Deloitte Report Reveals Significant Progress & Persistent Challenges in Corporate Sustainability Efforts

Deloitte's 2024 "Sustainability Action Report" unveils a landscape of substantial progress in corporate sustainability initiatives, while also highlighting ongoing challenges in data quality and reporting. The report offers a detailed look at how companies are adapting to increased regulatory scrutiny and evolving stakeholder expectations around environmental, social, and governance (ESG) issues.

Some of the main findings from the report include:

1. Widespread Progress on Sustainability Goals: An overwhelming 98% of executives report making progress toward their sustainability objectives over the past year, with 25% citing significant advancements and 60% reporting moderate progress. This indicates a growing commitment to ESG initiatives across the corporate landscape.
2. Data Quality Remains a Primary Concern: Despite progress, 57% of respondents identify data quality as their top challenge in ESG reporting. Additionally, 88% list it among their top three challenges, underscoring the need for improved metrics and measurement systems.
3. Universal Preparation for New Requirements: A near-unanimous 99% of companies are actively preparing for increased sustainability reporting requirements, reflecting the evolving regulatory environment. However, the intensity of preparation has slightly decreased, with 38% preparing extensively in 2024 compared to 58% in December 2022.
4. Cross-Functional ESG Teams Becoming Standard: 52% of respondents report having established cross-functional ESG councils or working groups, a significant increase from 21% in March 2022. These groups are meeting frequently, with 98% convening at least quarterly and 43% meeting monthly or more often.
5. Creation of New Roles: 77% of companies report creating new roles and responsibilities to support enhanced reporting processes and controls, with variations across industries. Oil and gas companies lead with 86% creating new roles, while financial services firms lag at 74%.
6. Investment in Technology and Tools: 74% of respondents are likely to invest in new technology or tools to enable more timely and higher-quality disclosure, although this represents a decrease from 99% in December 2022, likely due to previous investments.
7. Greenhouse Gas Emissions Reporting: While 74% osf respondents are currently reporting on Scope 1 emissions (up from 61% in December 2022), only 15% are reporting on Scope 3 emissions, highlighting a significant gap in comprehensive emissions disclosure.
8. Assurance Trends: 99% of respondents plan to obtain assurance or engage in assurance readiness, up from 96% in December 2022. 78% have evaluated or made progress on moving from limited to reasonable assurance, though only 13% have completed their evaluation of next steps.

The report indicates that regulatory developments, such as the SEC's climate disclosure rule published on March 6, 2024, and new EU requirements, are driving organizations to invest more heavily in sustainability reporting capabilities. Over half of the surveyed executives noted that their sustainability efforts have led to greater efficiencies, reduced risks, and enhanced stakeholder trust.

The strategic importance of ESG is further evidenced by organizational changes, with the rise of ESG-specific positions such as ESG controllers, as well as increased involvement from Chief Sustainability Officers (CSOs) and general counsel in ESG matters. The role of CSOs in collaborating across organizations to oversee ESG reporting has increased by 13% since December 2022.

Companies are recognizing both internal and external benefits from their ESG reporting efforts. Brand reputation (20%) is the top expected business outcome, followed by enhanced talent attraction (15%) and the potential for pricing premiums (14%). Internally, 51% expect to see benefits like improved operational efficiencies, risk reduction, or strengthened stakeholder trust.

As the corporate world continues to grapple with sustainability challenges, Deloitte's report suggests that despite obstacles in data quality and comprehensive emissions reporting, companies are increasingly integrating sustainability into their core business strategies. The focus on capacity building, regulatory compliance, and strategic investment in ESG capabilities indicates a shift towards more robust and credible sustainability reporting practices across industries.

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