Companies are getting ready to disclose more information about their efforts to control greenhouse gas emissions as the Securities and Exchange Commission gets set to unveil new rules for climate-related disclosures.
In March, the SEC proposed a
In response, 89% of the executives surveyed said they have enhanced internal goal-setting and accountability mechanisms, while 81% reported creating new roles and responsibilities to prepare for additional disclosure requirements. Technology has become a major focus when it comes to preparedness, with 99% of the respondents indicating they are somewhat likely or very likely to invest in more technology and tools in the next 12 months. Over half the executives surveyed (57%) reported having implemented a cross-functional ESG working group, a significant increase from 21% only a year ago. Another 42% of the respondents said they're taking steps to set up a cross-functional ESG working group.
"Companies are looking at and self-examining where they are today and where they need to go, specifically as it relates to greenhouse gas emissions," said Lee Ballin, managing director for sustainability and ESG services at Deloitte. "They're making sure that before they go out and set a goal or a target that they understand the impact that they're having in terms of emissions and that they have a plan that's embedded into their overall business strategy to address some of these ESG issues that they know are front and center in the investors and the regulators' minds, as well as other stakeholders. This is now becoming an enterprise-wide initiative."
Executives are anticipating business benefits to integrating sustainability into business strategy. More than half name talent attraction and retention (52%), increased efficiencies and ROI (52%), and building stronger stakeholder trust (51%) as potential business outcomes of enhanced ESG reporting.
While most companies are taking steps to improve their sustainability disclosures, there are still plenty of challenges. Sustainability data is a top concern, with 35% of executives citing ESG data quality and 25% citing access to ESG data as their greatest challenge. Additionally, executives continue to face hurdles when addressing Scope 3 greenhouse gas emissions disclosures, with just over a third (37%) currently prepared to disclose details.
"Sustainability reporting and disclosure is more than a 'check-the-box' compliance exercise — it is a business imperative," said Jon Raphael, national managing partner, sustainability, transformation and assurance at Deloitte & Touche, in a statement. "Sustainability, integrated with business strategy, is about unlocking value for a company and its stakeholders, as well as creating a sustainable future, where people and the planet prosper together."
Most of the executives surveyed (95%) are preparing for more disclosure requirements, including nearly three out of five that said they're already making extensive preparations.
"Stakeholders increasingly expect a company's business strategy to align with its climate and equity commitments," said Kristen Sullivan, U.S. sustainability and ESG services leader and global audit and assurance climate services leader at Deloitte & Touche, in a statement. "While companies are at various stages on their sustainability journey, they must drive accountability today for a sustainable tomorrow."
One of the main concerns for many companies is whether the SEC will require them to disclose information about the emissions they anticipate not only from their own operations, but also from their suppliers and customers.
"To put in place the systems and controls to deliver the quality information that the market is asking for is going to be an undertaking for most organizations, especially for those organizations that haven't done a Scope 1 or Scope 2 emissions inventory," said Ballin. "I would say that the urgency hasn't left the conversation despite the fact that the rule hasn't been finalized. The time to get going is now and to start thinking about the overall implications for your organization."
