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Kristen Sullivan headshot

Gearing Up for ESG Reporting: Insights from Public Company Executives

CEO executive in board room with glass windows - ESG reporting in business

Committing to meet environmental, social, and governance (ESG) objectives and targets is one thing. Acting on them is quite another. What are businesses doing to prepare for high-quality sustainability and ESG reporting, and what challenges are they uncovering along the way? To find out, Deloitte surveyed 300 public company executives to get a pulse on current trends and sentiment. Here are five takeaways from the front lines of real-world change.

Embed ESG in the corporate strategy

Nearly 3 in 5 executives (57 percent) say their company has established a cross-functional working group to drive strategic attention to ESG, an increase of 21 percent since last year. Another 42 percent say they’re in the process of establishing one. 

A typical ESG working group includes executives from finance, accounting, risk, legal, sustainability, operations, supply chain and other functional areas. Increasingly, accountability for ESG performance can be most effective with an integrated governance structure that brings together all business functions. A philosophy of ownership across the business, paired with a strategic approach to governance, can establish ESG as a strategic priority highly aligned to corporate strategy. 

Assign roles and responsibilities

Only 3 percent of executives say their companies are prepared for potential increased ESG regulatory or other disclosure requirements, but many are getting ready. For instance, 81 percent of companies have created new roles or responsibilities, and 89 percent say they’ve enhanced internal goal-setting and accountability mechanisms to promote readiness. 

Who has management responsibility over ESG disclosure? Today, in many cases, it’s the chief financial officer (CFO) or chief sustainability officer (CSO), but many respondents indicate that increasingly there is shared responsibility for ESG reporting across the executive leadership team, human resources, supply chain and other functions. 

Of those executives surveyed, board-level oversight has been predominantly assigned to the nominating and governance committee, but we are seeing a trend of expanded oversight responsibility across all committees, aligned to respective remit, to drive greater integration and oversight of ESG risks and opportunities. 

Increase focus on assurance 

Nearly all (96 percent) surveyed executives plan to seek assurance for the next ESG reporting cycle. To prepare for a reasonable level of assurance, 37 percent of companies are starting to apply the Committee of Sponsoring Organizations of the Treadway Commission (COSO)’s internal control guidelines, which can help companies measure, manage and validate ESG information with the same rigor typically applied to financial reporting.  

Respondents shared that they use a range of different frameworks and standards for their disclosures. The most common is the Task Force for Climate-related Financial Disclosures (TCFD) (56 percent), closely followed by the Sustainability Accounting Standards Board (SASB) (55 percent). Around half of respondents also use standards from the Greenhouse Gas Protocol, International Integrated Reporting Council (IIRC), and Global Reporting Initiative (GRI).

For multinational firms, the rapid progress of the International Sustainability Standards Board (ISSB) signals optimism for convergence of a number of leading sustainability reporting standards and frameworks and the creation of a global baseline for sustainability reporting to help meet the information needs of the capital markets, as well as serve as the basis upon which other jurisdictions can build. 

Develop a workable solution for data gaps

When it comes to sustainability reporting, access to quality ESG data now appears to be a bigger challenge than data availability. Still, a majority (61 percent) of respondents indicate their companies are prepared to disclose details about the greenhouse gas (GHG) emissions they directly produce, known as Scope 1. Even more (76 percent) say they’re ready to disclose details of their Scope 2 GHG emissions, or emissions generated by the electricity a company purchases, a substantial increase from the 47 percent who said so the previous year. 

At the same time, Scope 3 emissions — which account for GHGs produced along a company's entire value chain — appear to remain a challenge. Most respondents (86 percent) indicate they’ve run into challenges measuring them, and only 37 percent are prepared to disclose them in detail. 

To close any gaps, companies may consider focusing on the Greenhouse Gas Protocol, which currently serves as the leading standard for measuring greenhouse gas emissions and provides for methodologies to promote consistency of measurement with due consideration to the level of measurement uncertainty and data availability. 

Invest in technology for ESG reporting, disclosure and action

New technology is on the horizon for many companies as they embark on their ESG integration and disclosure journeys. Nearly all executives (99 percent) are somewhat likely or very likely to invest in new technology to prepare to meet stakeholder expectations and future regulatory requirements. 

Technology solutions can assist in accelerating preparedness in moving from reporting in accordance with voluntary sustainability standards and frameworks to enhanced disclosure in accordance with authoritative ESG standards and new regulation. 

No matter where a company is in their sustainability journey, strategic attention to ESG integration and disclosure today can help to deliver long term value to  stakeholders into the future. By implementing the insights shared by public company executives, companies can gear up for ESG reporting and work to meet stakeholder expectations while also creating long-term value. 

Image credit: Andrea Piacquadio/Pexels

Note: This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

Kristen Sullivan headshot

Kristen B. Sullivan is a partner with Deloitte & Touche LLP and leads Sustainability and ESG Services, working with clients to help address their sustainability and non-financial disclosure strategy needs. Kristen also serves as the Deloitte Touche Tohmatsu Limited’s Global Audit & Assurance Sustainability and Climate Services Leader and the Integrated Reporting Community of Practice Leader. Kristen brings extensive experience in delivering sustainability risk assessment, governance, strategy alignment, measurement, reporting, and assurance services.  

Given the growing market emphasis on the importance of ESG standards and frameworks, Kristen serves as a member of the Global Reporting Initiative (GRI) Community, the Sustainability Accounting Standards Board (SASB) Assurance Task Force, the Sustainable Stock Exchange (SSE) Initiative Corporate Working Group, and as Chair of the AICPA Sustainability Task Force. She previously served on the International Integrated Reporting Council (IIRC) Working Group. 

Read more stories by Kristen Sullivan