ESG is not just an investment for federal agencies; it’s an opportunity

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This content is sponsored by KPMG.

La Poste recently doubled its order of electric vehicles; four bipartisan senators introduced a bill asking agencies to develop strategic plans to manage and recycle electric vehicle batteries; and the Thrift Savings Plan will soon introduce environmental, social and governance (ESG) funds into the Federal Employees Retirement Plan, throughout the year since President Biden issued the Executive Order on Financial Risks in the climate. In fact, President Biden…

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This content is sponsored by KPMG.

La Poste recently doubled its order of electric vehicles; four bipartisan senators introduced a bill asking agencies to develop strategic plans to manage and recycle electric vehicle batteries; and the Thrift Savings Plan will soon introduce environmental, social and governance (ESG) funds into the Federal Employees Retirement Plan, throughout the year since President Biden issued the Executive Order on Financial Risks in the climate. In fact, President Biden has issued nearly 30 executive orders related to ESG topics.

Federal agencies are adopting concrete measures in favor of ESG. With spending of about $3 trillion a year in the largest federal agencies, the federal government is larger than the largest publicly traded corporations in the world. Additionally, the government is the largest employer in the United States. The government should pave the way for a more sustainable future.

“ESG is not just a challenge, but an opportunity to unlock value and help transform government operations and even its mission,” said Corinne Dougherty, audit partner at KPMG IMPACT. “There is an upfront cost, but in the long run the government can save resources that can then be spent on other mission-critical needs.”

For example, Dougherty said, the Department of Defense recently released its own climate strategy. One thing he understood was the goal for tactical vehicles to be fully electric by 2050, in support of the president’s goal of net zero emissions in the United States by 2050. But that won’t reduce just the costs to the DoD by reducing its reliance. on fossil fuels; it will impact the DoD mission. Currently, fuel supply chains in combat zones are crucial and require the protection of soldiers. But if everything is fully electric and battery operated, that eliminates the need for convoy fueling. This reduces the need to put these soldiers at risk, and they can then be reassigned from convoy protection duty to other mission-critical duties.

“Each agency has a different mission based on their ‘industry’ and operations,” Dougherty said. “So they should really think about how a strong ESG strategy not only helps reduce costs, but how can it help their mission, which can ultimately benefit citizens, as well as agency workforces.”

Currently, about 20 agencies have developed specific plans on how to adapt to climate change, and these agencies have begun to implement these plans. But there’s a crucial step that needs to happen in between: the government needs to figure out what metrics it’s going to use to track those efforts and how it’s going to report them. For example, Dougherty said a recent White House fact sheet mentioned that an interagency task force is identifying and deploying tools and data systems to measure, monitor, report and verify carbon dioxide emissions. carbon, methane and other greenhouse gases.

Dougherty also said that in addition to monitoring and measurement, disclosure and reporting will be essential to achieving the goals set out in the executive order. Additionally, gaining assurance from these reports is critical to building trust, accountability, and public confidence in the achievement of the U.S. net zero goal, because what gets measured gets managed.

“Does it really depend on the data they’re using?” What are the ways to aggregate data? ” she says. “The DoD has operations all over the world; how will they accumulate, for example, greenhouse gas emissions and ultimately report them? Are the data complete and accurate? Ultimately, the government will need to track its greenhouse gas emissions to determine if the changes it has made to reduce greenhouse gas emissions are actually in place and working. Data will need to be complete, accurate and reliable for the government to make informed decisions. Having high quality reporting and controls around the data will be really important for the government to make decisions in the future.

In other words, there needs to be a whole-of-government standardization of metrics. One way to do this, Dougherty said, is to borrow lessons learned from the agency’s chief financial officers. Because the CFO’s office already has very similar processes and controls around its financial statements.

With those measures in place, Dougherty said federal agencies will be able to realize opportunities in another area: their workforces. As a new generation enters the workforce, they want to work for organizations aligned with their own values, she said. And while federal agencies have recently made diversity, equity, inclusion and accessibility a priority, people are largely waiting to see what the results of that commitment will be.

Upholding this commitment to diversity, equity and inclusion is an opportunity for federal agencies to increase workforce diversity, which will help them develop the skills needed for the future.

“ESG really impacts government and government impacts the broader economy and citizens,” Dougherty said. “This is not just a subject for the private sector. When you think about the size and scope of the federal government, the government should lead by example.

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