Global firms prioritise sustainability reporting amid evolving standards
Companies are ramping up their environmental, social, and governance (ESG) reporting efforts, according to a survey by global professional services firm Deloitte.
Nearly all respondents are preparing for increased disclosure requirements. However, data quality remains a significant hurdle for many organisations.
The ‘2024 Sustainability Action Report‘ found that 74% of public companies will likely invest in new technology or tools to enhance their ESG disclosure capabilities over the next 12 months. This is because 99% of surveyed companies report taking steps to prepare for potential increased regulatory or other disclosure requirements.
“Organisations that have been taking a ‘wait and see approach’ to climate-related risk and reporting may find that they have catching up to do to prepare,” the report reads. Additionally, Deloitte stated that many who took early action report significant progress and may already realise some internal and external benefits resulting from a deeper understanding and measurement of ESG risks and impacts.
Trends and challenges in ESG reporting
The survey, which included 300 executives from publicly owned companies with annual revenues of $500 million or more, revealed several key trends in ESG reporting:
1. Cross-functional collaboration: 52% of respondents report establishing a cross-functional ESG council or working group, up significantly from 21% in March 2022. Of those with established groups, 98% meet at least quarterly, with 43% meeting monthly or more frequently.
2. Progress on sustainability goals: 98% of respondents report progressing toward their goals and targets in the past year, with 25% citing significant progress.
3. New roles and responsibilities: 77% of companies have created new internal roles or responsibilities to prepare for increased ESG disclosure requirements.
4. Board-level oversight: 44% of respondents indicated that the entire board provides oversight of ESG matters, while 42% reported oversight by the audit or compensation committees.
Despite these positive trends, the survey highlights persistent challenges in ESG reporting. Data quality emerged as the top concern, with 57% of executives citing it as their biggest challenge and 88% ranking it among their top three challenges. After all, accurate, complete, and timely data is crucial for meaningful ESG disclosure and decision-making.
Other critical challenges identified in the survey include:
1. Documentation and review processes: 81% of respondents reported challenges related to documentation, review, and sign-off procedures for ESG data.
2. Scope 3 emissions reporting: 74% of companies currently disclose Scope 1 emissions, and 53% report on Scope 2; only 15% prepare and disclose Scope 3 emissions data.
3. Supply chain data: Among those reporting Scope 3 emissions, 64% cite a lack of confidence in primary data from supply chain partners as a significant challenge.
The survey also reveals that companies recognise both internal and external benefits of enhanced ESG reporting. Brand reputation (20%), improved talent attraction (15%), and the potential for pricing premiums (14%) were cited as top external benefits. Internally, companies expect enhanced operational efficiencies, reduced risk, and strengthened stakeholder trust.
As ESG reporting evolves, companies increasingly turn to multiple reporting standards and frameworks. The survey found that 54% of respondents use the International Sustainability Standards Board (ISSB) standards, 50% use the Global Reporting Initiative (GRI), and 49% follow the Task Force on Climate-related Financial Disclosures (TCFD) recommendations.
The report indicates a growing trend toward seeking external assurance for ESG disclosures. 99% of respondents plan to obtain assurance or engage in assurance readiness for their next reporting cycle, with 39% already doing so.
As companies continue investing in their ESG reporting capabilities, the focus on data quality and consistency will likely intensify. With regulatory requirements evolving and stakeholder expectations rising, organisations that can effectively address these challenges will be better positioned to drive value and build trust through their sustainability efforts.
