Editor's note: Alessio Lolli is Vice President of Enterprise Performance Management for North America at CCH Tagetik, part of Wolters Kluwer in the Netherlands. The views expressed in this article are solely those of the author.

For CFOs of large multinational corporations, new regulations surrounding environmental, social, and governance (ESG) reporting are forming a "perfect storm." Such reporting is complex, time-consuming, and constantly evolving, requiring internal teams, functions, regions, and business units to collaborate in new ways to collect, report, analyze, and ensure the accuracy of vast amounts of data, which is often scattered across different technology systems and spreadsheets.

There are currently 600 ESG standards in effect globally, and the number is growing. In addition to regulators and standard-setters, investors, analysts, customers, and employees are increasingly demanding reliable ESG data. The success or failure of CFOs in ESG reporting carries significant weight, and it is evident that although the momentum of ESG reporting may have slowed somewhat, it is here to stay.

Fortunately, although ESG reporting may be a relatively new challenge, executives facing transformative, "perfect storm"-style reporting requirements is nothing new. To illustrate this point, one only needs to look back at the implementation of the Sarbanes-Oxley Act (SOX) in the early 2000s. Here are three key SOX lessons that today's CFOs can draw upon to navigate the ESG reporting storm:

1. Mindset is paramount: Reporting must go beyond "tick-the-box" compliance

ESG reporting standards cover a much broader scope than SOX, but the objectives are fundamentally the same. Similar to SOX, most ESG reporting standards and regulations aim to increase transparency, drive the development of more reliable methods to ensure data accuracy, and prevent companies from (intentionally or unintentionally) sharing incorrect information with key stakeholders. Both SOX and ESG reporting place a heavy burden on corporate finance teams. However, in the early days of SOX implementation, many CFOs quickly realized that compliance challenges could also present significant opportunities. With this mindset, forward-thinking executives saw opportunities beyond "tick-the-box" and "compliance," using SOX requirements as a driving force to establish new safeguards, processes, and governance practices that support the long-term health of the organization. This mindset is equally crucial for optimizing the potential positive business impact of ESG reporting.

2. Initial ESG data may be imperfect, and that's okay — you have to start somewhere

Many pioneers of SOX compliance will tell you that once they began collecting and processing broader, more accurate financial data, they uncovered significant (sometimes even shocking) weaknesses and gaps. The SOX reporting process seemed daunting, in part because it revealed a multitude of processes, policies, and practices that needed improvement. Financial leaders must avoid becoming paralyzed or overwhelmed by the challenges or risks revealed during the discovery phase when responding to new ESG reporting requirements. Viewing the entire ESG reporting process as an opportunity to reduce risk and uncover new insights can inform business strategy and thereby unlock value.

3. Lead exponential change with a digital-first mindset

Given the high stakes of ESG reporting, it is surprising that KPMG's 2024 ESG Organization Survey found that 47% of companies still use spreadsheets to manage ESG data. The good news is that the same report found that over the next three years, 40% of organizations plan to invest in ESG-specific software, and 37% plan to invest in data collection and management tools. In my view, these investments cannot come soon enough. The technological support available to SOX implementation pioneers at the time was limited, but those companies that quickly leveraged existing corporate performance management (CPM) technology to strengthen financial data collection and reporting and reduce the burden on compliance resources held a distinct advantage. Similarly, financial leaders who accelerate investment in advanced CPM platforms today will be best positioned to drive efficient and rapid progress in ESG reporting. By integrating ESG data through a CPM framework, organizations can automate reporting, simplify data complexity, reduce risk, and comply with the evolving ESG regulatory landscape, while uncovering new opportunities to advance sustainability strategies.

ESG reporting is not the first "perfect storm" CFOs have faced, nor will it be the last. But "perfect storms" are not just challenges — if handled correctly, they can also be opportunities. By treating ESG reporting as an exercise that goes beyond "tick-the-box" and leading with a digital-first mindset, CFOs can harness the power of ESG reporting to build stakeholder confidence, positively influence corporate valuation, and amplify the value they bring to their organizations.