Environmental, Social, and Governance (ESG) reporting has moved from a fringe concern for large public companies to a mainstream business expectation that is beginning to reach small and mid-sized private businesses — particularly those in enterprise supply chains. For Utah small business owners, understanding what ESG reporting is, which regulations are actually enforceable, and when you may face practical pressure to disclose ESG data is now a necessary part of business literacy.
This article focuses on practical, grounded guidance — not ideology. The question is not whether ESG is good or bad, but what it means for your financial reporting obligations and business relationships.
What ESG Reporting Is
ESG reporting refers to disclosures about a business’s performance on three dimensions:
- Environmental: Carbon emissions, energy consumption, water use, waste generation, climate risk exposure.
- Social: Employee welfare, diversity and inclusion metrics, community impact, supply chain labor standards, customer data privacy.
- Governance: Board composition, executive compensation, anti-corruption policies, cybersecurity governance, transparency of financial reporting.
Large public companies — required to file with the SEC — are the primary targets of mandatory ESG disclosure rules. Private companies, including most Utah small businesses, are generally not subject to mandatory ESG reporting to regulators. However, the pressure is trickling down through supply chains and financing relationships.
The Regulatory Landscape
SEC Climate Disclosure Rule (Finalized March 2024)
The Securities and Exchange Commission finalized its climate disclosure rule in March 2024, requiring public companies to disclose:
- Material climate-related risks and their impact on strategy and financial planning
- Greenhouse gas (GHG) emissions data (Scope 1 and 2 emissions; Scope 3 for large accelerated filers if material)
- The financial impacts of severe weather events and climate-related transition costs
Implementation timeline:
- Large accelerated filers: Fiscal years beginning in 2025
- Accelerated filers: Fiscal years beginning in 2026
- Non-accelerated filers and smaller reporting companies: Later
The rule faces legal challenges and may be modified or vacated. As of mid-2024, the SEC has voluntarily stayed enforcement pending court review.
Impact on Utah small businesses: If you are a private company with no SEC reporting obligation, the SEC rule does not directly apply to you. The indirect impact comes through your relationships with public company customers, lenders, or partners who must report on their supply chains.
European Union Supply Chain ESG Rules
The EU Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD) impose ESG disclosure requirements on companies operating in the EU — and, through supply chain provisions, on non-EU companies that supply to EU-based businesses.
Who this affects in Utah: Utah businesses that supply products or services to EU-based companies (directly or through distributors) may face contractual ESG data requests from their EU customers. The EU rules are phasing in through 2026–2028 and affect different company sizes at different timelines.
California Climate Laws
California enacted two climate disclosure laws in 2023:
- SB 253 (Climate Corporate Data Accountability Act): Requires companies with revenues over $1 billion doing business in California to disclose Scope 1, 2, and 3 GHG emissions annually
- SB 261: Requires companies with revenues over $500 million doing business in California to disclose climate-related financial risks
Utah businesses with California operations or California revenues that exceed these thresholds may be covered by California’s requirements — regardless of where they are headquartered.
Supply Chain ESG Pressure: The Practical Reality
For most Utah small businesses, the most immediate ESG pressure comes not from regulators but from customers — specifically, large enterprise customers who are either publicly reporting ESG metrics or responding to their own investors’ ESG requirements.
Common supply chain ESG requests:
- Completion of ESG questionnaires (annual survey of your environmental, social, and governance practices)
- Carbon footprint disclosure (Scope 3 emissions from suppliers are increasingly required for large company reporting)
- Supplier code of conduct acknowledgment (labor standards, anti-corruption commitments)
- Diversity and inclusion data (workforce composition by gender, race/ethnicity)
- Cybersecurity certification or questionnaire (SOC 2, NIST framework, supplier security assessment)
Practical response: If an enterprise customer requests ESG data, treat it like any other customer requirement. Develop a process for collecting and responding to these questionnaires. The data they request (employee count, energy bills, waste volumes, safety incident records) is often already available internally — it simply needs to be organized and formatted for the questionnaire format.
ESG and Business Financing
Lender ESG Requirements
Banks and institutional lenders are increasingly incorporating ESG factors into underwriting for commercial loans:
- Energy-efficient commercial real estate may qualify for green building premium pricing or preferred loan terms
- Some lenders offer favorable rates for certified green business practices
- Certain industry sectors (coal, oil extraction, some agriculture) face more restrictive lending policies at ESG-focused lenders
For most Utah small businesses, standard commercial lending is unaffected by ESG underwriting practices as of 2024. The trend bears watching as ESG integration in lending deepens.
SBA and Government Programs
Several federal and state government programs provide financing or incentives tied to environmental investments:
- Investment Tax Credit (ITC): Tax credit for qualifying solar energy installations (reduced to 26% for 2024 from 30% after the Inflation Reduction Act transition period — confirm current rate with your CPA)
- Energy-efficient commercial property deduction (Section 179D): Deduction for energy efficiency improvements to commercial buildings; expanded by the Inflation Reduction Act
- SBA 7(a) Green Loans: Some SBA lenders prioritize green business practices in program allocation
These programs create financial incentives for specific environmental investments — entirely separate from ESG reporting obligations.
ESG Data and Financial Reporting: The CPA Perspective
ESG reporting intersects with financial reporting in several ways that involve your CPA:
Carbon Credits and Environmental Attributes
Businesses that purchase carbon offsets, renewable energy certificates (RECs), or other environmental attributes must account for them correctly:
- Carbon credits purchased are typically expensed as an operating cost
- RECs may be expense or asset depending on the terms
- Any income from selling environmental attributes is taxable
The accounting and tax treatment of carbon and environmental credits is an evolving area — specific transactions should be reviewed with your CPA.
Climate-Related Financial Statement Disclosures
As the SEC climate rule takes effect and financial statement auditors begin asking climate-related questions, businesses with audited financial statements may need to disclose:
- Material climate risks that affect asset values or ongoing operations (coastal flooding, wildfire risk, drought in agricultural businesses)
- Capital expenditures related to climate adaptation
- Insurance costs attributable to climate-related risks
For Utah businesses with audited statements (typically required by lenders or investors), discuss climate-related disclosure requirements with your CPA and auditor.
Internal ESG Metrics for Management Decisions
Even without external reporting requirements, tracking ESG-relevant metrics has management value:
- Energy cost per unit of revenue (identifies efficiency opportunities)
- Employee turnover rate (tracks the cost of poor retention — an ESG-adjacent metric)
- Workplace safety incident rate (affects workers’ comp premiums and regulatory exposure)
- Supplier dependency concentration (governance-adjacent supply chain risk)
These metrics inform better operational decisions regardless of whether they are disclosed externally.
ESG for Utah Small Businesses: A Practical Framework
Given where ESG requirements actually stand for private Utah small businesses, here is a practical framework:
Right now:
- If you receive ESG questionnaires from enterprise customers, respond with accurate data. Develop a standard process for collecting and responding.
- If you have California revenues above $500M–$1B, assess California climate law applicability.
- Review any supply chain code of conduct commitments you have signed with large customers.
Watch closely:
- The SEC climate rule legal challenges — if it survives, Scope 3 supply chain disclosure will increase pressure on small business suppliers of public companies
- EU supply chain rules implementation for any Utah businesses with EU customer relationships
- Any Utah state-level ESG legislation (currently minimal)
Invest in when practical:
- Energy efficiency improvements (Section 179D deduction, ITC for solar) where the economics make sense independent of ESG optics
- Workforce practices that reduce turnover and training costs — these are often the highest-ROI “social” investments
Do not overinvest in right now:
- Voluntary ESG reports or sustainability certifications without a specific customer, investor, or lender requirement driving the decision
- ESG software platforms designed for large enterprise reporting — not scaled for small business needs or budgets
Call (801) 927-1337 or visit cpaone.net/advisory if your business is facing ESG data requests from customers, investors, or lenders and you want to understand the financial and tax dimensions. We help Utah businesses prepare for the reporting environment that is evolving around them — without overspending on compliance that isn’t yet required.
About the Author
Missy Dennis, CPA | Partner | FJ & Associates, PLLC | Kaysville, Utah
Missy holds a Master of Accounting degree from the University of Utah and is a licensed Certified Public Accountant. She is committed to providing clear, accurate, and actionable guidance so clients can navigate complex financial decisions with confidence. With more than twenty years of public accounting experience, Missy Dennis specializes in: Tax preparation and tax advisory; Bookkeeping strategy alignment; Estate and trust taxation; Audit and consulting services; Low-income housing tax credits; Non-profit accounting; Small- and mid-sized business advisory.
