Article
Fast approaching climate-related risk and reporting requirements impact the middle market
What does this actually mean and how can your organization prepare?
Aug. 23, 2023
Middle market organizations may unknowingly face profitability and compliance issues with looming climate-related risk and reporting requirements. In the media, climate-related reporting and other looming regulations look to only impact public entities, but that’s not the case. There are related downstream effects and stakeholder pressures on private entities to evaluate risks, report on climate data and respond to ESG questionnaires. Action is needed and it goes beyond compliance and reporting. Private organizations can leverage ESG and sustainability for data and reporting readiness and to protect and enhance value.
Baker Tilly ESG specialists discuss the impact of proposed climate-related disclosures and what the middle market is doing today. Read the Q&A below to understand what this actually means for your organization and what you can do to prepare.
Q&A
1. What do we hear from clients? How are they preparing and responding to ESG risks?
Clients are facing pressures from both internal and external stakeholders to track, manage and report ESG and sustainability goals and progress. As a result, we work with clients to help them understand the risk areas specific to their organization and their market. Most of the time, incorporating climate-related risk mitigation into their existing risk management processes is the first step. After taking those first steps, our clients see the opportunity beyond compliance and risk management. Building a sustainability strategy yields value and revenue creation. Learn more about aligning ESG risks with your existing ERM program.
2. What percentage of our middle market client base is under the initial or developmental stage?
Most organizations are just getting started. We see about 60-70% of our clients are in the initial or developmental stage of their ESG growth journey. Learn more about ESG maturity and the importance of understanding your organization’s current state.
3. How do I get started on my ESG and sustainability journey?
Evaluate your current state. You are likely already addressing many ESG-related elements within your current operations. Next, determine what is material, or valuable, to your organization and stakeholders. Then you can build your plan for the future. See guiding questions and learn more about the phases of ESG maturity.
4. What regulatory requirements apply to private middle market organizations?
While private middle market organizations will not be directly impacted by the proposed SEC climate-related disclosures or other regulations, there are related downstream effects and stakeholder pressures on private organizations to report climate-related risks and data. Other mandatory reporting regulations include the Corporate Sustainability Reporting Directive (CSRD), Sustainable Finance Disclosure Regulation (SFDR) and Federal Acquisition Regulation Climate-Related Disclosure Rule (FAR). These regulations are redefining the need for organizations to formalize their ESG capability. To better understand if your organization is impacted,
ESG and sustainability
Going beyond responsibility to value and opportunity, we provide comprehensive and industry-focused environmental, social and governance (ESG) and sustainability advisory and assurance from development to execution.
How mandatory regulations are shifting the global ESG and sustainability reporting landscape
The global ESG and sustainability reporting landscape is shifting from voluntary reporting to mandatory disclosure. The most impactful of these regulations include the SEC’s proposed climate-related disclosure rule, CSRD, SFDR and the proposed FAR amendment.