For years, the Big Four have been active participants in the development of climate and sustainability reporting. The US firms have commented extensively on proposed climate-disclosure rules. Their global networks have joined international initiatives supporting greater consistency in climate reporting. All four were founding members of a net-zero alliance for financial-service providers. And all four later signed a declaration supporting the International Sustainability Standards Board’s climate standard as a global baseline.
Now their motivations are being called into question. A coalition of 16 Republican state attorneys general has sent Deloitte, EY, KPMG and PwC a 38-page letter dated 24 August 2026 questioning whether their climate-related commitments are compatible with their obligations as independent auditors.
The coalition was co-led by Nebraska Attorney General Mike Hilgers together with the attorneys general of Texas, Alaska and Florida. The Nebraska Attorney General’s office said the inquiry concerns climate-related financial-reporting commitments made by all four firms. Bloomberg Law separately reported that the attorneys general are also raising possible state consumer-protection-law and government-contract issues.
The letter opens with the allegation that Deloitte, EY, KPMG and PwC:
“appear to have violated their professional duty of independence”
It then goes on to demand information and explanations from the firms, so the attorneys general can establish whether an independence breach occurred.
The political context
Republican state attorneys general have increasingly targeted ESG policies and climate-disclosure requirements, while the SEC under Republican chairman Paul Atkins has proposed rescinding the federal climate-disclosure rules adopted in 2024, arguing for a return to a more materiality-focused approach.
The letter the attorneys general sent the Big Four sits squarely within that broader political pushback against climate reporting. But beneath that political battle over ESG lies a broader question about the Big Four business model.
Deloitte, PwC, EY and KPMG have publicly supported important elements of the emerging reporting architecture. At the same time, they sell sustainability reporting, climate advisory and assurance services.
So the question is — are the firms supporting climate-reporting initiatives simply to create a new business line for themselves?
And does participation in the regulatory ecosystem in itself constitute an independence problem?
The Big Four were active participants in the climate-reporting debate
The four US firms submitted detailed responses to the SEC’s 2022 proposal on climate-related disclosures. PwC supported mandated climate disclosures, EY supported greenhouse-gas disclosure and independent third-party assurance, KPMG was in favour of disclosures aligned with the Task Force on Climate-related Financial Disclosures, while Deloitte supported efforts to provide investors with consistent and comparable climate information.
The ISSB COP28 Declaration
Internationally, the firms also supported the International Sustainability Standards Board’s COP28 Declaration, calling for the global standards for sustainability-related financial disclosures developed by the board to be used as a global baseline for sustainability reporting.
Republican SEC Commissioner Hester Peirce criticised the creation of the ISSB in 2021, questioning the subjectivity and breadth of sustainability standard-setting. She also warned against international convergence around a single set of ESG standards.
Fellow Republican Commissioner Mark Uyeda echoed concerns that the IFRS Foundation's sustainability work should not detract from its traditional accounting-standard-setting role.
The Republican attorneys general's criticism of the Big Four’s role in the development and internationalisation of mandatory climate reporting clearly aligns with the long-running Republican challenge to the expansion of ESG regulations.
The commercial question is real
The Republican attorneys general are on firmer ground when they point to a genuine commercial interest. The Big Four sell services connected with the reporting regimes they have supported, and broader or more demanding disclosure requirements can increase demand for advisory and assurance work. That creates a potential conflict of incentives. But the existence of that commercial incentive is not, by itself, evidence that the firms supported more extensive reporting requirements in order to generate revenue.
In the letter, the attorneys general tell the firms that they:
“stand to financially benefit from pushing climate-related disclosures and reporting through the for-profit services you offer.”
They then ask them to identify the revenue earned during each of the past five fiscal years from climate-based disclosure assurance, sustainability reporting and ESG-related consulting services, and to explain why those revenues do not create a conflict of interest while the firm supports expanded climate-related disclosure requirements.
The firms had not publicly answered the substantive questions in the letter at the time of publication, so it is too early to speculate on the revenues they are earning from these services, but in 2022, Bloomberg reported on estimates that ESG assurance generated by European sustainability-reporting requirements could produce between $4 billion and $8 billion in annual fees.
Interestingly, the report also described concerns among European lawmakers about potential conflicts if the Big Four came to dominate sustainability assurance as they already dominate large-company financial audit.
A familiar Big Four tension: advising both sides of the rules
The Big Four’s value to governments and regulators derives partly from the same expertise they sell commercially. They understand complicated markets, corporate structures, accounting systems and regulatory requirements because they advise thousands of companies operating within them.
That can put a professional-services firm on both sides of regulatory change: helping governments or standard setters understand how rules should work while also advising companies affected by those rules.
Australia has already seen an extreme example of what can happen when the boundary between those roles fails.
Former PwC Australia tax partner Peter Collins participated in confidential Treasury consultations on proposed legislation and policy intended to combat multinational tax avoidance. Despite having signed confidentiality agreements, Collins shared confidential information obtained through those consultations with PwC partners and personnel in Australia and overseas. Subsequent disclosures showed that the confidential information had reached at least 53 PwC partners.
So Collins had access to information about how proposed legislation could affect existing and prospective clients, while PwC was in a position to sell tax advice to companies responding to those same reforms.
The climate-reporting controversy is not equivalent to the PwC tax scandal.
The attorneys general’s letter does not allege that confidential regulatory information was misused in relation to climate reporting, nor does it identify evidence that any Big Four firm improperly influenced climate-reporting rules or compromised an audit because of its climate commitments.
But the broad similarity between the two situations exposes a structural tension. The Big Four occupy positions close to the formation of regulation, while simultaneously possessing a commercial interest in helping clients respond to the resulting rules.
The attorneys general are now asking a related — though materially different — question about climate reporting: what protects independent judgement when a firm has both participated in the development or promotion of a reporting regime and sells services within the market that regime creates?
ESG assurance inherits an old audit problem
There is another independence issue here which does not depend on the firms’ climate commitments at all.
Sustainability assurance can reproduce the same commercial tension that has long existed in financial audit. The practitioner is engaged and paid by the company whose disclosures it is expected to scrutinise. And where the engagement is renewed, the firm has a commercial interest in retaining the work while simultaneously being expected to challenge management’s reporting.
That does not mean that an assurance provider will appease a client in order to retain an engagement. But the economic structure creates a familiar pressure.
International standard setters themselves have recognised that independence is a central issue in sustainability assurance. The International Ethics Standards Board for Accountants’ new International Ethics Standards for Sustainability Assurance, effective from 15 December 2026, specifically address risks including bias, conflicts of interest, pressure to act unethically, greenwashing and threats to the independence of sustainability assurance practitioners.
Significantly, IESBA has also published a direct comparison between those sustainability-assurance independence rules and the ethics and independence provisions applicable to financial-statement audits. The sustainability regime is not being constructed on the assumption that ESG assurance somehow escapes the independence problems familiar from audit.
The International Auditing and Assurance Standards Board has taken a similar approach. Its new ISSA 5000 global standard, generally effective for sustainability information reported for periods beginning on or after 15 December 2026, covers sustainability assurance engagements from acceptance and continuance through to reporting and is intended to operate alongside robust ethical and independence requirements.
So there are potentially two different independence questions in the current controversy.
The attorneys general are asking whether the Big Four’s institutional support for climate-reporting regimes creates an independence threat.
But even without those commitments, ESG assurance can recreate a much older problem: the independent assurance practitioner is being paid by the entity whose disclosures it is reviewing.
And there are already cases which show why the quality and scope of that assurance deserve scrutiny.
KPMG and forestry assurance in Canada
In 2023, the International Consortium of Investigative Journalists examined KPMG’s environmental assurance work as part of its Deforestation Inc. investigation.
One of the cases involved the Fort St. John Pilot Project in British Columbia. According to ICIJ, KPMG served as environmental auditor for the sustainable-forest-management project while also serving as financial auditor to Canfor, one of the forestry companies operating in the area.
ICIJ reported that KPMG repeatedly issued assurance reports which classified instances including logging in protected areas, destruction of wildlife habitat and degraded water quality as:
“minor non-compliances”
The broader controversy over the cumulative effects of industrial development in the region eventually produced a landmark court judgment. In 2021, the British Columbia Supreme Court found that the Province had infringed the Treaty 8 rights of the Blueberry River First Nations by permitting the cumulative impacts of industrial development to diminish meaningfully their ability to exercise those rights.
The court did not make a finding against KPMG. It was British Columbia’s conduct that was before the court.
But ICIJ’s subsequent investigation raised questions about what the environmental auditing and certification process had been detecting — and what level of comfort users should have taken from the assurance being provided. KPMG Canada told ICIJ that it was committed to delivering high-quality services in accordance with applicable regulated and international standards and independence requirements.
KPMG and APRIL in Indonesia
A related assurance-quality and scope issue had already arisen in Indonesia.
Pulp and paper group APRIL had commissioned KPMG Performance Registrar to provide limited assurance over implementation of its Sustainable Forest Management Policy.
In 2020, a coalition of Indonesian environmental organisations published a satellite-imagery investigation into the concession of PT Adindo Hutani Lestari, one of APRIL’s major wood suppliers.
The researchers said they identified 7,291 hectares of natural-forest loss within the Adindo concession between June 2015 and August 2020. Importantly for KPMG’s assurance work, they said nearly 2,000 hectares of the deforestation they identified occurred during 2017.
KPMG had visited the Adindo concession in April 2018 as part of an engagement covering 2017. KPMG described its mandate as providing:
“a limited assurance engagement over the data for 45 performance indicators presented by APRIL in relation to its SFMP 2.0”
The environmental groups said KPMG’s subsequent report did not identify the deforestation they had detected for that period. KPMG’s own report did, however, disclose gaps in the data available from APRIL’s “Open Market Suppliers”, including data on the number of hectares developed by category.
APRIL disputed the environmental groups’ underlying conclusions. It said that its own investigation had found no breach of its sustainability commitments and no destruction of designated High Conservation Value areas in the relevant plantations.
KPMG also responded to the researchers. It said its reports were issued to APRIL’s independent Stakeholder Advisory Committee, that it had forwarded the researchers’ correspondence to that committee, and noted that their initial letter had not included specific evidence of the alleged new development.
So this is not evidence that KPMG deliberately overlooked environmental problems in order to retain a client. Nor is it a regulatory finding of an independence breach.
But it illustrates an important problem for the emerging ESG-assurance market.
An assurance engagement is necessarily defined by its scope, criteria, evidence and level of assurance. A limited assurance report over specified sustainability indicators is not the same thing as an independent investigation into whether every aspect of a company’s environmental claims is correct.
Yet the distinction may not always be obvious to the investors, consumers and other stakeholders who see the name of a Big Four firm attached to a sustainability report.
And behind that question of scope sits the same economic tension that has existed in financial auditing for decades: the firm must exercise independent professional judgement while maintaining a commercial relationship with the company paying for that judgement.
That means the current debate should perhaps extend beyond the question raised by the Republican attorneys general.
The question is not only whether the Big Four can support climate-reporting regimes while making money from the services those regimes create.
It is also whether the rapidly expanding ESG-assurance market reproduces some of the very same independence pressures that have long troubled financial audit.
A threat to auditor independence?
The SEC’s auditor-independence framework states that an accountant will not be recognised as independent with respect to an audit client if the accountant is not capable of exercising objective and impartial judgement — or if a reasonable investor, knowing the relevant facts and circumstances, would conclude that it is not capable of doing so.
The SEC framework assesses an accountant's independence with respect to an audit client. The attorneys general are therefore asking whether a broader firm-level policy commitment — rather than a conventional financial, business or service relationship with a particular audit client — can itself create an independence threat.
The firms have not yet publicly answered the substantive questions raised in the letter. If they provide the requested revenue figures and explain how audit independence is protected from their sustainability advisory and assurance businesses, those answers could help separate two issues that need not be mutually exclusive: the political campaign against ESG, and the broader structural question of how the Big Four manage independence when they support reporting frameworks around which they also build commercial businesses.
This article is part of the Big4News Investigations & Analysis series, examining the structural forces shaping Deloitte, PwC, EY and KPMG — including audit independence, commercial incentives, governance, regulation and accountability.
About Claudine Cassar
I’m a corporate anthropologist and former Deloitte equity partner. I sold my technology business to Deloitte in 2016 and led the Malta Consulting team for five years. I am the founder and editor of Big4News, which provides independent, clear analysis of PwC, Deloitte, EY, and KPMG — free from corporate spin.
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