Hall Chadwick ESG

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From Trump’s Withdrawal from the Paris Agreement: How Financial and Accounting Systems Can Anticipate “Disclosure Risks” and “Compliance Costs”

When policy directions are no longer aligned, systems become the only risk control tool that companies can truly manage

On January 20, 2025, U.S. President Trump announced the country’s renewed withdrawal from the Paris Agreement. This declaration has once again heightened international sensitivities around climate commitments and disclosure policies. What companies now face is not just shifting international policies, but the real risk of fragmentation in ESG disclosure logic and standards.
While the EU continues to tighten disclosure requirements, the U.S. may move in the opposite direction, easing regulations. Without stable internal systems, companies will struggle to cope with these external shifts.
In this climate of global disclosure uncertainty, what companies need most is not more reporting templates, but a proactive early warning mechanism and a solid institutional foundation led by the finance and accounting teams.
 

1.When Policy Uncertainty Becomes the Norm, Disclosure Risks Will Also Emerge Systematically

1.1 The Trend of ESG Standard Fragmentation and the Spread of Corporate Risks

Trump’s potential withdrawal from the Paris Agreement is not just the act of a single nation exiting a treaty—it signals the arrival of an era of “disclosure standard fragmentation.” Companies exporting simultaneously to the EU, U.S., and Southeast Asian markets will face varying ESG disclosure requirements across regions.
Without a clear and stable institutional framework, companies may encounter a cascade of problems, including redundant data submissions, logical inconsistencies in content, and declining trust due to inconsistent disclosure narratives. Ultimately, these challenges can undermine the ability to pass audits and negatively affect supply chain ratings and investor confidence.

1.2 “False Consistency” and Soaring Compliance Costs from Lack of Systems

Many companies claim to follow IFRS S2 or GRI standards in their sustainability reports, but in practice lack internal version control, data traceability, and clear responsibility assignments. This results in:
  • Data that cannot be reconciled with financial statements, leading to audit issues
  • Inability to provide evidence during international client spot checks, resulting in lost business
  • Outsourcing report writing every year, leading to discontinuous content and a lack of credibility
U.S. President Trump announced the country’s renewed withdrawal from the Paris Agreement
Image source: FREEPIK
 

2. Financial and Accounting Systems Should Serve as the “Risk Early Warning Center” Amid Policy Shifts

2.1 ESG Disclosure Is Not an Information Problem — It’s a Systems Problem

The finance and accounting department, with its expertise in data logic, audit processes, and responsibility design, is the unit best positioned to lead institutionalized disclosure. Companies should view ESG data as a form of “non-financial asset management” and embed it systematically into existing workflows, including: establishing standard operating procedures for data entry and cross-departmental accountability mechanisms, incorporating carbon emissions, social performance, and governance processes into ERP or accounting system fields, and designing audit and anomaly reporting mechanisms to meet disclosure requirements and handle format conversions across various standards.

2.2 Estimating “Compliance Costs” and “Policy Risk Costs” in Advance

When preparing financial budgets and investment assessments, companies often underestimate the cost of building systems for ESG compliance. The accounting department can proactively implement:
  • Disclosure obligation cost tables: projecting future labor and audit expenses based on country-specific regulations
  • Policy risk simulation tables: evaluating the cost of switching compliance plans if Trump wins and IFRS is not mandated
  • Conversion mapping tables: establishing the logic for translating between data fields and report formats (e.g., CSRD⇄GRI⇄IFRS)
By quantifying the costs of disclosure obligations and system transitions due to policy changes in advance, companies can better allocate resources and prepare for contingencies in a world of regulatory uncertainty, avoiding reactive responses and high expenditures when policy shocks occur.
Financial and Accounting Systems Should Serve as the “Risk Early Warning Center” Amid Policy Shifts
Image source: FREEPIK
 

3. How Can Companies Build Early Warning Capabilities Through Financial and Accounting Systems?

3.1 Establishing Institutionalized Version Control and Responsibility Allocation Mechanisms

Companies can apply the version control logic used in financial reporting to ESG by building similar systems:
  • Label each data entry with a number/version/reviser
  • Retain supporting documents and approval records
  • Clearly designate data entry personnel, reviewers, and auditors
Such systems can be implemented using Excel, Google Forms, or simple ERP modules, effectively enhancing transparency and auditability.

3.2 Building a Policy Change Scenario Simulation System

Companies are advised to introduce a “policy risk response SOP,” designing action plans and internal transition processes for potential future scenarios (e.g., U.S. withdrawal from the Paris Agreement, IFRS phase-out, carbon tariff shifts). For example: if Standard A is canceled and replaced by Standard B, how should the company internally switch its disclosure logic and reporting fields? Who is responsible for the transition? How many days will it take? Establishing such systems in advance can significantly reduce reporting delays and audit risks caused by policy disruptions.
Establishing Institutionalized Version Control and Responsibility Allocation Mechanisms
Image source: FREEPIK
 

4. Conclusion

ESG disclosure is not a static compliance task; it’s a dynamic negotiation of international trust. While companies cannot control how policies change, they can decide whether to build internal mechanisms capable of “stabilizing data, adapting systems, and managing risks.” Whether Trump will once again withdraw from the Paris Agreement remains uncertain, but the accelerating fragmentation of global standards is an undeniable reality. The value of accounting systems lies not only in bookkeeping and auditing, but also in serving as the company’s best line of defense for weathering policy storms and maintaining a stable foundation of trust.

 


Is your company ready to meet the new ESG challenges?

Hall Chadwick Taiwan has extensive experience in ESG financial consulting and can assist your company in building a sustainability reporting framework that aligns with the latest regulatory requirements.
 If you have any questions regarding the 2025 ESG financial disclosure requirements, feel free to contact us.
  
 
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