ESG (environmental, social, and governance) skills are in high demand! I think this is wonderful news. Why is it happening now? A major reason is that ESG reporting is moving from being a voluntary to a mandated activity in many parts of the world. Even in the voluntary arenas, investors are finding that ESG metrics provide valuable information for their risk assessments.
The mandatory requirements will soon appear in Europe and the US. In Europe, the Corporate Sustainability Reporting Directive reporting requirement is expected to affect some 50,000 companies and comes into effect in 2024 for many large EU companies and some non-EU companies. In the US, the Securities and Exchange’s (SEC) proposed climate change rule (expected fall 2023) will require large publicly listed US companies to submit information about their greenhouse gas (GHG) emissions. Of particular note is that major suppliers to the US federal government will be required to submit their environmental impacts to CDP. This is expected to be finalized sometime in 2024.
At the state level, in September 2023 California passed two climate disclosure bills, SB-253 Climate Corporate Data Accountability Act and SB-261 Greenhouse gases: climate-related financial risk. This is relevant for the entire US because due to the size of its economy, California laws have frequently been the harbinger for many states in the rest of the country.
Starting in 2026, SB-253 will require public and private businesses that earn more than $1 billion annually and which operate in California to publicly disclose scope 1 and scope 2 greenhouse gas emissions and to obtain assurance on these reports. In 2027, all their GHG emissions will need to be disclosed. This will affect about 5300 companies.
For public and private companies that earn more than $500 million and operate in California, SB-261 will require them to prepare a climate-related financial risk report. In this report, they must disclose their climate-related financial risk and measures adopted to reduce and adapt to climate-related financial risks. No assurance is required. This will affect around 10,000 companies.
In the Allianz 2023 Risk Barometer, 2,712 risk management experts from 94 countries and territories ranked the lack of ESG expertise and resources as one of the top four ESG risk trends that are of most concern to their companies. This coincides with the multitude of ESG reporting requirements facing companies. The demand for people with ESG skills is far greater than the supply.
Responses from the Big Four accounting firms illustrates how important ESG expertise has become. EY, PricewaterhouseCoopers, Deloitte, and KPMG are spending billions to assist clients measure their GHG emissions, achieve climate and diversity pledges, overhaul supply chains, and comply with forthcoming regulations. In particular, KPMG said it would spend more than $1.5 billion over three years to expand its ESG practice and train its 227,000 workers across the Americas, Europe, and Asia Pacific. PwC unveiled the largest push of Big Four accounting firms, with plans to invest $12 billion over five years and make 100,000 new hires in ESG and artificial intelligence. Deloitte announced a $1 billion investment in its sustainability and climate practice, including offering training to all 340,000 of its employees.
Trained personnel are in great demand, and the courses I will be delivering should help you or others in your company acquire these skills.