Despite the enormous challenges of corporate sustainability—including budgeting, talent and skill acquisition, consumer skepticism, fighting back against a politically fueled backlash, new obstacles related to compliance and regulation, and of course the ultimate goal of actually making a difference—most executives say they are making progress in their eco-initiatives. New research from consulting and advisory services firm Deloitte finds that more than three-quarters of executives surveyed have seen significant or moderate progress towards their sustainability goals in the past year. But challenges continue to mount.
The firm’s 2024 Sustainability Action report, based on a survey of 300 senior business leaders across industries, details these execs’ approach to and integration of ESG measures. The findings reveal that mandatory reporting requirements are prompting many companies to strengthen their focus on integrating sustainability into strategic planning, risk management and data governance.
From a strategic focus on capacity building, to navigating challenges of ESG data quality, the 2024 report explores companies’ current ESG mindsets and the benefits that can be realized from acting now to strengthen trust with stakeholders and prepare for regulation.
“Sustainability reporting and transparency can drive trust with stakeholders and is now subject to assurance and regulatory scrutiny in many jurisdictions,” said Kristen Sullivan, Audit & Assurance partner, and US Sustainability and ESG marketplace leader at Deloitte & Touche LLP, in a news release. “By strengthening sustainability governance and capabilities, organizations can prioritize performance on material sustainability impacts, risks and opportunities, and unlock strategic insights to help capture market value and stakeholder trust.”
Executives recognize the business benefits of sustainability reporting
The last year saw significant shifts in the sustainability landscape, with the US Securities and Exchange Commission (SEC) adopting final rules on climate-related disclosures and more extensive requirements mandated by the European Union. Despite legal challenges with the SEC climate rule, many organizations are investing in sustainability reporting as they aim to recognize tangible business benefits both internally and externally.
More than half (51 percent) of respondents cited greater efficiencies, reduced risk, and enhanced trust with stakeholders as the top three internal business benefits influenced by investing in sustainability reporting. Brand reputation and enhancement (20 percent) is the top business outcome respondents expect to see from enhanced ESG reporting. Another 15 percent expect enhanced talent attraction and retention, and 14 percent seek to realize pricing premiums for their products, highlighting how ESG reporting can influence external perceptions of the company. These findings demonstrate the multidimensional value that can be derived from high-quality sustainability reporting—from driving operational efficiencies to performance enhancement and stakeholder trust.
Investment in sustainability capabilities is on the rise across organizations
Companies are continuing to strategically integrate ESG into their workflows and shore up talent with relevant skillsets to meet demands for more rigorous disclosure. Virtually all (99 percent) respondents reported they are preparing for potential increases in sustainability requirements, and 77 percent are creating new roles and responsibilities as a result.
Additionally, more than half (52 percent) report having created a cross-functional ESG council or working group, down from 57 percent in December 2022. This slight decrease reflects the fact that many organizations have already established these governance mechanisms. Those with an already established cross-functional ESG group were more likely to make significant progress on their sustainability goals (38 percent) than those without (10 percent).
“Regulatory requirements and the evolving risk landscape have prompted many organizations to fill sustainability experience gaps in the C-suite, boardroom, and beyond,” said Evan Harvey, Audit & Assurance managing director, Deloitte & Touche LLP, in the release. “The emphasis on talent and change management is becoming apparent as sustainability governance and oversight become more of a strategic priority.”
Data quality continues to be a challenge
As companies increase capacity and experience to prepare sustainability reporting, many gain a deeper appreciation of the complexities and challenges with data quality. More than half of respondents cited data quality (57 percent) as their top challenge, and 88 percent report it as a top three challenge. Similarly, 81 percent of respondents cited documentation and sign off as a top challenge.
About three-quarters (74 percent) of respondents are currently prepared to disclose Scope 1 greenhouse gas (GHG) emissions—up from 61 percent in December 2022 and 58 percent in March 2022. Still, there is progress to be made, particularly in the consumer products (52 percent) and oil and gas industries (48 percent), which report being the least prepared to disclose Scope 1 GHG emissions. Similarly, private companies report slower progress in disclosing their Scope 1 GHG emissions.
Only 15 percent of respondents are currently preparing and disclosing Scope 3 GHG emissions. The top challenges highlighted by respondents include a lack of confidence in the data they receive from vendors (64 percent), as well as a lack of consistent industry standards and methodologies (50 percent), complicating their ability to measure consistently.
More companies are obtaining assurance
As organizations look to improve the quality and value of sustainability reporting, respondents indicated progress in obtaining assurance over their sustainability data, with 99 percent of respondents planning to obtain assurance or engage in assurance readiness. At this point, 80 percent of respondents indicate they are taking steps to move from limited to reasonable assurance, though only 13 percent have completed their evaluation of the next steps to take. Market practice among private companies suggests a different story, however, with 72 percent of respondents indicating they haven’t completed their review of next steps. Similarly, private companies aren’t as mature in their assurance readiness, with only 30 percent already obtaining assurance, compared with 39 percent of public companies.
Check out the full report here. To see how your company’s ESG readiness measures up, Deloitte’s ESG SelfAssess tool can help navigate the complexities of the quickly evolving regulatory environment.
Deloitte commissioned an online survey in January 2024 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 250 in each of the following industries: consumer products; financial services; life sciences and health care; oil and gas; and technology, media and telecommunications.
