Things are changing - be prepared

Nobody likes to be told to "stay in your lane", but when lanes are shifting this abruptly and quickly, it is the only thing to do.

As the ESG space makes the transition from social to regulatory license to operate; we must recognize that while losing market favor often has a powerful impact on the business, losing the regulatory right to operate can have an more immediate, more lasting and potentially permanent impact. It can also come with financial consequences far beyond those of lost revenue.

losing regulatory favor can have a more immediate, more lasting and potentially permanent impact

Just as ESG is an overarching umbrella term for many of the functions contained without throughout an organization, the role of the Chief Sustainability Officer will require CSO's be even more well versed and well integrated with the regulatory, investor relations, legal, accounting, risk management, strategy, communications and HR. They have to know enough to manage the different expectations but also know when it's time to listen to experts within their organizations or advisory firms.Advisory firms are going to have to change their approach to ESG and sustainability.

In blunt terms, it's time for those that have been focused on the storytelling aspect to prepare to cede responsibly for the content (if not the presentation) of the tables and charts in the back of the sustainability report* just as with for annual reports.The role of strategic advisers will not change is just that we will be able to use better data with which to inform our suggestions and management decisions. And that means not only understanding what is required from a regulatory standpoint but also being able to align recommendations with the long-term business strategy. If an organization is in a growth mode for example, an intensity based emissions reduction target may be more appropriate than an absolute one (as long as that does not run afoul of any regulatory reporting requirements to which the organization is subject).

It will no longer be a case of picking that which tells most favorable story but rather ensuring what you measure and report satisfies the rules and contextualizing it that so people understand what you're doing, how it meets their expectations as well as your organizational goals.

The ESG profession shift, and for many companies it has already shifted, is being driven by the regulatory requirements that are being put in place around the world. The role for financial professionals including internal auditors, accounting, finance, regulatory affairs legal, and external accounting firms is going to increase - and they are going to be playing in some unfamiliar lanes.

Those who have been in those lanes are going to have to yield and embrace the additional professionals working in the space but also the additional support that this brings. All this is part of why I went to work for an accounting firm. But I say it again, even though I no longer do, based on more than 25 years looking beyond the horizon in this space.

* For as long as there are separate sustainability reports.