Companies in the United States are beginning to shift from commitment to action when it comes to environmental, social, and governance (ESG) issues to address stakeholder concerns and pending regulations, according to a report from Deloitte.
Businesses are taking that next step by implementing working groups and staff led by executives such as chief sustainability officers, chief financial officers, and chief strategy officers. They are investing in new technologies and data, and nailing down accurate reporting. Nearly 100% of the companies that responded to the Deloitte survey said they were going to invest in new technologies and other tools throughout the next year, as access to quality data and overall ESG preparedness can also create value and help address growing stakeholder demands.
In addition to stakeholder pressure and brand reputation, ESG strategy is important to address pending government regulations, such as the proposed Security and Exchange Commission emissions disclosures. Those rules would require companies to disclose all their emissions, including Scope 3 emissions. With more strict regulations on the horizon, the Deloitte survey shows companies want to use updated tools to also stay ahead of future requirements.
Executives Look to Disclosure Preparedness
More than 60% of respondents said they are already prepared for or are extensively preparing for the expected increase in requirements. A wide majority, 81% of executives, said new roles and responsibilities within their companies have been created to accommodate further disclosure requirements, and 95% said they expect more requirements in the future.
While executives such as CFOs and chief sustainability officers are leading the internal strategy for ESG initiatives at many companies, a majority have installed cross-functional working groups to make sure these efforts are realized. The survey shows 57% of respondents have implemented these groups to put ESG strategies in place, up from 21% who said they had that type of program in 2021. The groups include ESG councils and assurance programs.
In addition to adding internal groups to promote successful ESG strategies, companies are increasingly striving for outside assurances that their efforts are working. Nearly all executives – 96% – said they plan to seek external assurance for the next reporting cycle. Of those, 35% are doing so for the first time.
Quality ESG Data Remains an Obstacle
Executives said obtaining quality data is still a challenge in ESG reporting, with 35% saying a lack of good information is their biggest obstacle. A quarter of respondents said access to data holds them back the most in regard to ESG reporting.
Those challenges are highlighted when it comes to Scope 3 emissions reporting, which has been more of a focus in many industries, especially in light of the proposed SEC rules. A vast majority (86%) of the respondents said they have had problems measuring Scope 3 emissions, with 51% having a lack of confidence in the information they are receiving from suppliers. Lack of data availability and inconsistency of industry measurement standards are also hindering their efforts, the survey found.
Despite those challenges, many of the executives said there are benefits to these increased ESG actions. Those include increased operational efficiencies and return of investment (52%), enhanced trust of stakeholders (51%), increased brand reputation (49%), and reduced risk (48%).