Non-financial reporting in areas such as climate and society are becoming increasingly mandatory tasks for businesses. As new standards and frameworks are adopted, global governance on sustainability reporting increases. 

But much ESG reporting is not robust or timely enough to meet the requirements of regulators, shareholders, stakeholders and investors. It’s still being produced by a separate sustainability team, rather than by a team within finance. As such, it’s often not delivered with the necessary rigour. It is becoming increasingly clear that sustainability reporting should sit within the finance function. Accountants have the skills to deliver robust, timely, data-backed reports. 

Many Boards and CEOs are realising that they need to pass ESG reporting to finance. CFOs are now trying to work out how to develop and deliver reporting along Taskforce for Climate-related Financial Disclosures (TCFD) and Transition Plan Taskforce (TPT) lines. In some cases, they are deciding how to deal with the various standards and requirements in place across jurisdictions.

It’s a major learning curve, but it’s also a full-scale transformation project, which can be tricky to implement in itself. How do you win over hearts and minds, adequately upskill your team and restructure it to incorporate sustainability reporting requirements alongside financial ones? It’s a daunting task and difficult to know where to start. 

ICAEW’s series on business transformation delves into these issues in more detail, but this article will give you an overview of where to start.

Understanding disclosure requirements

Here’s a checklist of some of the disclosure requirements for ESG-related reporting:

Environment:

• emissions 
• energy 
• water 
• waste 
• biodiversity 

Social:

• diversity and inclusion 
• talent development 
• training
• health and safety 
• human rights 

Governance:

• leadership and corporate governance 
• risk management
• anti-corruption
• competitive behaviour 
• tax transparency 

That amounts to a lot of metrics to collect data on, measure and report. Getting your head around what data you already have and what you need to start collecting is an important first step. With such a significant broadening of the data needed for sustainability reporting, it’s inevitable that you will need to make transformational changes to your finance function, from structure and skills to systems and technology.

Identifying gaps

Assess what you already have in place and what you’re missing. This involves research into the various frameworks, identifying what is and isn’t mandatory, and what you think you can deliver in the first instance. Much of this will be an iterative learning process, with reporting developing as you go. 

Produce a gap analysis to outline what you do well and what requires improvement. Articulate your goals and define the perspectives and maturity levels for transformation. 

Perspectives comprise the various elements of the function that may be impacted by the transformation – such as people, technology and processes. For sustainability, this also includes the perspectives outlined by Accounting for Sustainability (A4S): governance and ownership; materiality and metrics; data collection and forecasting; reporting frameworks and standards; and embedded technology.

Plot out a maturity model for where the business is today and where it wants to be. Set targets for the year ahead and where you want to be in, for example, three years. Score the maturity level out of five, where five is the highest level:

1. Non-existent: there is no evidence of this perspective being considered within the organisation.
2. Embryonic: there is ad-hoc evidence of this perspective being considered within the organisation.
3. Existence: there is evidence of this perspective existing in the organisation and ad-hoc evidence of alignment with some of the other perspectives.
4. Alignment: there is evidence that this perspective is aligned with all other perspectives.
5. DNA: evidence that all perspectives are aligned, managed and continuously improving to meet strategic demands engrained in the DNA of the organisation

Three actions to take right now

1. Sign up to ICAEW’s transformation webinar series. These have been running across 2024 and will continue into 2025
2. Understand the scope of the current ESG roadmap – is it only carbon reporting? Is it nature? What about social impact? Is it only historic reporting or more value-add future planning and insight?
3. Make a transformation plan – design and deliver – link to resources

Further actions and resources

ICAEW recently ran a webinar on sustainability transformation that goes into more detail on the subject. You can watch it on demand here. 

A summary document on the methodology to implement finance transformation programmes is also available through ICAEW.