Greener Pastures: 74% of Public Companies to Harvest New Tech for Sustainability Reporting – Deloitte Survey

Approximately three quarters of public companies report that they are likely to invest in new technology or tools to help improve their ESG disclosure capabilities over the next year, as nearly all companies are preparing to meet increased reporting requirements, yet data quality remains the top ESG challenge, according to a new survey released by global professional services company Deloitte.

The report reveals a significant shift in corporate strategies, as an overwhelming 99% of companies are preparing for new regulatory sustainability reporting mandates and standards. These include the EU's Corporate Sustainability Reporting Directive (CSRD), the International Financial Reporting Standards (IFRS) Foundation's International Sustainability Standards Board (ISSB) standards, California's pioneering climate reporting legislation, and the U.S. Securities and Exchange Commission's (SEC) climate disclosure rule.

Investments in Technology and Talent for Strategic Advancement

To meet the growing demands of ESG reporting, companies are making substantial investments in technology and human resources. According to the survey, 74% of respondents believe their companies are likely to invest in new technology or tools to facilitate more timely and higher-quality disclosures. Almost all respondents, 99%, have either already enhanced or plan to enhance internal mechanisms to prepare for future disclosure requirements. Additionally, over three-quarters of respondents have created new roles and responsibilities to address increased ESG regulatory or disclosure requirements.

The survey highlights a notable trend: the rise of cross-functional Environmental, Social, and Governance (ESG) teams. Currently, 52% of respondents have established such teams, while an additional 46% are in the process of forming or planning these teams. Among companies with established teams, 98% report regular meetings, with 43% convening monthly.

Increased Importance of Executive Roles and the CSO

The survey reveals a significant increase in executive responsibility for sustainability reporting, particularly in the role of the Chief Sustainability Officer (CSO). The report indicates that 55% of respondents stated that the CSO holds management responsibility for ESG disclosure, up from 42% in a similar survey conducted in 2022. Additionally, 42% reported involvement of the executive leadership team in ESG disclosure management, up from 31%, and 41% indicated the involvement of general counsel, up from 26%.

Positive Impact on Sustainability Progress

The formation of cross-functional ESG teams is proving to be a catalyst for sustainability progress and preparedness. While 98% of companies have made some progress towards their sustainability goals over the past year, a significant 38% of those with cross-functional ESG teams describe their progress as "significant," compared to only 10% of those without such teams. Furthermore, 92% of companies are actively preparing for potential increased ESG regulatory or disclosure requirements. Among those with cross-functional ESG teams, 52% are "preparing extensively now," compared to only 24% of those without such teams.

Despite increased investments in technology and tools, data quality remains the primary challenge in ESG reporting, cited by 88% of respondents as a top three challenge. This is followed by 81% citing issues with processes and controls, including documentation, review, and sign-off.

Executives are optimistic about the benefits of enhanced ESG reporting. When asked to select the top three anticipated business outcomes, 53% of respondents cited risk reduction, 52% cited increased efficiencies and return on investment (ROI), 51% cited talent attraction and retention, and 51% cited enhanced brand reputation.

Kristen Sullivan, Audit & Assurance partner and US Sustainability and ESG marketplace leader at Deloitte & Touche LLP, provided her insights on the findings: "The establishment of dedicated ESG teams, the rise in specialized roles, and investments in sustainability reporting signify a strategic shift towards embedding sustainability into core operations. While challenges persist, the commitment to sustainability is becoming increasingly evident as companies continue to unlock the potential of ESG insights.

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Source: https://www.esgtoday.com/74-of-public-companies-plan-to-invest-in-sustainability-reporting-technology-and-tools-over-next-year-deloitte-survey/