As businesses prepare to report their environmental, social, and governance (ESG) data, many are adding a critical new position: the ESG controller.
Controllers have long played an essential role in financial accounting — overseeing accounting operations, building and applying controls and procedures to ensure data integrity, guiding strategic financial decisions, and making sure the company is compliant with relevant regulations and standards. Now, this same level of oversight is needed for environmental and social data. A wave of new regulations, including Europe’s CSRD, the US SEC Climate Disclosure Rule, and California’s SB 253 and SB 261 are compelling businesses to share data about their greenhouse gas emissions and other ESG metrics, often with third-party assurance. As a result, the ESG controller function is becoming increasingly critical.
In this article, we’ll examine the role of ESG controllers: what they do, why they’re valuable, and the resources available to support them in this journey.
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What is an ESG controller?
An ESG controller is a professional who helps align an organization’s ESG practices with its overall strategic objectives, ensuring transparency and accountability.
An ESG controller is often an expert in financial accounting who is focused on collecting and disclosing ESG data, such as carbon inventory. They typically work within the finance department but also closely with the sustainability team, legal, and other key functions within the organization.
They not only oversee ESG reporting and regulatory compliance but also play a lead role in integrating sustainability issues into the company’s financial planning, risk management, and decision-making processes. An ESG controller needs to have the analytical skills typical of finance professionals—they must know how to establish systems and controls to gather data that is reliable and can withstand external scrutiny.
What does the ESG controller do?
An ESG controller ensures the integrity, completeness, and reliability of an organization’s ESG data.
Even five years ago, ESG disclosures were mostly voluntary, and the standards were fragmented. Now, they are far more harmonized and regulated. ESG data integrity has become essential, but many organizations are still not confident in the data they report. However, companies with an ESG controller in role show significantly higher confidence in their disclosures, according to a recent Deloitte study — 75% of respondents with an ESG controller said they felt confident in their reporting, compared with just 45% without the role.
In the simplest terms, an ESG controller helps ensure the integrity of the data an organization reports to regulators and other stakeholders. To do this, they focus on several activities, including:
- Determining which metrics need to be tracked. The ESG controller will work with teams across the organization to understand which metrics are material. They must identify the type of information that would be important for a stakeholder making an investment decision — this is the data the company needs to collect.
- Establishing internal controls. Just like financial controls, ESG controls are designed to minimize the risk of errors. An ESG controller will put measures and systems in place to provide confidence in a company’s ESG data.
- Gathering data from different parts of the company. Collecting and reporting ESG data requires collaboration among many different functions. These can include the sustainability team, legal, operations, logistics, procurement, R&D, real estate, travel, and others, depending on the company and industry. An ESG controller provides leadership and connective tissue among these functions.
- Bringing financial controls expertise to ESG. Organizations need to apply rigorous controls to ensure the reliability of the sustainability data they report to regulators and other stakeholders. An ESG controller with a background in financial controls will understand the steps needed to meet this high bar and will know what’s needed to prepare for auditing and assurance.
- Sourcing necessary software and systems. An ESG controller will be in the best position to identify the technology needed to aggregate an organization’s ESG data. This includes tapping into existing systems, and, for complex functions like carbon accounting, finding the supplemental systems necessary to transpose data that requires special transformation.
- Ensuring consistency. To minimize the risk of errors, companies need a single source of truth and a central repository for their ESG data. The ESG controller acts as the owner of this responsibility — safeguarding the consistency of data that is reported externally to regulators, investors, and the public.
Why is the ESG controller so valuable?
They facilitate collaboration, free up resources, and build confidence in disclosures.
The ESG controller meets several crucial needs. An organization may already have a sustainability team with experience in climate policy or decarbonization, but that team won’t necessarily bring the specialized expertise in financial controls and accounting that’s might be necessary to confidently disclose to bodies like the SEC. An ESG controller will. They’ll already know how to ensure the integrity of data; ideally, they’ll have experience preparing information for assurance and reporting to regulators.
Most importantly, an ESG controller can connect the dots within an organization and facilitate cross-functional collaboration — for example, bridging the gap between the accounting and sustainability teams. Adding a single owner for ESG data also makes it clear that there’s an internal mandate, so teams preparing climate disclosures don’t have to rely so heavily on soft power and goodwill.
Finally, the ESG controller will free up other team members to focus on the story the data tells, so they can rapidly identify climate-related risks and opportunities and build the appropriate strategies to respond. Ultimately, the person in this role can help shape corporate behavior, setting the company up to succeed in the climate transition.
How should an ESG controller get started?
Understanding regulations and establishing governance is key.
A company’s approach to ESG controllership will vary depending on its industry and jurisdiction, but there are some fundamental steps all ESG controllers should keep in mind. First, they need to start with a solid understanding of the organization's reporting obligations. Ideally, they should work with their legal and corporate reporting teams to help keep a pulse on regulatory and policy updates to ensure compliance with all relevant legal requirements.
The ESG controller will need to identify what data needs to be collected or calculated and where data resides within the organization. This will inform the question of who will need to be involved.
“Robust governance structure early on is integral to make sure there’s full alignment.” - Theshan Goble, ESG & Sustainability Controller, S&P Global
What resources are available to help the ESG controller, given how new the role is?
Standard-setters and peers can offer support.
When an ESG controller joins a company, they may be the first person to hold the position, and they’ll often have to forge a new trail. Fortunately, there are resources available to offer support. Controllers can refer to ESG accounting guidance from the Association of International Certified Professional Accountants (AICPA), the Financial Accounting Standards Board (FASB), and the International Organization for Standardization (ISO).
They can also lean on the new framework released by COSO (Committee of Sponsoring Organizations of the Treadway Commission) in 2023. This framework outlines the steps necessary to achieve effective internal control over sustainability reporting (ICSR), applying principles from its Internal Control - Integrated Framework (ICIF), which has become a global gold standard for ethical and accurate financial accounting.
One of the most helpful resources will be their own skills as financial controllers, which will serve them well as they establish ESG controls and procedures. Finally, they can find information and support from peers; a new LinkedIn group for ESG controllers is a great place to start.
Building Resilience Through Data Integrity
The world of ESG reporting is evolving rapidly, but one thing is clear: scrutiny over companies’ sustainability and social impacts will likely only increase. Regulations like Europe’s CSRD, the SEC Climate Rule, and California SB 253 and SB 261 are raising the bar for the information companies share, and they need safeguards in place to ensure reliability and credibility. An ESG controller helps fill this need. By establishing robust internal controls, facilitating collaboration, and overseeing data integrity, they can help organizations mitigate climate risks — and capitalize on opportunities that arise from the transition to a low-carbon economy.
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