About the Panelists

The second panel of the morning, “ESG,” focused environmental, social, and governance topics facing auditors and their clients. The participants included Alyssa Rade, chief sustainability officer, Sustain. Life, and Laurie Tish, Partner, national practice leader, Moss Adams. The panel was moderated by Soma Sinha, leader of U.S. Assurance Professional Practice and Global Sustainability Standards, Mazars, and member of the ASB’s ESG Task Force, ASB. The comments and opinions expressed at the conference and reproduced here represent the speakers’ own views, and not necessarily those of their employers or affiliated institutions.


The ESG panel discussion began by distinguishing between the similar but distinct concepts of sustainability—“meeting the needs of the present generation without compromising the ability of future generations to meet their own needs”—and ESG, which is “all about enabling stakeholders to understand how an organization is managing risk and opportunity related to various ESG topics or criteria,” according to Alyssa Rade, chief sustainability officer, Sustain. Life.

“The lens of sustainability is all about how the company impacts the external world, whether that’s the social world and community, whether that’s the physical world and the globe, whereas ESG is really about how all of those things impact the company’s performance,” Rade continued. She emphasized that materiality plays a central role in the evolution of regulations and mandatory disclosure about ESG topics—how they impact the company and how the company impacts them. Rade then continued with a brief history of sustainability standards and the “alphabet soup” of disclosure and reporting frameworks.

Rade described the concept of double materiality coming from the European Financial Reporting Advisory Group (EFRAG) and the Corporate Sustainability Reporting Directive (CSRD), which includes not just financial impact, but also how a company impacts the environment, social criteria, and its community. “We all have a shared planet, a shared good, a shared ability to thrive in the limited and finite resources that we have,” she said. “And that’s why mandating double materiality disclosure is important.”

Rade explained: “You are going to go through an exercise of understanding what are the financially material risks that all of these topics pose to my company, versus if you’re thinking about this through the lens of sustainability reporting and disclosure, you’re going to think about, ‘How is my company impacting all of these different topics? And what do we really need to be disclosing against?’”

The Value Proposition

Soma Sinha, leader of U.S. assurance professional practice and global sustainability standards at Mazars, asked the panel how a company can derive value from the ESG reporting process.

Laurie Tish, partner, national practice leader, Moss Adams, answered: “For ESG reporting to be successful and accurate, it does have to be permeated throughout the organization. You have to have internal controls. You have to have communication. You have to have reporting, and you have to have that framework that stretches across operations, accounting, marketing, and the executive C-suite. It needs to be embraced, and policies and procedures and internal controls spread out across the entire organization. It is not going to be successful otherwise.

“I don’t think we have as hard of a sell now to embrace why there is a business case for ESG … it needs to be embraced, so that it is actually improving the profits, improving the reputation, improving the brand, improving the company.” Tish admitted that “greenwashing” is a problem with voluntary, unattested reporting, but also noted that some of her clients face challenges getting suppliers on board.

Before ESG, there was corporate sustainability reporting (CSR), or the “3 Ps” (People, Profit, Planet); Tish stressed that without profits, a company can’t maintain its ESG program because it won’t be in business.

“You really do need to ensure that the programs that are put into place, the reporting that is put into place, the efforts that are going in to capture the data that’s going into that ESG report, are not so costly that you’re not getting the benefit out of it,” Tish said. “I think that’s reassuring to companies that are embarking on this for the first time, because they’re scared of how much it’s going to cost.”

“Now we’re all waiting with bated breath for the SEC to finalize their proposed rules,” Tish continued. “This isn’t a broad ESG rule; it is very narrowly focused on climate disclosures, and it had a lot of detail specific to potential risks around climate change and weather-related events.”

Tish also mentioned recently enacted bills that would apply to companies doing business in California. “You can imagine that scopes in a lot of companies. … It wouldn’t surprise me if we start to see similar rules passed in other states in the not-too-distant future.”

Laying the Groundwork

In the absence of a mandate, many companies decide to use their own framework, Tish noted, choosing items that fit their industry and are most important to their stakeholders. “That’s where accounting firms can help as well. Before you can ever even examine or review a report, sometimes our clients need help just putting it together and getting organized, and understanding what they’re actually going to report on.”

“Data, of course, is so important,” Tish emphasized. “Everything has to be interconnected. You can’t have ESG data over there in some department. It needs to be aligned with and interconnected with all of the other data, including financial data, of the organization.”

“How do you show that your ESG data is pertinent to your organization, to your stakeholders?” Tish asked. “You need to keep it consistent, or people are not going to understand the progress being made. Even if it’s negative, you need to show what are your goals and keep them consistent for a few years. If you’re constantly pulling in different ESG factors every year and rotating them in and out, you don’t have a way to show your progress. … It’s not to say that reports can’t change from year to year—but just that the very important goals stay the same, with the key performance indicators showing progress or lack of progress from year to year.”

“For ESG reporting to be successful and accurate, it does have to be permeated throughout the organization. You have to have internal controls. You have to have communication. You have to have reporting, and you have to have that framework that stretches across operations, accounting, marketing, and the executive C-suite.”

—Laurie Tish

Sinha said that, much was the case with internal controls after the enactment of Sarbanes-Oxley (SOX), she believes that entities will eventually understand the value proposition of putting in place a proper system of internal controls under the SEC’s proposed rule, which may eventually lead to “a fully integrated environment where financial reporting is hand-in-hand with ESG reporting.”

“We talk about risk, and I think it’s helpful to give some tangible examples of what that looks like in practice,” Rade replied. She gave an example from her own practice working in real estate in New York City, where a company would evaluate if its operations face physical risk from increased extreme weather events such as storm surges and floods. “And then what can we do about it? What are the climate related opportunities that we can actually pursue to mitigate that risk?,” Rade added, providing other examples.

“I just want everyone to think about the idea of the audit trail and transparency, because that is what so much of this regulation is requiring,” Rade explained. “There is a big distinction in these regulations around scope 3 emissions. … it’s basically things that happen throughout your value chain that your company doesn’t directly operate or control, but that is supporting its business.” She said that the inclusion of these emissions was an area where there was a lot of pushback on the SEC proposal. “Basically, for any company, 90% of your emissions are scope 3. If you’re actually trying to disclose material risk … you’re missing the boat if you’re not focusing on scope 3.”

After providing some background on the science behind greenhouse gases that underpins carbon accounting, Rade emphasized the challenges of accounting for scope 3 emissions: “The difficulty with scope 3 is, it’s happening outside of your direct control. … The transparency is much more difficult,” Rade noted. “That’s where a lot of the discomfort comes from in mandating the disclosure of scope 3 emissions, because you don’t have control or true oversight over the underlying activity data that is resulting in those emissions.” Sinha noted that any company’s scope 1 and 2 emissions will likely be part of some other entity’s scope 3.


The conversation turned to the assurance of ESG reporting. Laurie Tish noted that “because of the inherent uncertainty and the estimation … for GHG [greenhouse gas] matters, you’re typically going to see a review as opposed to an examination for that data.” Tish continued that “we are working very hard on the Auditing Standards Board ESG Task Force to match up the ISSA [International Standard on Sustainability Assurance] 5000 exposure draft to our existing examination review standards and point out where there may be some holes.”

“If you look at my audit binder for an ESG project, it is going to look exactly the same as a financial statement binder. Some of the procedures are going to be very similar,” Tish noted. “Internal controls are very important. … I stress this more than anything: you have to have an internal control structure, or your data will not be able to be verified. … no matter what unusual thing that you’re looking at, there needs to be internal controls in place, so that as the auditor coming in, I have the ability to verify that information.”