ESG Reporting Faces Steep Challenges Amid Rising Global Regulations

A major new study from Workiva has revealed that companies around the world are struggling to adapt their environmental, social, and governance (ESG) reporting processes to comply with emerging regulations like the Corporate Sustainability Reporting Directive (CSRD) in the European Union.

The 2024 Global ESG Practitioners Survey, which gathered perspectives from ESG professionals across executive leadership, finance, accounting, sustainability, internal audit, risk management, and operations teams in North America, the EU, UK, and Asia Pacific, found that 87% find it challenging to modify reporting to meet new regulatory requirements.

Despite the hurdles, integrated reporting that combines financial and non-financial disclosures is becoming the new standard. An overwhelming 81% of companies not currently subject to CSRD rules still intend to follow the comprehensive sustainability reporting guidelines.

The survey results highlight the crucial role of independent assurance, with 88% of respondents believing external verification of ESG information increases the likelihood a company achieves its sustainability goals and targets. Assurance promotes accountability on ESG matters.

However, confidence in data accuracy remains an issue. While 98% of ESG practitioners expressed confidence in the accuracy of their current ESG disclosures, 83% nonetheless agreed that collecting precise, auditable data to meet CSRD's exacting standards will challenge their organization.

To improve ESG reporting capabilities, the vast majority (92%) of companies are investing in technology solutions to enhance collaboration and integration among the cross-functional reporting teams involved.

As the CSRD and other ESG reporting mandates take effect globally, the pressure is on for companies to significantly upgrade their processes and controls around non-financial data. The Workiva study suggests many organizations may be overconfident about their current reporting capabilities, while simultaneously recognizing major gaps they need to address through technology investments, assurance, and cross-functional collaboration.

Meeting stakeholder demands for transparent, auditable ESG disclosures requires a fundamental transformation in how businesses manage and govern sustainability information. Those that rise to the challenge could see competitive advantages from enhanced accountability and performance against ESG targets. However, the steep learning curve evident in the survey results indicates the road ahead may be difficult for firms stuck in legacy reporting approaches.

Overcoming data quality and process shortcomings exposed by the survey's findings will be critical for organizations to build market confidence and unlock the strategic benefits of effective ESG management and disclosure.

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