” 

Further, the language of the chamber’s comment letter raised the specter of the cultural backlash that has threatened the advancement of a proposed Securities and Exchange Commission rule that would require publicly traded companies to provide detailed disclosures on carbon emissions and climate risk. 

“The proposal reflects the efforts of politically driven activists in seeking to compel firms to disclose information —using GAAP under the guise of providing decision-useful information for investors — to name, shame, or otherwise vilify companies, influence tax policy, increase taxes on businesses, and deter investment,” the chamber stated in the May 30 comment letter signed by Thomas Quaadman, executive vice president with the chamber’s Center for Capital Markets Competitiveness and Watson M. McLeish, senior vice president of tax policy at the chamber.  

With the comment period ended, the FASB staff will begin analyzing the feedback and then present its analysis to the board, which will then begin its deliberations on the matter, a spokesperson for FASB wrote in an emailed response to questions from CFO Dive. It’s too early to predict when the board will take up the matter, she said.

CFOs in the U.S. and abroad for months have faced the prospect that regulators would set sweeping and costly rules for disclosure about climate risk.

The timing and details of the standards have recently grown clearer — climate risk disclosure requirements, while likely to take force soon, may end up softer than originally proposed.

The International Sustainability Standards Board said on Feb. 16 that it plans by June to release global guidelines for reporting on both sustainability and climate risk.

Following an “urgent” recommendation from its staff, the ISSB also set Jan. 1, 2024, as the effective date. The board is backed by the Group of 20 advanced and developing countries and the sister organization to an accounting rulemaker recognized by 167 regulatory jurisdictions worldwide.

Meanwhile, the Securities and Exchange Commission recently said that before May it plans to release a final rule requiring publicly traded companies to report on greenhouse gas emissions and the risks from climate change.

The SEC proposal has drawn fire from businesses, lawmakers, state officials and other stakeholders. Critics have said in more than 14,000 comment letters that by pushing forward with the rule the agency would overstep its authority, subject companies to onerous compliance costs and require disclosure of information immaterial to investor decisions.

“I’ve been practicing for 15 years and this is by far the most attention an SEC rule has seen from a political or news standpoint, or a comments standpoint,” said Darryl Smith, a partner at Eversheds Sutherland, a law firm.

In response to the criticism, the SEC will likely blunt its proposed rule, according to attorneys who specialize in regulation and sustainability. The ISSB has already set an example for ways to ease compliance by allowing companies to gradually build climate risk reports.

The ISSB last week approved “a package of reliefs” for companies during the first several months of implementation, according to ISSB Vice Chair Sue Lloyd. For example, it will waive for one year the requirement that companies detail so-called Scope 3 GHG emissions by suppliers and vendors across their supply chains.

Also, ISSB guidelines for gauging all categories of a company’s GHG emissions — including its direct emissions and those by its energy suppliers — will initially allow for estimation and a gradual move toward precision, Lloyd said in a Feb. 16 podcast.

“We have developed a measurement framework that allows companies to use estimation and techniques that will enable people to have a little bit of a softer start, which is a dangerous word for me, but a softer start to how you do that measurement,” Lloyd said. “Over time we would expect people to become more sophisticated in their approach.”

Even if the SEC follows the lead of the ISSB and gradually phases in its rules, U.S. companies need to prepare for disclosing much more detailed information on climate risk, Smith said in an interview.

“Regardless of the final details of the proposed rule, you will see increased climate disclosure in SEC reports,” Smith said. “There already is a very robust framework in terms of what information is material, and a number of investors have been very clear that climate-related risk disclosure is material information in their view.”

Hitting targets

As described in its 490-page proposed rule, the SEC aims to mandate that companies describe on Form 10-K their strategy toward climate risk, including plans to achieve any targets they have set for curbing such risk.

Companies would need to disclose data on their GHG emissions, either from their facilities (so-called Scope 1 emissions) or through their energy purchases (Scope 2). They would also need to obtain independent attestation of their data.

The SEC, hoping to avert litigation, is considering phasing in a Scope 3 reporting requirement, according to attorneys who specialize in regulation and sustainability.

The agency may also increase the threshold at which companies must report climate change costs on each line item of their audited financial statements, they said. Under the proposed rule, companies would need to report any climate-related costs totaling 1% or more of a line item.

“Those are two of the most controversial aspects of the proposed rule, and two of the most burdensome aspects for a company,” Smith said. “Those have had a bull’s eye on them from the get-go.”

Clear, widely accepted standards for disclosure will help clear up confusion caused by dozens of conflicting measurement and rating frameworks for sustainability, removing an obstacle to more detailed reporting on climate risks, according to C-suite executives and sustainability experts.

“There is a measurement and ratings challenge, but at the same time I feel that it often gets used as the excuse for inaction,” Marjella Lecourt-Alma, CEO and Co-Founder of Datamaran, said in an interview. “There’s no escaping it — so you just have to do it.”

Without clarity on climate risk measurement and regulation, some companies get away with “greenwashing,” exaggerating progress in meeting their net-zero targets for carbon emissions, UN Secretary General António Guterres said last month in Davos, Switzerland.

“More and more businesses are making net-zero commitments, but benchmarks and criteria are often dubious or murky,” he said.

“This can mislead consumers, investors and regulators with false narratives, and it feeds a culture of climate misinformation and confusion, and leaves the door open to greenwashing,” Guterres said.

Lighter burden

Some industries can more easily measure progress toward cutting GHG emissions than others.

“In the real estate industry, it’s pretty straightforward,” according to Étienne Cadestin, founder and CEO of Longevity Partners, an ESG consultancy.

“You’ve got a building which is pretty much a box,” with measurable carbon used in its construction and GHG emissions from both its operation and from people as they come and go, he said. “So in terms of the definition of net-zero carbon for the real estate industry, it’s very clear.”

Many commercial real estate firms when measuring progress in limiting carbon emissions and other ESG factors rely on the Global Real Estate Sustainability Benchmark.

“Not having an ESG strategy today in my industry is suicide,” Cadestin said in an interview, noting that investors often snub properties that lack a plan for cutting GHG emissions.

“If you’re reducing carbon emissions, you’re going to increase air quality and you’re going to reduce health costs,” he said. “It’s a win-win.”

Electric utilities, after years of providing regulators with detailed reporting, will also find disclosure compliance easier than companies in many other industries, Smith said. “Environmental and climate disclosure has been at the forefront of the utility space for the past 15-plus years.”

The financial industry faces far bigger challenges, he said, noting that an investment bank would need to measure the carbon emissions of companies throughout its portfolio.

“The ability to gather and provide accurate and verifiable information on that scale — it’s going to be a huge challenge,” he said. “The limitations on the information you get at this point, and the amount of assumptions you’d have to include, degrades the value of information and how accurate or actionable it is.”

Tall order

At first glance, Anheuser-Busch InBev, the world’s largest brewer selling 630 beer brands in 150 countries, would seem to face a daunting challenge in measuring carbon emissions.

Yet the company’s short list of production ingredients — water, hops, yeast, barley and other grains — and dependence on local farmers and small-scale vendors in 150 countries, prompted it to pursue sustainability comparatively early.

“We’ve been doing sustainability since I joined the company nearly 20 years ago, even before we knew what sustainability was,” CFO Fernando Tennenbaum said in an interview. “It was very clear to us from the beginning that we need to be efficient in how we use these resources, and make sure they are not only here for our current year, but for the next 100 years.”

AB InBev has pledged that it will derive all of its purchased electricity from renewable resources by 2025, and it aims to achieve net zero carbon emissions across its value chain by 2040.

Such goals require close cooperation with suppliers and vendors, Tennenbaum said. Farmers need adequate financing and access to technology. The owners of mom-and-pop stores can cut costs by upgrading to efficient refrigeration.

“We are a global company but our business is very local,” he said. “So it was clear to us from the beginning that if we don’t have a community that is thriving, then we won’t thrive as well.”

AB InBev, based in Leuven, Belgium, uses at least five different frameworks to measure sustainability.

“There are several standards, and everybody is trying to find the standard that properly captures their business,” Tennenbaum said. When measuring sustainability, the company asks, “how do we do that in a way that will not create a huge bureaucracy that instead of focusing on sustainability is focused on doing reports?”

CFOs can avert administrative bloat, reduce costs and find new profit opportunities by making sure that their approach to sustainability complements their business strategy, according to Lecourt-Alma at Datamaran, a provider of software analytics focused on environment, social and governance metrics.

“The step that companies first need to take is to look at ESG as a governance and strategic imperative,” she said. “Focus on where you can have the most impact, and then assign responsibility in the company to the highest level of the organization.”

Aligning business strategy with reporting on climate risk and other facets of sustainability requires gaining fluency in the use of a common measurement system, ISSB Chair Emmanuel Faber said.

“There is broad recognition around the table of the [ISSB] board that what we’re developing here is a new language,” he said. “And we’re not going to learn that language together if we don’t start the experience of speaking that language.”

“We know that preparers, users, regulators or ourselves are not going to be right in using that language from day one,” Faber said. “But the only way that one day we’ll be right is to start as early as possible.”

Two dozen large global companies are failing to live up to their commitment to lead the fight against climate change and achieve “net zero” greenhouse gas emissions, according to the second annual Corporate Climate Responsibility Monitor. “The companies are hiding their climate inaction behind the fig leaf of green-sounding ‘net zero’ plans.”

Based on their current practices, the 24 companies by 2050 would reduce their current emissions by 36% rather than the 90% to 95% required to meet their pledges, according to the CCRM report. The companies generate more than $3 trillion in total revenue and are responsible for about 4% of global emissions.

“At a time when corporations need to come clean about their climate impact and shrink their carbon footprint, many are exploiting vague and misleading ‘net zero’ pledges to greenwash their brand while continuing with business as usual,” Carbon Market Watch Executive Director Sabine Frank said in a statement. “Since multinationals have both an oversized impact on the planet and the means to reduce their carbon footprint, they must take real action to clean up their act and not just their image by slashing their emissions.”

The CCRM report aligns with a finding by CDP, a platform for environmental disclosure, that only 81 of 4,000 companies worldwide that have committed to a climate transition plan disclose details about scenario analysis, financial planning, board oversight, policy engagement and 17 other indicators of credible plan execution.

Thirteen percent of the companies publicize 14 to 20 of the indicators, “demonstrating that they are on their way to disclosing a credible transition plan,” according to CDP, which studied disclosure across 13 industries in 135 countries. “Companies are recognizing the need for climate transition plans but are not moving fast enough amidst incoming mandatory disclosure.”

More than a third of companies provide sufficient disclosure on the risks and opportunities from a climate transition plan but only 3% provide relevant, forward-looking financial details supporting their plan, CDP said.

Both reports coincide with a call to reduce climate change from regulators, non-profits, international organizations and other stakeholders worldwide.

“We are flirting with climate disaster,” UN Secretary General António Guterres said last month at Davos, Switzerland. “Greenhouse gas emissions are at record levels and growing,” pushing up global warming toward 2.8 degrees Celsius, well above the 1.5 C target.

“Our climate goals need the full engagement of the private sector,” Guterres said.

Not all large, global businesses have failed to make credible progress in meeting their net-zero commitments, according to the CCRM report, a project by CMW and the NewClimate Institute.

Apple, Walmart, Foxconn and H&M Group help their suppliers buy renewable electricity through either guidance or by helping arrange such purchases, according to the CCRM report.

Google and Microsoft have pledged that by 2030 all of their energy consumption will be matched around the clock with renewable energy generation at nearby installations.

Five companies – H&M Group, Holcim, Stellantis, Maersk and Thyssenkrupp – have plans to reduce their GHG emissions by 90% by their target date, commonly 2040 or 2050, according to the CCRM report. This includes Scope 3 emissions by suppliers and vendors across their supply chains.

At the same time, the CCRM report said, “we find the long-term targets of 17 companies to be of poor integrity, due to the inadequacy or complete lack of explicit emission reduction commitments alongside ambiguous net-zero pledges.”

Small and medium-sized companies are lagging behind in terms of how quickly they are addressing climate risk, said Shari Littan, director of corporate reporting research & policy at the Institute of Management Accountants.

“We're observing a disconnect and almost two different conversations happening out there where smaller and medium sized companies are not moving at a fast pace towards addressing climate and other [environmental, social and governance] related risks,” Littan said in an interview with CFO Dive.

As stakeholders and investors are increasingly looking for businesses to respond to climate change, organizations have been forced to take a hard look at both their external reporting to meet the demands of regulators and policymakers and their internal management to “to support management decision making on sustainable business issues,” according to a December report from the IMA. 

Private companies are not subject to the same regulations that public companies will be subject to once the Securities and Exchange Commission sets climate risk rules — which it is expected to do by May. The IMA report was critical of the focus on the push toward disclosures of carbon emissions through regulation from the SEC and other organizations alone. 

It “may be “exacerbating disparities between the decision-usefulness of standards for public companies and a lack of attention by private companies,” the report said. 

A disconnect

Some of the IMA’s findings indicated a lax attitude toward the issue. About half of respondents in the December IMA survey, which polled 14,000 public and private business leaders internationally, stated that sustainability information is not used by management for any purpose. Respondents from private companies have neither identified climate as a relevant matter nor acted on it, according to the report. 

When it comes to how regulators can work with SMEs and private companies in order to close the gap between that of public companies, “the main thing is education and communication,” said Littan. 

For example, Littan noted, it’s important to know that executing these audits can uncover cost saving opportunities. One agricultural company started looking at their carbon footprint a few years ago and discovered how much water they were wasting, Littan recalled. “They ended up saving a bundle because this helped with their water management,” she said. 

“There needs to be a focus, perhaps, on how we reach the entire economy up and down the value chain. So that we actually are moving towards a sustainable economy and building sustainable businesses,” said Littan.

The CFO’s role

In terms of how companies — private and public — can realize opportunities with these regulations, the leadership style of the CFO is crucial, according to Littan. 

“There is so much focus right now on what needs to be reported. And companies of every size are thinking about the ‘how to’: how to get started, how to build along the process, and we find that the expertise and leadership style of those who are CFOs or in the corporate finance and accounting function, bring enormous insight to the table,” Littan said. 

The most important skill that finance leaders bring to the table, is their ability to think along the lines of investor relations — which can be a key pillar to success no matter how large the organization.

“CFOs have a training in the rigor of delivering quality information, how it gets processed, how it gets gathered, and summarized and delivered in a way that responds to the company's purpose,” said Littan.