The largest global accounting firms pushed climate reporting standards while selling services tied to those rules, and 16 Republican state attorneys general have asked for detailed documents and revenue figures to determine whether those actions compromised auditor independence or violated state laws.
Sixteen state attorneys general have raised a straightforward question: how can firms sell themselves as independent auditors while also promoting climate disclosure standards that create demand for services they sell? Deloitte, Ernst & Young, KPMG, and PricewaterhouseCoopers face scrutiny over their public endorsements of climate initiatives alongside a growing market for sustainability consulting and assurance work.
The coalition argues that the Big Four’s public climate commitments could create conflicts with the duty of independence auditors owe to clients and investors. Attorneys general warn those commitments may run afoul of professional standards that require impartiality, objectivity, and avoidance of advocacy when auditing financial statements.
Officials also want to see the money trail. The states requested five years of revenue figures tied to climate-disclosure assurance, sustainability reporting, and ESG consulting, along with documents explaining how the firms disclosed climate commitments to audit clients and any safeguards used to separate consulting from audit work.
“The Big 4’s climate commitments force clients to make burdensome climate-related disclosures that drive up the costs of their services and place onerous requirements on farmers and small businesses. These costs will ultimately be passed onto consumers, who will be forced to bear the burden of increased prices for food, energy, and other everyday products.”
That quote captures the coalition’s core concern: policies and standards originated or promoted by the firms can translate into regulatory and compliance burdens for clients. When those same firms offer paid services to help companies comply, the line between objective auditing and profit-driven advocacy becomes blurry.
The Big Four backed several high-profile climate initiatives, such as the Task Force on Climate-related Financial Disclosures, the Net Zero Financial Service Providers Alliance, and the International Sustainability Standards Board. Under some commitments, firms pledged to align products and services with net-zero goals by 2050 or sooner and supported broader adoption of ISSB reporting standards.
Notably, many jurisdictions have announced intent to adopt International Sustainability Standards Board rules, while the United States has not formally done so. The attorneys general want to know how the firms reconciled promoting disclosure frameworks that encourage reporting of Scope 1, Scope 2, and even Scope 3 emissions with auditors’ traditional role in assessing materiality.
“It also does not go unnoticed that the Big Four stand to financially benefit from pushing climate-related disclosures and reporting through the for-profit services you offer.”
That line from the states highlights the potential for self-dealing. If a firm advocates wider nonfinancial reporting that creates demand for assurance, consulting, or reporting tools, critics say that firm can profit both from shaping the rules and supplying the compliance services those rules generate.
Regulatory and contractual exposure is on the table as well. The coalition says misleading representations about independence could violate state consumer-protection statutes, and contractual clauses in state or municipal agreements could expose firms to penalties or contract termination if independence was compromised.
The Big Four have publicly framed their work as part of a transition to a lower-carbon economy. Deloitte has said it is helping “lead the way toward a low-carbon future,” and KPMG described assisting clients in reducing environmental footprints as its “most important contribution” to a net-zero society. Those statements are now part of what prosecutors and regulators will evaluate for possible conflicts with auditing duties.
One practical tension involves materiality. Auditors traditionally assess whether information is material to investors, but some climate frameworks encourage disclosure of emissions regardless of materiality and push for Scope 3 reporting that relies on third-party data and estimations. Attorneys general want explanations for how firms managed those differences without influencing audit outcomes.
Beyond theory, the inquiry demands records: communications about climate commitments, revenue breakdowns tied to ESG services, contracts with governments and municipalities back to 2020, and descriptions of internal controls designed to keep audit work separate. The firms will need to produce concrete proof that promoting climate frameworks never affected independent audit judgments.
The stakes are more than reputational. If state prosecutors find evidence of impaired independence or deceptive representations, firms could face enforcement actions, contract fallout, and financial penalties. The request from state attorneys general signals a shift: years of endorsement for climate disclosure are now being weighed against legal duties that protect investors and consumers.
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