80% of large firms doubt their ESG reporting ability

Over four-fifths of senior executives are not satisfied that their company can report on environmental, social and governance (ESG). 

The figure, which comes from a Deloitte report titled ‘Preparing for high-quality disclosures’, shows that only 17% of surveyed individuals are “completely confident” that their company is adequately staffed to carry out proper ESG reporting.

The remainder was split between 45% “mostly confident”, 32% “somewhat confident”, and 5% with little to no confidence at all.

The figures were drawn from a survey of 300 senior accounting, finance, legal, and sustainability executives in public companies in the United States with revenues over $500 million. Three quarters represented firms with revenues over $1 billion.

“We are at a pivotal moment in history where environmental, social, and governance (ESG) concerns have never been more important,” says Deloitte experts Jon Raphael and Kristen Sullivan.

“As understanding grows about the risk and value creation opportunities that ESG presents, the demand for ESG disclosure has accelerated.”

The figures will likely shed more light on what has historically been a murky area of ESG reporting.

ESG progress remains difficult to convey in many instances, caused by a combination of complicated metrics, a lack of universal standards, and ESG itself being a very broad topic.

The 16-page Deloitte document has found that data and technology are the two most significant barriers to accurate ESG reporting. More specifically:

• The most significant concern concerning data is a simple lack thereof. 32% (the highest proportion of respondents) felt that data availability was their biggest obstacle.
• Over 92% of respondents were concerned that they didn’t have the required technology to sufficiently report on ESG. This figure – and the splits within – mirror the levels of confidence described above, painting a picture that any executives tie their tech capacity directly to their ability to monitor and convey progress on ESG.

However, concern has already fuelled a desire for change, the report suggested.

“Senior executives are proactively taking action to ensure they are presenting reliable ESG data,” it said, “with more than 8 in 10 (89% of survey respondents) noting a likelihood that their organisation will enhance its ESG control environment.”

Meanwhile, the report has also found that less than a quarter of survey respondents have an ESG council or working group in place within their companies.

These groups are primarily meant to analyse ESG topics, figure out how they relate to company activity, and suggest goals that both influence and align with company strategy. Their low rate of popularity comes despite the increased attention on ESG from stakeholders, the report said.

While admitting that 57% of respondents were in the process of establishing such a group, the report acknowledged that the same problem with capacity arose again.

“A strong majority of respondents (82%) believe they will need additional resources to generate ESG reports that meet the information needs of critical stakeholders,” it warned.

There’s a growing appetite for ESG and a growing rate of investment, but the confidence has not kept pace.

Even executives in some of the world’s most prominent firms doubt whether any progress made so far has been enough. Very few fully believe in the accuracy of the ESG story they tell – which will become more worrying if it does not change.

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