A new survey of ESG practitioners reveals that a strong ESG reporting program is seen as a key competitive advantage for businesses in the coming years, despite the challenges that come with it.
The survey, conducted by software company, Workiva, and in partnership with Ascend2, polled more than 900 professionals across the globe to learn more about their work as it exists today, as well as what developments they expect over the coming years.
According to the results, an overwhelming majority (90%) of respondents believe that ESG reporting will play a prominent role in driving competitiveness for their organisation in the next two years.
In line with this, the survey found that businesses are taking steps to strengthen their ESG reporting capabilities. Almost three-quarters (71%) of respondents said that three or more internal teams are involved in ESG reporting, while 74% said that at least one employee has been appointed to oversee ESG metrics – a 6% increase on last year.
“It’s no secret ESG is receiving heightened attention in boardrooms or that increasingly complex frameworks, standards, and regulations are presenting new challenges in ESG reporting,” said Alex Edmans, London Business School’s professor of finance.
Differences in opinion
Edmans noted that there is a perception gap based on ESG performance, depending on who within the business was polled.
The study found that while 62% of executives “strongly agree” that their company applies the same diligence to ESG reporting as it does to financial reporting, only 32% of managers expressed the same sentiment. This suggests that there is a disconnect between the two groups when it comes to the maturity of ESG reporting standards.
Furthermore, respondents were not aligned as to the level of resources dedicated to ESG reporting, with 87% of executives having appointed someone internally to an ESG-specific role, compared to just 67% of managers.
When asked about the challenges of ESG reporting, executives and managers also had different concerns. Executives were most concerned with regulatory compliance and the measurement of qualitative initiatives. Managers, on the other hand, were more concerned with a lack of adequate technology and obtaining reasonable assurance.
“What struck me from the survey results is the dichotomy between practitioners of all levels agreeing they find value in ESG reporting, while managers in the trenches are saying it’s not being treated with the discipline it requires.” said Edmands.
However, regardless of this internal disconnect, the report’s evidence is clear: ESG practitioners at all levels “overwhelmingly agree” ESG reporting generates business benefits.
Challenges with reporting
The ability to measure qualitative initiatives was seen as the top challenge for almost half (40%) of respondents, followed by complying with ESG frameworks and standards (39%) and compiling data from multiple sources (39%).
The release of the final International Sustainability Standards Board’s (ISSB) IFRS1 and IFRS 2 standards earlier this year has been seen by many as a way to help to clarify the reporting landscape and reduce the burden on businesses by creating a consistent baseline for disclosures.
Regulation was seen as a major challenge, with 33% of respondents choosing it as the largest obstacle they expect to face. ESG regulations are expanding around the world, with research from ESG data management firm ESG Book finding that global ESG regulation has increased by 155% in the last decade. The most notable of these is the EU’s Corporate Sustainability Reporting Directive (CSRD), which is set to take effect in 2024 and will have a significant impact on businesses.
Despite these challenges, the report found that companies that successfully implement a strong ESG reporting program can reap a number of benefits, including improved brand awareness and reputation, cost savings, and reduced risk related to climate change, among others.
