Global professional services firm Deloitte announced today the release of a new survey examining the preparedness, challenges and plans of US companies with respect to ESG disclosure. The survey indicated that while companies are actively working to improve their sustainability reporting capabilities, significant work and investment will be required to meet the ESG transparency needs of stakeholders, in areas including data quality, reporting consistency, technology and governance, among others.
The study commissioned by Deloitte surveyed 300 senior finance, accounting, sustainability, and legal executives across a wide range of industries at US public companies with revenues greater than $500 million. More than 75% of respondents represented companies with revenues greater than $1 billion.
The survey comes as executives at companies globally are facing increasing demands from multiple stakeholders to enhance ESG transparency, and as regulators worldwide are ramping sustainability reporting requirements, with the U.S. Securities and Exchange Commission’s (SEC)’s widely anticipated ESG disclosure rules expected to be unveiled imminently.
Kristen Sullivan, US Sustainability and ESG Services Leader and Global Audit & Assurance Climate Services Leader, Deloitte & Touche LLP, said:
“With increasing calls for higher quality ESG disclosures, organizations need a robust, integrated strategy that weaves ESG into their DNA. Done right, the integrated approach can be a tool to promote resilience and adaptability — and drive greater overall value for the business.”
One of the key areas targeted for action by the surveyed executives is improvements in ESG data capabilities, with 89% reporting that their organizations are likely to enhance the control environment in place for ESG data. The greatest data challenges cited included availability or access to data, reported by 32%, followed by data quality (25%).
Technology and staffing are likely to be key focus investment areas for companies as they look to enhance ESG reporting. Only 7% of respondents reported that they are not at all concerned about having adequate technology to facilitate ESG disclosure requirements, with nearly half saying that they are ‘very’ or ‘extremely’ concerned. Only 17% of the executives reported being completely confident that they are properly staffed to meet ESG disclosure demands, though only 1% were ‘not at all confident.’ Senior finance and accounting executives, and non-C-suite respondents reported lower confidence in staffing level adequacy than their legal/risk/sustainability and C-suite counterparts.
Scope 3 emissions reporting is likely to emerge as a key challenge area for ESG reporting for companies. This area of emissions, which covers those out of a company’s direct control across the value chain, often account for the significant majority of most organizations’ climate impact, but are typically the hardest to measure, track and address. Less than a third (31%) of respondents reported being prepared to disclose scope 3 greenhouse gas emissions. The most challenging scope 3 emissions to report cited by respondents included end-of-life treatment of sold products (45% of respondents are not currently able to measure), followed by fuel and energy activities outside of scope 1 and 2 (40%), and processing of sold products (40%).
Consistency also emerged as a key issue in the survey, in areas ranging from reporting venues to standards. While 100% of the executives reported that they are providing ESG disclosures currently, reporting is done across multiple different channels including on company sustainability webpages, standalone ESG reports, within financial statement disclosures, and at investor conferences, among others. Companies are following multiple reporting standards, such as SASB, CDSB, TCFD and GRI. On average, companies are reporting using two standards or frameworks, with more than a third using three or more.
The report also examined ESG reporting issues including accountability and assurance. Governance oversight varies by organization, with executive leadership teams most often having responsibility for ESG disclosure oversight, followed by an ESG committee and audit and nominating and governance committees. Only 21% of respondents reported having a cross functional ESG council, but 57% say they are working to establish one. 75% of respondents plan to obtain assurance over ESG disclosures in the next reporting cycle.
Jon Raphael, National Managing Partner, Transformation & Assurance (ESG),Deloitte & Touche LLP, said:
“As companies rise to meet the moment, they will need the right mix of skilled professionals, streamlined processes, and dynamic technology to address stakeholder expectations for high-quality ESG disclosures that instill trust.”
Click here to access the Deloitte survey results.