What can you lease? An asset. What has a carbon footprint? An asset. 

Not long ago, accounting teams around the world began to comply with ASC 842 and IFRS 16. The process involved painstaking data collection for each individual asset owned by a company.  

Now, a similar but more extensive exercise is underway to collect Environmental, Social, and Governance (ESG) data. ESG accounting promises to be a much larger project. But the lessons learned from lease accounting compliance will prove invaluable. 

Lesson 1: Don’t Delay 

Reflecting on the ASC 842 transition, many lease accountants at public companies regret not starting sooner. 

Even before the guidelines were finalized, proactive companies began organizing working groups, consolidating information silos and collecting lease data into central repositories. This practice turned out to be an enduring best practice amidst industrywide changes.  

Companies should adopt a similar approach for ESG accounting standards. Regardless of the form of the final standard, we will likely need to collect extensive data. 

Most companies took the lease accounting transition down to the wire. Some even ran out of time and had to implement costly temporary solutions that required reworking later. By starting early, companies can avoid pitfalls and ensure a smoother transition to comprehensive ESG reporting. 

Is ESG compliance a good thing for lease accountants?

Our experts says YES!

Is ESG compliance a good thing for lease accountants?

Lesson 2: Involve the Right Stakeholders 

Just as with lease accounting, the information required for ESG reporting will be controlled by various groups within the organization.  

Opening lines of communication with these groups is crucial. And to frequently update about stakeholders about what to expect.  

Common stakeholders involved in ESG reporting include: 

• Real Estate and Property Management
• Logistics and Maintenance
• IT – Servers, Printers
• Procurement and Fleet Management
• Legal
• Financial Planning
• Accounting
• External Reporting
• Investor Relations
• Treasury
• Tax
• HR
• Sustainability
• Energy Management

Each of these groups holds pieces of the ESG data puzzle. Bringing them together early in the process ensures two things:  

• All necessary data is collected.
• No gaps exist in the reporting. 

Collaborative efforts across departments will lead to a more comprehensive, accurate ESG metrics and have a more positive impact on the organization as a whole. 

Lesson 3: It’s All About the Data 

Enterprise companies need the capacity to collect high-quality, auditable ESG data. They must have the proper controls in place to ensure accuracy and completeness. This data must then be consolidated into central repositories in an organized format that enables effective reporting. 

Introducing the CoStar ESG Data Vault

Protect Your Portfolio with ESG Reporting

Introducing the CoStar ESG Data Vault

Moving Forward 

ESG reporting will ultimately lead to greater transparency and accountability, benefiting not only individual companies but the broader business landscape as well. However, the overall cost and burden on your company will depend on the steps you take now to set the stage. Investing in ESG software with robust data collection and management systems will pay off in the long run, providing a solid foundation for ESG reporting and helping to avoid the pitfalls of hasty, last-minute data gathering. 

The transition to ESG reporting is a significant undertaking. But the lessons learned from lease accounting compliance offer a valuable roadmap. By starting early, involving the right stakeholders, and focusing on data quality, companies can navigate this transition smoothly and set themselves up for success.