US Public Companies Take Action to Prepare for Enhanced Sustainability Disclosures
New Deloitte survey of 300 senior finance, accounting, legal and sustainability leaders highlights increased preparations and planned investments underway to address challenges and growing expectations for high-quality reporting
- Companies begin to shift from commitment to action. To address disclosure readiness, 89% of executives surveyed say they enhanced internal goal setting and accountability mechanisms, and 81% report creating new roles and responsibilities to prepare for additional disclosure requirements. Technology is also a major focus when it comes to preparedness, with 99% saying they are somewhat likely or very likely to invest in more technology and tools in the next 12 months.
- Environmental, social and governance (ESG) prioritization is on the rise. Nearly 3 in 5 executives (57%) report having implemented a cross-functional ESG working group tasked with driving strategic attention to ESG and another 42% are in the process of establishing one. As reported in the previous ESG executive survey, this a notable increase from last year when only 21% of a similar profile of survey respondents reported implementing a cross-functional ESG working group.
- Beyond potential regulatory requirements, executives anticipate business benefits to integrating sustainability into business strategy. More than half name talent attraction and retention (52%), increased efficiencies and ROI (52%), and building stronger stakeholder trust (51%) as potential business outcomes of enhanced ESG reporting.
- While most companies are taking meaningful steps toward enhancing sustainability disclosures, challenges remain. Sustainability data is a top concern, with 35% of executives citing ESG data quality and 25% citing access to ESG data as their greatest challenge. Additionally, executives continue to face hurdles when addressing Scope 3 greenhouse gas (GHG) emissions disclosures, with just over a third (37%) currently prepared to disclose details.
Why this matters
Sustainability and equity concerns continue to transform the financial landscape. Companies are moving from commitment to action in their sustainability reporting to address evolving stakeholder expectations. Furthermore, they are recognizing the opportunity to capture value while contributing to a sustainable future. Companies making proactive strides to hold themselves accountable may be better positioned to thrive long term. Deloitte’s “Sustainability action report: Survey findings on ESG disclosure and preparedness” shares executive insights about increased preparations, challenges, and planned investments being made to meet the growing expectation for high-quality sustainability reporting information.
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Moving from commitment to action
Rather than waiting to react to disclosure requirements, companies are taking steps now to accelerate their sustainability journeys by proactively implementing changes to accelerate readiness and are pivoting to anticipate the strategic business benefits of integrating sustainability into business strategy.
Most executives surveyed (95%) are preparing for more disclosure requirements, including nearly 3 in 5 that are already making extensive preparations. A vast majority (89%) of executives have also enhanced internal goal setting and accountability mechanisms to promote readiness, and a majority (81%) report that new roles and responsibilities have already been created to prepare for additional disclosure requirements.
Companies are internally shifting focus to prioritize ESG oversight, controls, and disclosure to prepare for increasing demand for high quality sustainability disclosures. Nearly 3 in 5 (57%) executives report having implemented a cross-functional ESG working group tasked with driving strategic attention to ESG and another 42% are taking steps to do the same. A similar profile of survey respondents in 2021 indicated that only 21% had implemented a cross-functional ESG working group. While nearly all respondents have plans to create a cross-functional ESG council or working group, progress varies by industry. The consumer products industry led the way (66%) in establishing a cross-functional working group and the financial services sector (44%) trailed among five of the industries surveyed.
Sustainability planning and action
Beyond potential regulatory requirements, executives anticipate business benefits to integrating sustainability into business strategy. More than one half noted talent attraction and retention (52%), increased efficiencies and ROI (52%), and building stronger stakeholder trust (51%) as potential business outcomes of enhanced sustainability reporting.
Companies also expressed willingness to invest in new technologies and tools to well-position themselves to meet stakeholder expectations and future regulatory requirements. Virtually all executives (99%) are likely or very likely to invest in more technologies and tools over the next 12 months.
ESG readiness and external assurance remains a valuable tool in preparations and makes a significant and immediate impact on a company’s governance and reporting processes and controls. Nearly all respondents (96%) plan to seek external assurance for the next reporting cycle, with 61% already seeking external assurance and 35% seeking external assurance for the first time in the next reporting cycle.
ESG reporting challenges
While companies are actively working to meet the growing need for high-quality sustainability reporting and disclosure, challenges remain. Companies are concerned about the accuracy and completeness of sustainability data. Executives list quality (35%) as the top data challenge, up from 25% in 2021. Another 25% cited access to data as the greatest challenge, a slight decrease from the 32% cited by a similar profile of respondents in 2021.
Many companies report being prepared to disclose Scope 1 GHG emissions (61%), and more than 3 in 4 (76%) executives are prepared to disclose Scope 2 GHG emissions, a noteworthy increase from 47% in 2021. However, Scope 3 disclosure is still a work in progress, with only one third (37%) of respondents currently prepared to disclose details, a modest increase (31%) from 2021. The vast majority (86%) reported challenges measuring Scope 3 GHG emissions.
“Sustainability reporting and disclosure is more than a ‘check-the-box’ compliance exercise — it is a business imperative. Sustainability, integrated with business strategy, is about unlocking value for a company and its stakeholders, as well as creating a sustainable future, where people and the planet prosper together.” – Jon Raphael, national managing partner, sustainability, transformation and assurance, Deloitte & Touche LLP
“Stakeholders increasingly expect a company’s business strategy to align with its climate and equity commitments. While companies are at various stages on their sustainability journey, they must drive accountability today for a sustainable tomorrow.” – Kristen Sullivan, Audit & Assurance partner, U.S. sustainability and ESG services leader and global Audit & Assurance climate services leader, Deloitte & Touche LLP
Deloitte commissioned an online survey in August and September of 2022 of 300 executives at publicly owned companies with a minimum annual revenue requirement of $500 million or more, as well as conducted interviews to increase the total sample size to 100 in each of the following industries: consumer products; financial services; life sciences and health care; oil and gas; and TMT (technology, media and telecommunications). Executives are defined as senior finance, accounting, sustainability, and legal executives with a minimum seniority of director, or chief risk officers, general counsels, chief legal officers, or chief sustainability officers.