Key takeaways:
- Regulatory expansions are promoting changes in ESG team structure and size, and the need to ensure compliance is helping ESG leaders make the case for more resources.
- In conjunction with new reporting mandates, there’s a growing focus on ESG data roles. As a result, some companies have added ESG controller roles and additional headcount for reporting and data strategy.
- Soft skills will continue to be valuable, particularly when it comes to effectively communicating and engaging with your key enterprise partners.
2024 marks a turning point for ESG (environmental, social, and governance), as a wave of mandatory climate disclosure requirements shape the future of this corporate function.
On March 6, the SEC (Securities and Exchange Commission) voted on its highly-anticipated climate disclosure rules, shifting climate reporting from a primarily voluntary practice to an enforced standard.
The expansion of mandatory disclosures, like those passed by the SEC or the Corporate Sustainability Reporting Directive in Europe, is a trend likely to continue.
How can we expect these changes to shape corporate ESG programs of the future?
Regulatory Expansions Will Continue to Prompt Internal Growth
Two years ago, ESG & CSR Board members came together in our confidential community to discuss how their teams were evolving, and the consensus was they were growing.
While team size and structure varied widely, many members reported adding additional headcount to their teams, allowing them to work on projects that had been on the back burner for years.
Perhaps unsurprisingly, many of those new roles were focused on ESG data and reporting. Several members shared that the “what ifs” caused by an increasingly volatile regulatory landscape have meant more support for increasing their available resources.
“We’ve started talking and thinking about what our team could look like in five years. I think it’d be up to us to make the business case to get to that ideal state between now and then. The regulatory changes are going to be a big part of that business case.”
Trent Riley, Director of ESG Reporting and Analytics at AbbVie
Today, increasing geopolitical regulations are still prompting transformations in corporate ESG programs.
At the start of the year, the ESG & CSR Board hosted a panel discussion, The State of ESG in 2024, where panelists shared how they’re thinking about the future of their teams.
Trent Riley, Director of ESG Reporting and Analytics at AbbVie, said they haven’t made headcount adjustments as a result of legislation yet, though they have utilized third-party consultants.
It’s likely, however, that regulations will be the vehicle for securing resources looking ahead, according to Trent.
“We’ve started talking and thinking about what our team could look like in five years. I think it’d be up to us to make the business case to get to that ideal state between now and then. The regulatory changes are going to be a big part of that business case,” shared Trent.
In contrast, Daniel Pellegrom, Director of ESG and Corporate Responsibility at Leidos, shared that they were in the midst of the hiring process at the time of the panel discussion.
“We’re thinking more about geopolitical risk and regulation and looking for someone who can really track this,” Daniel said.
Evolving Your Team to Navigate Integrated Reporting Requirements
As sustainability rapidly becomes more of a financial discipline, many are restructuring their ESG teams to meet these heightened expectations.
ESG & CSR Board members recently discussed integrating ESG and financial reporting, and the impact it’s having on their teams and staffing.
Members in attendance asked if anyone was actually bringing on ESG controllers, like the Big 4 seem to be pushing for. The role may have been virtually nonexistent just a few years ago, but today, it’s being hailed the “hottest new job in sustainability” by organizations like GreenBiz and PwC.
A few members said they were, but many shared that they’re still watching this development. However, they are changing team structures and adding headcount around ESG reporting and data strategy. The high level takeaway was: This is a shared responsibility at most companies involving multiple functions from ESG to internal audit, finance, HR, and more.
Additionally, instead of adding an ESG controller role, several said they are standing up senior-level working groups that ESG leaders are co-leading with internal audit, controller, or finance leaders.
These working groups monitor voluntary reporting and regulatory compliance and prepare for increased data governance and auditing needs that are likely to arise soon.
“We’re trying to make sure that we’re not just looking at where we are currently, but where the company is going.”
Daniel Pellegrom, Director of ESG and Corporate Responsibility at Leidos
During the panel, Trent, Daniel, and Andrya Clark, Senior Director of Sustainability at Smith+Nephew, shared details of similar committees dedicated to tracking the regulatory landscape.
Daniel shared that they specifically leverage a cross-functional “Tiger Team” that encompasses folks from operations, international business, legal, controllers, U.K. team members, and more.
This team meets monthly, whether there’s something specific on the agenda or not, and even if it’s determined that a piece of regulation may not immediately apply to them, they continue to stay on top of it.
“We’re trying to make sure that we’re not just looking at where we are currently, but where the company is going,” Daniel said.
Softer Skills Are Just as Valuable For Your Team
It’s clear the ESG space is becoming more technical and complex every day, but panelists also advised those in this industry not to overlook the value of soft skills.
In particular, Daniel said having team members with strong written and verbal communication and skills, and the ability to influence others will be paramount to keeping stakeholders engaged long-term.
“We all know how CSR and ESG can be,” Daniel said. “Sometimes there’s some soft influencing that needs to happen.”
Not only are these softer skills valuable for securing long term buy-in, they’re also essential to communicating with and educating your internal partners. Those in ESG are often in the weeds of their companies, so it’s important to have members of your team capable of understanding and disseminating complex topics.
This skill is particularly helpful when working with your supply chain team, which Daniel referred to as one of your most important enterprise partners.
Andrya echoed this sentiment, and said at Smith+Nephew, they have a dedicated CSR lead within procurement who works with category manners and suppliers directly. That individual helps answer their questions, perhaps regarding Scope 1 and Scope 2 reporting.
“We definitely have a dedicated person in procurement to do that — to speak the language,” Andyra said. “To Daniel’s point earlier, they can put that information in the right terms, where maybe as a sustainability person, that’s not my language.”
Similarly, during ESG & CSR Board members’ private discussion on team structure, they made it clear that regardless of whether a team operates under a more centralized or dispersed team structure, one common theme got echoed again and again: collaboration is critical.
They said they’re leaning into cross-functional teaming more than ever with HR, legal, compliance, supply chain managers, comms, just to name a few, in order to work towards our ESG goals and accurately report on our progress.
