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ESG Disclosure Rules to Be ‘Transformational': KPMG Audit Leader

Aug. 17, 2021, 9:40 PM

KPMG LLP’s audit leader urged companies to prepare for expanded ESG reporting rules in the U.S., comparing the potential disruption to the Enron-era Sarbanes-Oxley Act.

“I don’t want to be an alarmist,” said Scott Flynn, the firm’s vice chair for audit, speaking of coming rules for disclosing environmental, social, and governmental issues. “But this really is a transformational event that’s going to have an impact on companies’ internal processes and how your companies document and attest to critical internal data.”

  • Companies will need to draw on staff from across finance, human resources, and operations to respond to expanded disclosure mandates expected to initially address climate change, Flynn said during a webinar KPMG hosted Tuesday.
  • The Securities and Exchange Commission is expected to release rules this fall that would expand climate-related reporting. Many companies voluntarily report greenhouse emissions and related carbon reduction goals, but information in SEC filings requires more rigorous steps to ensure it can withstand auditor scrutiny.
  • The 2002 Sarbanes-Oxley Act strengthened auditor ethics and corporate board oversight. It also mandated internal controls testing, which was expensive and time consuming to adopt.
  • Similar ESG disclosure rules under consideration in the European Union could require companies operating there to have such information reviewed by auditors. It isn’t clear whether SEC rules will require some level of auditor review.

To contact the reporter on this story: Amanda Iacone in Washington at

To contact the editors responsible for this story: Jeff Harrington at; Vandana Mathur at