Data quality is top challenge for companies facing sustainability issues

Around 35% of Deloitte’s survey respondents cited it as their primary concern.

Companies are facing ongoing challenges with the accuracy and availability of sustainability data, according to a recent Deloitte survey amongst 300 executives at publicly owned companies with a minimum annual revenue of $500 million or more. 

Ensuring data quality was cited as the top challenge, with 35% of respondents citing it as their primary concern. This marks a slight increase from the previous year when 32% of respondents cited access to and quality of ESG data as their top challenge.

One of the key areas of focus for many companies is reducing greenhouse gas (GHG) emissions. Most companies are prepared to disclose their Scope 1 and 2 GHG emissions, which are emissions directly produced by the company and those produced by electricity purchased by the company, respectively. However, disclosing Scope 3 GHG emissions, which are emissions indirectly produced by the company through its value chain, continues to be a work in progress.

Lack of confidence in external vendor data and lack of data availability were cited as the top challenges to disclosing Scope 3 GHG emissions. This is a significant issue, as Scope 3 emissions account for the majority of a company's total GHG emissions. Without reliable data, it is difficult for companies to effectively measure and manage their emissions.

Companies for ESG disclosure

Nearly three in five executives surveyed have implemented a cross-functional ESG working group. Companies are taking a number of steps to prepare for ESG disclosure, including implementing new systems, controls, and hiring new staff to enhance their internal governance and control environments.

The survey showed a notable increase in the implementation of cross-functional ESG working groups compared to the previous year. In addition, 45% of companies surveyed are implementing new systems, 37% are implementing new controls, and 40% are hiring new staff to prepare for ESG disclosure.

Efforts to prepare for ESG disclosure are typically led by a chief sustainability officer or CFO. Companies are anticipating a number of benefits from enhanced ESG disclosure, including stronger stakeholder trust and elevated brand reputation. Other potential benefits include increased employee retention and improved return on investment. Risk reduction is also anticipated as a result of enhanced ESG disclosure.

By implementing cross-functional ESG working groups and enhancing their internal systems and controls, companies are positioning themselves to better manage their environmental, social, and governance risks and opportunities, Delloite said.

Investments in ESG preparedness

The changes being implemented by companies include creating new roles and responsibilities and plans to invest in technology and tools. More than half of executives surveyed believe they are already prepared or currently undertaking extensive preparations for increased disclosure requirements.

In addition, 81% of executives surveyed report that new roles and responsibilities have been created to accommodate additional disclosure requirements. Nearly all companies are willing to invest in new technologies and tools to meet stakeholder expectations and future regulatory requirements. About half of executives say their companies are very likely or somewhat likely to make these investments in the next 12 months.