In 2021 and again in 2022, Deloitte conducted executive surveys of 300 accounting, finance, legal, and sustainability executives for their views on a host of environmental, social and governance (ESG) related topics. This latest research, titled the “Sustainability action report: Survey findings on ESG disclosure and preparedness,” shares executive insights about the increased preparations, challenges and planned investments being made to meet the growing expectation for high-quality sustainability reporting information.

At a high level, sustainability and equity concerns continue to transform the financial landscape and 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. It’s increasingly clear that companies making proactive strides to hold themselves accountable may be better positioned to thrive long term.

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. As reported in the previous ESG executive survey in 2021, a similar profile of survey respondents 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.

We hope you find these insights meaningful to your ESG performance and disclosure strategy—wherever in the journey you may be. With greater transparency, equity, and trust, we can help deliver accountability today for a sustainable tomorrow.

For more information on Deloitte’s Audit & Assurance Sustainability and ESG services, click here, or contact Todd Bauer, Audit & Assurance Partner, Deloitte & Touche LLP.