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News

SEC’s New Climate-Disclosure Rules Will Likely Lead to More Business for Accounting Firms

By:
S.J. Steinhardt
Published Date:
Mar 18, 2024

The U.S. Securities and Exchange Commission (SEC) has estimated that its new climate-disclosure rules will lead to increased spending by public companies on external service providers—by as much as $907 million a year, an 18 percent increase over current levels, Reuters reported.  Big Four and other large accounting firms could benefit the most, 

"We anticipate more and more that our clients will be asking us for help" preparing so-called 'attestation' reports required under the new climate-disclosure rules, said Amy Brachio, global vice chair for accounting firm Ernst & Young, in an interview with Reuters. EY and other big audit firms could have an edge because corporate financial officers will now be responsible for climate reports, and they are used to working with firms like hers, she added. Much of the emissions reporting is now overseen by corporate chief sustainability officers, Reuters reported.

External service providers other than the big accounting firms, such as assurance firms, could also benefit from the new rules, according to Reuters. The leading assurance firm, Apex, boasts a 20 percent market share among S&P 500 companies for this type of work, Reuters reported, citing global CEO consulting and advisory firm Teneo.

Beth Wyke, global head of corporate assurance at the second leading assurance provider, ERM CVS, said that it has over 200 clients, mostly publicly traded companies, and expects to grow as the new rules from Washington and other jurisdictions take effect. She noted that the SEC increased the number of standards that could be used to assure data, making it easier for companies to hire firms like hers outside the traditional audit industry. "There’s room for everybody," she told Reuters.  Apex declined to comment.

Apple uses Ernst & Young as its auditor but hired Apex to assure parts of its latest environmental report, Reuters reported. Tim Weiss, CEO of carbon accounting software maker Optera, said that, while companies new to climate reporting might go with a traditional audit firm to handle the new disclosures, "a company like Apple might have a different calculus."

Apple said it supports emissions disclosures but did not address whether it would continue to use both Apex and Ernst & Young, according to Reuters.

Reuters also included a chart, based on data from Tenio, that indicates the executives who have primary environmental, social and governance (ESG ) oversight responsibilities. The top two are chief sustainability officers (27 percent) and chief executive officers (18 percent). Only 2 percent of chief financial officers have ESG oversight responsibilities.