To date, Environmental, Social & Governance (ESG) reporting has been voluntary. The SEC has released formal reporting regulations on ESG that will require companies to formally disclose climate-related financial risk in their financial statements.
How do organizations of any size plan for the governance segment of ESG?
For small organizations, it may be difficult to assess if this is something a firm of this size “really” needs? Likewise, private Companies may or may not have an Internal Audit department, and have varying levels of SOX Compliance requirements. To help navigate the nuances of ESG reporting, Pamela Stacey, MBA has put together checklists of the items that companies of any size need to consider:
ESG for Small Public Companies
(Less than $50 million in revenue; fewer than 100 employees)
- Engage the Board
- Appoint a program manager
- Know SEC dates
- Align strategy and risk
- Identify & mitigate risks
- Choose standards
- Map processes & controls
- Monitor & test
- Ensure Board oversight
- Explore eco-friendly actions
ESG for Mid-Size Public Companies
(Between $50 million and $1 billion in revenue; 100 – 1,000 employees)
- Meet with the Board to address ESG strategy
- Form an ESG team
- Comply with SEC reporting deadlines
- Align company strategy with ESG objectives
- Identify and address ESG risks
- Follow relevant regulations and standards
- Map processes and establish ESG controls
- Integrate ESG controls into SOX Program
- Monitor control execution and testing
- Board oversight of ESG program
ESG for Private Companies
- Identify the ramifications if ESG is not integrated into the Company
- Consider the Company’s future plans: Going public, M&A activities, or government contracts
- Discuss ESG approach with the Board of Directors
- Create an ESG committee/team or assign an employee to manage the program
- Align Company strategy objectives and risk appetite with ESG goals
- Determine relevant regulations and standards for compliance
- Monitor control execution and develop a testing strategy
- Ensure oversight of the ESG program by the Board of Directors
