Mandatory global climate reporting requirements for public and private companies, such as the European Union Corporate Sustainability Reporting Directive (CSRD), have made sustainability reporting a top priority for many business leaders. While the CSRD is a European directive, its requirements also apply to many non-EU companies that operate in the EU, often creating reporting obligations at both a consolidated parent and EU-subsidiary level. How can organizations prepare for these new requirements? The approach often varies, illustrating how leaders address sustainability can be based on their industry concerns and stakeholder needs.
In its latest installment, Deloitte’s 2024 Sustainability Action Report revealed virtually all (99%) of respondents are preparing for potential increases in sustainability requirements and 77% are creating new roles and responsibilities as a result. The way companies are going about this, however, varies industry by industry. To understand how some organizations are preparing, we asked 250 executives across five different industries to understand how they are addressing sustainability reporting challenges and opportunities, and the lessons they can offer.
Industries are experiencing pressure, but from different stakeholders
Many organizations are responding to growing regulatory mandates and societal expectations, but often in different ways based on specific industry and stakeholder concerns. For example, Life Sciences and Health Care (LSHC) and Financial Services Industry (FSI) respondents reported feeling pressure from ESG rating agencies. While nearly seven in 10 Technology, Media and Telecommunications (TMT) companies reported their customers often-or always-request greenhouse gas (GHG) emissions reporting as a requirement to respond to a request for proposal or to do business. TMT is also most likely to encounter pressure from nongovernmental organizations—showcasing the depth and breadth of the internal and external stakeholder groups that are increasingly playing a role in the everchanging sustainability reporting landscape.
Data quality is a universal challenge, with some bright spots
Calls for greater transparency are driving more holistic and detailed sustainability reporting throughout the value chain. 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%) as their single biggest challenge, and 88% report it as a top three challenge.
Certain sectors, however, are demonstrating measurable progress. Within LSHC, less than half (49%) of respondents said they lack confidence in the data they receive from vendors, compared to 64% of respondents across all industries. This is important to the sector, from pharmaceutical manufacturers to health care providers—all of which typically require strong data as part of their core operating structure.
As organizations look to improve the quality and value of sustainability reporting, respondents indicated progress in obtaining assurance over their sustainability data, with 99% of respondents now planning to obtain assurance or engage in assurance readiness, up from 96% in our December 2022 report.
Obtaining assurance will be an important consideration as organizations look to strengthen data quality and enhance sustainability reporting across industries.
Industries are tailoring governance to their needs
Management team structure continues to be an area where organizations are investing to bolster their sustainability reporting, but they’re taking different approaches in how they delegate these roles and responsibilities. Consumer (67%), and oil and gas (67%), reported a CSO is charged with management responsibility for sustainability disclosure. Whereas FSI organizations reported a prominent role for chief sustainability officers (58%) in assuming management responsibility over ESG disclosures, though 47% also rely on a chief financial officer.
We continue to see a range of leaders providing oversight, with notable growth within the general counsel (41%) as well. As for ESG oversight, respondents reported that the full board (44%) most commonly oversees ESG. Findings also show it is common for an existing committee, like the audit committee (42%) or compensation committee (42%), to provide oversight.
Sustainability reporting practices and operating models vary by industry. Nearly all respondents (98%) that have an established ESG council or reporting group report that it meets at least quarterly, though some industries are meeting more than others. Fifty-four percent of FSI respondents indicated they meet at least once a month; private companies are similarly more likely to meet at least once per month, with 49% already doing so. They are also more likely to take a “wait and see” approach, perhaps to watch how emerging regulations unfold and public companies respond in kind.
Further, Deloitte’s 2024 CxO Sustainability Report, a survey of over 2,100 global C-suite executives across 27 countries, found that climate change remains a top-three issue for business leaders. What’s more, close to half of executives surveyed reported a shift toward seeing more direct environmental and business impact as a result of their sustainability efforts, which may indicate we are entering a new phase in corporate climate action, one where sustainability goes beyond just a compliance or brand-building exercise and is increasingly serving as an engine for new value creation, a competitive differentiator, and a driver of innovation.
Across industries, regulation and changing societal expectations are working to drive change in the business community and although the responses have been different, many leaders are taking notice and implementing important steps to adapt.
Would you like to know how ready your organization is for measuring and reporting ESG data? Our ESG SelfAssess™ tool is here to allow you to take a closer look at your company’s ESG readiness.
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