SUSTAINABILITY

are getting more specific. Corporate reporting has undergone a transition in recent years, from more qualitative narratives around green initiatives to financial-grade accounting. With the introduction of requirements and guidance like the European Union’ s Corporate Sustainability Directive and California’ s SB 253, organisations often have to treat non-financial measures with the same precision as financial reporting. Voluntary climate commitments, standalone sustainability reports and unverified claims are no longer enough to satisfy global regulators, debt issuers or institutional investors. Instead, companies need to ensure they produce standardised disclosures that can be backed by double materiality assessments and verified evidence. Organisations that don’ t comply with these requirements can expose board directors and corporate officers to regulatory enforcement, or even statutory fines and litigation risks. CFOs themselves are often having to take primary ownership of ESG metrics and embedding them into financial reporting architecture.

ESTABLISHING INTERNAL CONTROLS To achieve audit readiness, many finance departments are establishing internal controls on sustainability reporting, structured directly on regulated compliance frameworks – with research from Deloitte research‘ The financial services industry’ s answer to ESG regulations and stakeholder demands’ finding that 38 % of financial services executives report that they are integrating ESG into existing Sarbanes-Oxley control environments. But a historical reliance on decentralised spreadsheets, estimated figures and informal operational inputs represents a significant vulnerability for finance leaders. In fact, PwC’ s Global CSRD Survey from 2024 found that 74 % of companies previously said they relied on manual spreadsheets to manage sustainability information – compared to just 27 % who said they used a dedicated sustainability management software. This introduces an elevated risk of human area, untracked modifications and unverified data entries. To manage these control gaps, many modern internal control environments enforce a strict separation of automated data validation routines and systematic line-item traceability across Scope 1, Scope 2 and Scope 3 emission metrics. By bringing carbon accounting directly into response planning software, financial leaders can make sure that every reported metric is able to match up with primary source documentation – such as utility invoices, meter readings and verified supplier disclosures – offering up an uninterrupted audit trail for external auditors, from raw data to final disclosures.

financechief. com

103