2024OfficeofFinanceOutlook:EnvironmentalImpactReportingExaminingtheGrowingSignificanceofLeaseControlsasComplianceStandardsEvolve1TableofContentsExecutiveSummary32023EnvironmentalImpactReportingAnalysis5CommonEnvironmentalImpactReportingChallenges&HowtoOvercomeThem7TheEvolutionoftheOfficeofFinance9Conclusion:SelectingtheRightFintechPlatformtoSupportEnvironmentalImpactReportingNeedsin2024112024OfficeofFinanceOutlook:EnvironmentalImpactReporting2ExecutiveSummaryThroughout2023,interestinEnvironmental,SocialandGovernance(ESG)reportingandgoalsettingsurged,transcendingindustryboundariesandreshapingcorporatelandscapesasorganizationsincreasinglyprioritizedsustainabilityandresponsiblebusinesspractices.Multiplefactorsaredrivingthistransformationinglobalenterprisebusinesses:PotentialInvestorEmployeeProfitabilityRelationsRetentionS&PGlobalfoundthatDeloittereportedthatAccordingtoMarsh&53%ofrevenuesoftheESG-mandatedassetsMcLennan,organizations500largestUScompaniescouldmakeuphalfofallwiththehighestemployeeand49%ofrevenuesofprofessionallymanagedsatisfactionhadESGscoresthe1,200largestglobalinvestmentsby2025.14%higherthantheglobalcompaniescomefromaverage,likelyduetotheirbusinessactivitiesthataretiedtosustainablestrongenvironmentalperformance.developmentgoals.AsthepressuretoestablishandexpandESGprogramstoprepareforemergingregulatoryrequirementsmounts,organizationsarealreadyanticipatingcriticism–infact,TheConferenceBoardfoundthatamajorityofcompaniesareconcernedaboutbacklashspreadingamongemployees,investors,businesspartners,consumersandthemediaoverthenexttwoyears.Thankfully,variousregulatorybodiesarecommittedtointroducingstandardizationtothereportingprocess.InJune2023,theInternationalSustainabilityStandardsBoard(ISSB)introducedthefirst-everglobalsustainabilitydisclosurestandards.Justafewmonthslater,CaliforniaGovernorNewsomsignedtheCaliforniaClimateAccountabilityPackage,comprisedoftwobills,SenateBill253(SB253)andSenateBill261(SB261),whichmandatebothpublicandprivatecompaniesoperatinginCaliforniatodisclosetheirgreenhousegas(GHG)emissionsaswellasclimate-relatedfinancialrisk.2024OfficeofFinanceOutlook:EnvironmentalImpactReporting3Withsomuch37%influx,thereisconfusion65%aroundwhatwillberequiredof28%differententities.65%oforganizationswithmorethanWhileESGreportingisprovingtobeextremely1,000employeeswillbereportingnuanced,thereisonecommonalityacrossallexistingundertheSECrequirementsandforthcomingregulations:impactedbusinessesshouldquicklygatherandanalyzeallrelateddataas37%oftheseorganizationsbelievetheanticipatedwindowforcomplianceisshort.theSECrequirementswillmirrortheISSBguidelinesAsifcomplianceweren’treasonenoughfororganizationsWhile28%believetheSECtoprioritizetheirESGreportingefforts,thereisanrequirementswillbedifferentopportunityfortheseentitiestousetheirexistingthantheISSBguidelinesdatatoestablishcriticalbenchmarks.Inthisreport,industryexpertsfromVisualLease(VL)andotherorganizationssuchasBioRad,PennStateHealth,Indeed,MISTRASandCompasswillshare:AnticipatedchallengesassociatedwithenvironmentalreportingandstrategiestomitigatethemTheadvantagesstrongleasemanagementpracticescanhavewithrespecttoenvironmentalimpactreportingin2024andbeyondHowfinanceleadersplayapivotalroleinguidingorganizationsthroughthistransformativeperiod2024OfficeofFinanceOutlook:EnvironmentalImpactReporting42023EnvironmentalImpactReportingAnalysisWorldwide,buildingsareresponsiblefor37%ofglobalcarbonemissionsand34%ofenergydemand,accordingtotheGlobalStatusReportforBuildingsandConstruction(Builings-GSR).Giventheinfluencecommercialleaseshaveonanorganization’soverallenvironmentalfootprint,manyarerecognizingtheimportanceofnegotiatingtermsthatalignwiththeirESGgoals.88%ofsurveyedsenioraccountingandfinanceexecutivesreportthatenvironmentalandsustainabilityfactorsareahighprioritywhenenteringintonewleaseagreements,includingrealestate,fleet,equipment,land,etc.49%45%41%areincreasingthenumberareincreasingthenumberareswitchingtoofLEED-certifiedbuildingsinofenergy-efficientvehiclesinrenewableenergytheirleaseportfolios.theirfleets.sources.35%arebuyingcarbonoffsets–thislowerinterestmaybeduetorecentnegativecoveragecompanieshavereceivedthatpointtoapotentiallinkbetweencarbonoffsetsand“greenwashing.”Butwithoutvisibilityintothecurrentenvironmentalimpactoftheirownedandleasedassets,businessescannotreasonablysetaccurate,achievablesustainabilitygoals.2024OfficeofFinanceOutlook:EnvironmentalImpactReporting5Inearly2023,VisualLeasereportedthatastaggeringThereisabigopportunityhereformostbusinesses,99%ofseniorrealestateexecutivesatcompaniesasnearly70%ofsenioraccountingandfinancewithmorethan1,000employeesnoteditisexecutivesreportthattheirorganizationsarenotfullyimportantthattheirorganization’sfutureleaseshelppreparedintermsoftheirabilitytotrackandmeasurereduceitscarbonfootprint.Forthosebusinessestotheenvironmentalimpactofleasedandownedassetmakeinformeddecisionsaboutfutureleases,theyportfoliostocomplywiththenewandemergingmustfirstassesstheirexistingleasestounderstandenvironmentalreportingrequirements.wheretheycanmakeimprovements.Theseinsightswillhelpinformago-forwardapproach–suchasHowever,84%oforganizationstransitioningtorenewablesourcesofenergyorhavesincemadestrongeroptingforsmaller,satelliteofficelocations–whichleasecontrolsandoverallwillassistthe90%ofsenioraccountingandfinancemanagementahigherexecutiveswhoarelookingtoimplementnewbusinesspriority.sustainabilitygoalsoverthenexttwotofiveyears.WhilethereareclearparallelsbetweenthepreparationThemajorityofsurveyedseniorfinanceandrequiredtoachievecompliancewiththeleaseaccountingaccountingexecutiveshavereportedthatwhilestandardsandenvironmentalreportingrequirements,they’vecollectedkeyenvironmentaldata,lessthanthereisoneimportantdistinctionthatorganizations40%haveanalyzedorusedthedatatoestablishmustaccountfor–whenitcomestofinancialstatements,benchmarks.Thisdelaycanbeattributedtoafewaccountantsandfinanceprofessionalshaveyearsdifferentreasons:somemaybeveryearlyintheofrelatedtrainingandexperiencewhereas,withgatheringprocesswithincompletedata,othersenvironmentalreportingandclimate-relateddisclosures,mightnottrusttheirdatayetduetoweakprocesses,theydonot.inadequatecontrolsand/oralackofacentralizedviewoftheirleasedandownedassetrecords.AllConsiderthisanalogy:Supposeyouhaveapileofamillionoftheseissuesareimpedimentstobeingabletobricks.Isthatalotoralittle?Howbigarethebricks?accessandanalyzeaportfoliotoestablishaccurateWhatwillbebuiltfromthem?Lackofrelevantexperiencebenchmarks.andcontextwillimpactorganizations’abilitytoestablishbenchmarks.Thankfully,theintroductionoftheleaseaccountingstandards(ASC842,GASB87andIFRS16)shinedTodosoeffectively,financeteamsrequiremorealightontheneedforstrongerleaseandrelatedknowledgeandon-goingsupporttonavigatethisrapidlyrecordmanagement–aprocessthatremainscriticalevolvingreportingneed.tosustainingleaseaccountingcompliance.Nearly40%ofglobalcarbondioxideemissionsoriginatefromrealestate-relatedassets.Properleasemanagementisanorganization’sentrypointtonotonlymeasuringandreportingontheirenvironmentalimpact,butalsounderstandinghowtomakeimprovementsforamoresustainablefuture.2024OfficeofFinanceOutlook:EnvironmentalImpactReporting6CommonEnvironmentalHomeServicesisa$5billionrealestateImpactReportingChallengescompany,withadecentralizedstructurethat&HowtoOvercomeThemmakestrackingdata–especiallycomplianceEarlierin2023,VisualLeasereportedthat83%ofdata–particularlytricky.seniorrealestateexecutivesfelttheircompaniesPriorto2018,HomeServicesusedahomegrowndidnothavetherequiredtechnology,peopleandprocessesneededtosuccessfullymanagetheirdatabasetostorebasicleaseinformation.lease-relatedexpenses.AfterimplementingVisualLeaseasToday,51%oforganizationstheircentralizedsystemofrecord,areeitherrelyingonExcelHomeServicesgainedvisibilityintotheirorathirdpartytohelpleaseportfolio,whichhastranslatedthemmanagetheirleaseintoconfidentreportingandhelpedadministrationprocesses.withbudgetingandforecasting.TheinherentcomplexityofleasedatademandsamoreLearnmoreaboutHomeServices’experience>sophisticatedsolution.Organizationsshouldmoveawayfromad-hocorfragmentedapproachesandoptVisualLeaseautomatedforadedicatedsystemofrecordthatenablesreportssavedPennStatestrongleasecontrols.Health180hoursayear.Doingsowilladdressthemainconcernsthat99%ofLearnmoreaboutPennStateHealth’sexperience>surveyedseniorfinanceandaccountingexecutiveshavewithmaintainingpropercontrolovertheirorganization’sleaseportfolio:Challenge#1:47%ofsenioraccountingandfinanceexecutivesareconcernedaboutresourcingtherequiredwork.Solution:Becausemultiplestakeholders(finance,realestate,procurement,accountspayable,legal,etc.)interactwithownedandleasedassetsthroughouttheirentirelifecycle,it’simportanttofirstestablishdefinedroles–i.e.,whoisresponsiblefornegotiatingtermsvs.monitoringthetermsoncealeaseisexecuted,etc.2024OfficeofFinanceOutlook:EnvironmentalImpactReporting7Challenge#2:48%ofsenioraccountingandScopeEmissionsfinanceexecutivesareconcernedaboutdataPrimeraccuracyandcompleteness.Scope1:Solution:Oncerolesareestablished,responsiblepartiesshouldgatherandanalyzeleaseandownedassetrecordstoidentifyDIRECTconsumptiondataofgreenhousegasemissions(CO2,PFCs,RefertoemissionsthatcomeCH4,SF6,N2O,HFCs).fromacompany’sownedorChallenge#3:44%ofsenioraccountingandfinancecontrolledsources.executivesareconcernedwithachievingcompliancewithESGrequirementsandpolicies.Scope2:Solution:EnsurethereisapartyresponsibleforkeepingtabsINDIRECTonESGreportingguidance–forexample,understandingtheRefertoemissionsthatdifferencebetweenscope1,2and3emissionsandkeepingcomefromthegenerationoftrackofupdatesfromregulatorybodiesliketheSEC.purchasedenergy.Challenge#4:46%ofsenioraccountingandfinanceexecutivesareconcernedabouttheirabilitytoreactScope3:tounforeseencircumstances,suchassupplychaindisruptionsandinflation.INDIRECTRefertoemissionsthatareSolution:LeverageyourcentralizedsystemofrecordtoanalyzenotcoveredinScope1andyourportfolioofleasedandownedassetstoidentifycostsavingsScope2,andarecreatedbyaopportunitiesandreallocatefundsbasedoncurrentneeds.company’svaluechain.Challenge#5:44%ofsenioraccountingandfinanceexecutivesareconcernedwithsustaininglease8accountingcompliance.Solution:Utilizingacentralizedleaseportfoliosystemofrecordwillalsoempoweryoutoeasilykeeptrackofanychangesormodificationstoyourleases,whichwillensureallleaseaccountingcalculationsareaccurateDay2andbeyond.Challenge#6:39%ofsenioraccountingandfinanceexecutivesareconcernedaboutbeingpreparedforaudits.Solution:Establishcontrolsthatenforcetherolesandresponsibilitiesofeachstakeholderbyenablingaccesstotheappropriatepointofcontactattheappropriatepointintime.Implementasolutionthatcanbeconfiguredtosupportyourorganization’scontrolpoliciestoensuretheyareadheredto.”Scope1,2and3Emissions”fromDeloitte2024OfficeofFinanceOutlook:EnvironmentalImpactReportingTheEvolutionoftheOfficeofFinanceAsreportedbyMcKinsey,“Modernfinancedepartmentsaretransformingtobecomethe‘guardiansofenterprisevaluecreation,’shiftingfromoverseeingtransactionaltaskstomanagingvalue-addedactivities.”Overthepastdecade,corporatefinancedepartmentshaveincreasinglyassumednewresponsibilitiesthatshapestrategicdecisionsanddrivecriticalbusinessinitiativesforward.Whenaskedwhatskillsaremostimportantforfuturefinanceleaderstohaveoverthenextfiveyears,senioraccountingandfinanceexecutivesprioritizedthefollowing:40%Theabilitytodrivedigitaltransformationprojectsthatunitedataviews38%Communicationcapabilitiestofacilitaterequiredcross-departmentalcollaboration38%Anticipatingneedsandsettingpoliciesthatfuture-proofbusinesses35%Theabilitytoanticipateandsolveproblems34%Dataanalysisandmakingdata-drivendecisionsGiventheimpactthatanorganization’senvironmentalfootprintcanhaveonitsinternalandexternalstakeholders,itiscrucialthatheadinginto2024,theOfficeofFinanceprioritizesrelatedreportingefforts.97%ofsurveyedseniorfinanceandaccountingexecutivesand100%ofsurveyedCAOsandCFOsatcompanieswithmorethan1,000employeesareinvolvedwiththeirorganization’scurrentstateofESGreporting.2024OfficeofFinanceOutlook:EnvironmentalImpactReporting9However,lessthanone-thirdofseniorfinanceandaccountingexecutivesreportthattheirESGreportingframeworkisfullyestablishedandincludesavarietyofenvironmentalfactorswith30%disclosingthattheirframeworkislimitedtospecificorganizationinitiatives,furtherunderscoringtheneedforaccurateandcompletedatasetstodeterminehelpfulbenchmarksandfacilitateinformedgoal-setting.Thesefindingsalsohighlighttheimportanceofconsultingwiththirdpartiestoensurethereisadequatesupportandresourcesdedicatedtokeepingupwithregulatoryupdatesandneed-to-knowsthatcanimpactyourorganization’scompliancewithinternalorexternalsustainabilitygoals.Respondentshaverankedthefollowingactionsasappropriatefirst17%stepstowardmeetingenvironmentalandsustainabilitygoals:27%20%20%18%CollectingdataaboutDecidingontheIdentifyingallAnalyzingportfolioIntegrateleaserecordgreenhousegasemissionsspecificESGinternalandexternalofownedandleaseddatawithotherfromownedandleasedassetssolutionsinthestandardsandstakeholdersassetsFintechstacktodeterminebaselinesmeasurestouseTheseaddedresponsibilitiesdonotreplace,butrather,“AsMISTRASrecognizesourresponsibilityareinadditiontotheexistingresponsibilitiesoffinancetoserveasanagentforpositivechangeandaccountingteams.AsrecentlyreportedinTheWallStreetJournal,anincreasinglylargenumberofandadvancementoftheCompany’saccountantsareleavingtheindustryduetoburnout,ESGinitiatives,we’rethrilledtobecomearesultinginagrowingshortageoftheprofessionalspilotcustomerforVLESGStewardTM.We’veneededtoimplementanddrivetheseinitiatives.usedVisualLeaseasoursystemofrecordDedicatedtechnologyisprovingtobethemostforourportfoliooffacility,automobile,effectivewaytotrackESGmetrics–includingandequipmentleases–andfeelthatdatapointsthatrangefromsustainabilityandtheyarewellpositionedtoexpandandcarbonconsumptiontothebusinesses’diversityprovidemeaningfulvalueintothecomplexandbroadersocialimpact–whilesimultaneouslycreatingefficiencies,allowingfinanceandaccountinglandscapeofESGreporting.”professionalstostreamlinemanualtasksandfocusonmorestrategicefforts.-ThomasTobolski,Treasurer,MISTRASGroup,Inc.Embracingpurpose-builtsolutionswillprovidetheLearnmoreaboutVLESGStewardTM>OfficeofFinanceandtheirorganizationswithastrategicadvantageovercompetitorsastheygainvaluabletime10andaclearandcomprehensiveunderstandingoftheirongoingprogressagainstthesegoalsinreal-time.2024OfficeofFinanceOutlook:EnvironmentalImpactReportingConclusion:SelectingtheRightFintechPlatformtoSupportEnvironmentalImpactReportingNeedsin2024Whiletherearebenefitstolivingthroughatechnologyrevolution,agrowingabundanceofoptionscancreatechallengesfortheOfficeofFinancewhenlookingtoidentifyasolutiontosupportitsenvironmentalreportingefforts.Surveyedsenioraccountingandfinanceprofessionalshaveprioritizedthefollowingcriteriaforselectingnewfintech:SupportscollaborationamongVisualLeasehasempoweredIndeed’scross-functionalteams(23%)globalaccountingteamtostandardizethewayinwhichtheydotheirleaseaccountingBecausesomanydifferentdepartmentsandindividualsinteractwithleases,itisacrossalloftheiroffices,reducingthecriticaltoprioritizeacentralizedsystemnumberofindividualsrequiredtoachieveofrecordthatwillenablecross-functionalaccessandcollaboration,creatingandmaintaincompliance.efficienciesalongtheway.LearnmoreaboutIndeed’sexperience>Thisisabigfocusareaformanycompaniesaslessthan40%ofsurveyedseniorfinanceandaccountingprofessionalsreportedthattheyarecompletelycollaborativewiththeteamthatmanagestheircompany’scommercialrealestateleases.Abilitytoaddressmorethanonebusinessneed(23%)Selectingasolutionthatoffersarobustleasecontrolsframeworkwillenableorganizationstoachieveaclearunderstandingoftheirleaserecords,helpingthemtoeasilymaintainleaseaccountingcompliance,minimizetheriskofinaccuratefinancialreportingandfailedaudits,identifycost-savingopportunitiesandsuccessfullyprepareforthenewinternationalsustainabilitystandards.2024OfficeofFinanceOutlook:EnvironmentalImpactReporting11Stronguserreviewsandcustomersentiment(21%)Choosingaproviderwithafirst-moveradvantageinthespecificspaceyou’relookingtotrackandreportcanbebeneficialasthesecompanieswilltypicallyhavesolutionsthatareaheadofthecurve,adaptableandbuiltfromvaluableinputandlessonslearnedfromearlyadopters.Strongcustomersupportmodel(18%)CompasstakesitsleaseportfoliodatafromtheVisualLeaseplatformStrongcustomersupportensuresthatanyandmarriesitwithitsbusinessdataproblemsorissuesencounteredwillbeaddressedpromptly,minimizingdowntime.inaproprietarydatavisualizationOptingforaproviderthatmakesitsproducttool,allowingthemtomakeholisticroadmapavailabletoitsusersandoffersdecisionsandkeepitsorganizationservicesthataligntosupportitwilltranslateintoamoresuccessfuladoptionoftheuptodateonportfoliochanges.platform’sfullcapabilitiesatyourorganization.LearnmoreaboutVL’sIntegrationcapabilities>Provenabilitytointegratewithexistingsystems(16%)Byprioritizingsolutionswithstrongintegrationcapabilities,accountingandfinanceteamscanmaketheirentirefintechstackworktogether,furtherincreasingtheirROI.TheroleandsignificanceoftheOfficeofFinanceisundergoingaprofoundtransformation.Inthecurrentlandscape,theseteamsfindthemselvescontendingwithdynamiccompliancerequirementsandconfrontingthechallengesposedbyshrinkingtalentpools.Thekeytosuccessfullynavigatingtheever-expandingscopeoftheirresponsibilitiesliesinforgingstrategicallianceswithsolutionandserviceproviders.Bydoingso,they’renotonlywell-positionedtokeepupwiththecomplexitiesoftoday’sfinancialterrainbutalso,proactivelyequipthemselveswithefficientsolutionstoaddresschallengesthatlieahead.2024OfficeofFinanceOutlook:EnvironmentalImpactReporting12AboutTheVisualLeaseDataInstituteTheVisualLeaseDataInstituteisacollectionofmarket-leadingdata,trendsandinsightsonleaseaccounting,management,sustainabilityreportingandoptimizationcreatedandcuratedbyVisualLease,providerofthe#1leaseoptimizationsoftware.TheInstitutewasfoundedon35+yearsofexperiencemanagingleasedataandfinancials,andwascreatedtoempowerorganizationswiththemarketdatarequiredtoleveragetheirleaseportfolioforstrategicfinancialandoperationaloutcomes.MethodologicalNotes:TheVisualLeaseSurveywasconductedbyWakefieldResearch(www.wakefieldresearch.com)among200USseniorfinanceandaccountingexecutiveswithtitlesofCAO,CFO,Controller,orDirectorofReportingatprivate,public,andgovernmentorganizations,betweenAugust24thandSeptember1st,2023,usinganemailinvitationandanonlinesurvey.Companysizerequirementforpublicandprivateorganizations:1,000+employees,doesnotapplytogovernmentorganizations.Theresultsofanysamplearesubjecttosamplingvariation.Themagnitudeofthevariationismeasurableandisaffectedbythenumberofinterviewsandthelevelofthepercentagesexpressingtheresults.Fortheinterviewsconductedinthisparticularstudy,thechancesare95in100thatasurveyresultdoesnotvary,plusorminus,bymorethan6.9percentagepointsfromtheresultthatwouldbeobtainedifinterviewshadbeenconductedwithallpersonsintheuniverserepresentedbythesample.2024OfficeofFinanceOutlook:EnvironmentalImpactReporting13