The emergence of new climate-related regulation has come in fits and starts: after first being proposed in 2022 the Securities and Exchange Commission’s long-anticipated climate-risk disclosure rule was finally approved in March only to be voluntarily stayed pending legal challenges.

Along the way the rule has faced considerable backlash. But PwC Partner Marc Siegel — who advises clients on ESG matters and was formerly on the Financial Accounting Standards Board and the Sustainability Accounting Standards Board — said in an online discussion that approaching the issue with complacency is a risky strategy given what he effectively sees as the dawn of a new era of climate-risk disclosure.

“In many ways, I think the market has spoken on some of this,” Siegel told CFO Dive’s Jim Tyson. Already 98% of S&P 500 companies voluntarily report ESG data with two thirds of them giving some assurance of their information. Meanwhile, the European Union’s Corporate Sustainability Reporting Directive is set. “The last thing that you want is to not be thinking about bolstering your ability to collect and report this information at scale and then all of a sudden have a rule that comes into place at the end and you’re scrambling to get ready for it.”

Here are 5 takeaways culled from Siegel’s talk Thursday around the core risks and opportunities that complying with this emerging new framework of climate regulation poses for CFOs:    

1. Work holistically to curb costs, avoid waste Siegel advises companies to think of climate risk disclosure reporting as they would any other project and to review what information you already have and plan accordingly. “Think about the SEC rule holistically, with all the other regulations you might be subject to around the world and do the appropriate GAAP analysis in order to leverage what you already might be capturing and reporting on a voluntary basis,” he said. 
2. Avoid ring-fencing Siloing information or efforts is one of the biggest mistakes that trip up companies’ climate reporting initiatives, Siegel said. Avoid thinking about a single rule as if it were the only one that a company needs to comply with and ignoring other potential requirements in other parts of the world, he said. “When you do that you might end up having to redo processes later or grab different information than you originally planned for because you’re just focusing on the SEC rules and then, all of a sudden…you notice ‘Oh no, I’m getting tripped up by the European rule which goes way beyond climate,” Siegel said.
3. Build out a cross-functional team to address ESG reporting Similarly, keeping the effort to comply with regulations siloed within the sustainability department and not leveraging the skills and the capabilities of the finance team itself can also be problematic. A better approach is a team that has representatives from across the entire company. At the same time, the organizational structure that is set up to manage ESG should align with the company’s culture. “If you’re a company that in almost every other way operates in a decentralized way…it won’t make sense to set up a centralized ESG reporting and governance model,” Siegel said.  
4. Steel yourself for a fragmented regulatory landscape The biggest surprise and disappointment Siegel sees companies finding as they embark on their ESG financial reporting is how splintered the regulatory frameworks are. The good news is there was some consolidation around the International Sustainability Standards Board but some companies are wholly adopting the standards while others are “inserting their own flavors in it.” Over the court of the decade, Siegel expects that there could ultimately end up being four different corporate reporting “dialects” that companies will grapple with. 
5. Scope 3 emissions measurement will continue to be a “third-rail topic” Requirements for public companies to disclose so-called scope 3 greenhouse gas emissions were carved out of the final SEC rules. They’ve drawn pushback as reporting of the emissions is so different from the kind of financial reporting companies are familiar with. “Most other 10-K information relates to either reporting about the financial position as of year-end or for the performance of the company over the last fiscal year. Well, scope 3 doesn’t have the same boundaries at all. It includes all the emissions of the company, suppliers, employees and customers in the value chain,” Siegel said. “So I think it’s going to continue to be a third-rail topic whenever any regulators try to touch it.”