Roughly three-quarters of public companies plan to invest in new technologies or tools to facilitate and improve ESG disclosure capabilities in the coming year. That's according to a new Deloitte survey of 300 finance, sustainability, accounting and corporate executives at companies with revenues of more than $500 million across various sectors, reports esgtoday.com.
Data quality remains the biggest challenge for companies. The report highlights the key steps companies are taking to prepare to meet the growing demands for ESG reporting, most notably investments in technology and human resources.
74% of respondents believe their companies are very likely to invest in new technology or tools to enable more timely and better disclosures, and almost all, 99%, are already or plan to improve internal advocacy mechanisms of readiness for future disclosure requirements.
More than three-quarters of respondents say they have created new roles and responsibilities to prepare for increased regulatory or ESG disclosure requirements.
Formation of cross-functional ESG teams
One of the key areas of sustainability-related development highlighted by the study is the formation of cross-functional ESG teams at many companies. 52% of respondents reported that they already had such teams in place, and almost all of the rest, 46%, reported that they were in the process of creating or developing plans for such teams. Among companies that have already established cross-functional ESG teams, 98% report that the teams meet at least quarterly, and 43% meet at least monthly.
The report also found that 98% of companies had made at least some progress towards their sustainability goals and objectives in the past year, with 38% of those with a cross-functional ESG team describing their progress as "significant", compared to just 10% of those without such teams.
92% of companies report taking steps to actively prepare for potentially increased ESG regulatory or other disclosure requirements, with 52% of those with cross-functional ESG teams saying they are “preparing extensively now,” compared to just 24% of those without teams in place.
Increasing executive responsibility
Another key finding of the study is the increase in executive responsibility in recent years in executive oversight of sustainability reporting and particularly the rise of the role of the Chief Sustainability Officer (CSO).
According to the report, 55% of respondents say the CSO has management responsibility for ESG disclosure, compared to just 42% in a similar survey in 2022. Additionally, 42% say management responsibility for ESG disclosure includes the executive leadership team, in compared to 31% before and 41% with general counsel, an increase of 26%.
The survey also shows that executives expect a number of benefits from improved ESG reporting. When asked to select the top three expected business outcomes from improved ESG reporting, 53% of respondents cited reduced risk, closely followed by increased efficiency and ROI at 52%, talent attraction and retention at 51%, and brand reputation at 51%.
“The creation of dedicated ESG teams, the increase in specialist roles and investments in sustainability reporting all indicate a strategic shift towards embedding sustainability into their core operations. While challenges still exist, the commitment to sustainability is becoming more evident as companies continue to unlock the potential of ESG insights,” commented Kristen Sullivan, Audit & Assurance Partner and US Sustainability and ESG Market Leader, Deloitte & Touche LLP.