Accounting for emissions

Companies unwilling to report climate impacts could be left behind, says KPMG’s climate leader

Companies unwilling to report climate impacts based on new ESG regulation could be left behind.
Companies unwilling to report climate impacts based on new ESG regulation could be left behind.

Editor’s note: This Q&A originally appeared in the ESG issue of Workflow Quarterly.

In March, the SEC released proposed regulations to enhance and standardize climate-related corporate disclosures. A key part of the new proposal is that disclosures would have to be independently verified. Enter Arun Ghosh, climate data and technology lead for Big Four accounting firm KPMG.

Since 2018, Ghosh has helped numerous companies track their emissions using KPMG’s proprietary, patent-pending climate accounting framework. (This interview has been edited for clarity and length. The opinions expressed are those of the interviewee and do not necessarily represent the opinions of KPMG.)

Q
How have companies reacted to the SEC’s proposed regulations?
A

A majority of the market won’t wait for this [to go into effect] because they have global supply chains and operations and they can’t just sit around. That’s why the UK and the EU markets [that already have regulations] are so critical, because if you solve for them, you can bring most of it stateside. The others are just starting out or waiting and watching to see what happens.

Q
Those others, what do they need to know to get started?
A

If you look at Biden’s infrastructure bill, which has a massive level of ESG incentives, if you look at California, New York, Massachusetts, and other states that have enacted similar regulations, there is a lot of [ESG] momentum both legislatively and privately with investors. For those companies that haven’t started, maybe we don’t make this about a wake-up call, instead it’s more about awareness.

The moment you bring awareness, the light bulbs go on. Almost half of our conversations start with awareness. We’re brought in and the client says, ‘You know, we’re hearing about ESG, but we don’t know what to do.’ We explain why E, S, and G matter in their world. As the awareness builds, so does the interest in effecting change. Because climate is not an optional thing, social economic investment is not an optional thing for companies anymore.

Q
The Republicans may take back Congress this year and maybe the White House in 2024, what will that mean for ESG in the United States?
A

There could be some scaling back. The challenge will be that companies are going to voluntarily want to disclose this information for stakeholders and stockholders. Maybe the government takes a minor role, because the wheels are already in motion.