SEC Climate Ruling: the early bird gets the edge

Organizations need to integrate ESG into their core business strategies. CEOs can respond to this pressure by investing in an effective ESG strategy that considers all aspects of business, including operations, accounting, and tax implications.

At KPMG, we understand ESG engagement must drive financial value. We work collaboratively to understand where strategy can be prioritized and will deliver out-sized gains while ensuring regulatory compliance.

Eric Tresino, KPMG Managing Director Advisory

ESG reporting goes beyond compliance to tell a company’s ESG story backed up by financial and non-financial information. Doing so enhances stakeholder trust and drives business resiliency. It’s not just the SEC, but European, state, and local requirements that create intersecting reporting requirements potentially affecting both public and private companies in the U.S. Companies that establish a mature ESG strategy underpinned by well-controlled data will have a competitive advantage to not only meet these expectations but stand out to stakeholders.

We help our clients navigate this changing landscape and ensure that their reporting meets the highest standards of transparency and accuracy. By embracing the SEC’s climate rule companies can build trust with their stakeholders, differentiate themselves in the marketplace, and drive long-term value creation.

Sam Jeffery, ESG Reporting Leader

Having a strong reporting strategy helps your company achieve timely and rigorous ESG reporting.  Our ESG assurance services will enable your company to deliver confidence to all of your stakeholders.  Our assurance services include limited or reasonable assurance of greenhouse gas emissions, diversity and inclusion metrics, green/social bond use of proceeds, GRI and SASB reports, as well as management developed KPIs.

If you are uncertain as to how your company stacks up against the SEC’s climate proposal, our Ready for Assurance service is a one-time review of necessary base company competencies that can be used to verify whether the conditions necessary for assurance to be performed for an entity over ESG reporting have been met.  In particular, the KPMG Ready for Assurance service examines an organization’s criteria for ESG measures and determines if they have the evidence that would be required to support the disclosures they want to make, regardless of the reporting framework.

We are crossing the Rubicon. Climate-related financial disclosures will not be theoretical, but likely a baseline expectation.

Maura Hodge, ESG Audit Leader

It’s not a surprise that a recent KPMG report finds that reducing emissions is most associated with higher share prices. Climate change is not just a societal challenge with investors, talent and customers demanding action, but it poses operational and financial risks for businesses. Not living up to commitments can have a reputational impact and can provoke a backlash from stakeholders. And, of course, failure to act means falling short in meeting the climate challenge. To reach goals of any kind, organizations need roadmaps, including near-term milestones and actions to drive a sense of urgency.

I believe that climate change is one of the most pressing issues of our time, and businesses have a critical role to play in addressing it. The SEC’s climate rule represents an important step forward in increasing transparency and accountability around climate-related risks and opportunities. As leaders, we have a responsibility not only in reducing our carbon footprint but also to support policies and initiatives that promote nature-based solutions and the decarbonization of our economy.

Mark Golovcsenko, ESG Strategy Leader

Social impact accountability continues to rise in importance. Consumers are focusing more on a company’s ESG profile. And stakeholders are increasingly requiring a company’s diversity, equity and inclusion metrics, emissions reduction, net zero targets and other ESG-related data when doing business with a company. Engaging with ESG is quickly becoming the cost of doing business. And those who don’t engage will lose out – financially and reputationally.

Equity and doing right are not only moral imperatives but also strategic ones given the potential impact of ESG actions on people, communities, and organizations. Companies that lead in this space will reap outsized rewards.

Zoe Thompson, ESG Social Strategy Leader

At KPMG, we think like an investor, offering better insights that result in better deal outcomes. Drawing on deep sector experience, keen business intelligence, and global resources, our approach combines data, analytics, and technology to maximize deal value and move at deal speed. Our proprietary methodology and tools bring issues that should be examined more closely right to the surface, even within compressed deal timeframes, to give you the confidence to make the best life cycle management decisions.

As business leaders, we understand the importance of delivering value to our clients and shareholders. With the SEC’s climate rule, we see an opportunity to create value by integrating climate considerations into our deal-making processes. By assessing climate-related risks and opportunities, we can help our clients make more informed investment decisions and drive long-term value creation. At the same time, we recognize that addressing climate change is a critical societal change, and we are committed to doing our part to promote sustainability and help transition to a low-carbon economy

Steve Arnold, ESG Financial Services Leader

Businesses are increasingly turning towards a “circular economy model” to help manage regulatory requirements and create sustainable growth for the company. The benefits of this approach include greater efficiency and profitability, less waste and cost, better innovation and stronger relationships with customers. If companies adopt the following three drivers successfully, circular economy brings value to their business.

By requiring companies to disclose their climate-related risks and opportunities, the SEC is creating a powerful incentive for businesses to adopt circular business models that prioritize waste reduction, resource efficiency, and closed-loop systems. Companies can position themselves for long-term success in a rapidly changing business landscape by embracing the circular economy and the SEC’s climate rule.

Blythe Chorn, ESG Circular Economy Leader

We help our clients identify and measure ESG risks, affect change and reduce impact across the end-to-end supply chain, ultimately supporting them reach their ESG ambitions and positively impact our world. Supply chains are complex networks, which in our globalized world span numerous geographies, climates, governments and societies to connect people to the goods and services they desire. It’s therefore no surprise that these interdependent, multi-nodal networks are challenging to understand and control. We help our clients identify and measure ESG risks, affect change and reduce impact across the end-to-end supply chain, ultimately supporting them reach their ESG ambitions and positively impact our world.

As companies seek to address their climate-related risks and opportunities, the sustainability of their supply chains has become an increasingly important consideration. The SEC’s climate rule encourages companies to adopt more sustainable supply chain practices, such as responsible sourcing, energy efficiency, and waste reduction.

Rob Barrett, ESG Sustainable Supply Chain Advisor

ESG is now a chief measure of corporate behavior, with tax playing a key part due to its linkages to environmental, societal, and governance benefits. Tax departments are being challenged to adjust tax strategies and affairs, and to ramp up reporting processes to address transparency demands, demonstrate commitment to a sustainable approach to tax, and take advantage of green tax incentives.

We are closely monitoring the evolving tax implications of the SEC’s climate rule and working with our clients to ensure that their tax reporting accurately reflects their climate-related risks and opportunities. By taking a proactive approach to tax and the SEC’s climate rule, companies can not only enhance their financial reporting but also manage their tax risks and opportunities more effectively.

Brett Weaver, ESG Tax Leader

ESG reporting goes beyond compliance to tell a company’s ESG story backed up by financial and non-financial information. Doing so enhances stakeholder trust and drives business resiliency. It’s not just the SEC, but European, state, and local requirements that create intersecting reporting requirements potentially affecting both public and private companies in the U.S. Companies that establish a mature ESG strategy underpinned by well-controlled data will have a competitive advantage to not only meet these expectations but stand out to stakeholders.

Ensuring ESG reporting is driven by strategy rather than viewed as simply a compliance exercise is an overarching responsibility of corporate boards. Boards are expected to be transparent about how they are overseeing risks and opportunities and companies will need to be clear in their disclosures.

Steven Estes, ESG Governance Leader