Nearly two thirds of senior decision makers in UK feel their organisation is under-prepared to meet ESG goals and regulatory reporting mandates.
73 per cent don’t have confidence in the data currently being reported to stakeholders despite 59 per cent of UK businesses having appointed an ESG-specific role to oversee reporting, according to a new global survey released by Workiva Inc.
The survey examined 1,300 organisations’ current processes, collaboration and confidence in their ESG reporting. Respondents involved in their company’s ESG reporting and strategy were polled from across finance, ESG, sustainability, HR, compliance, operations, and legislative affairs.
“ESG reporting requirements are constantly evolving and businesses are faced with increasing complexity and risk when consolidating disparate financial and non-financial data to cohesively report on their ESG performance to stakeholders,” said Julie Iskow, president & coo at Workiva. “The survey results indicate how ESG practitioners from a range of industries across North America, Europe and APAC are tackling the challenges and opportunities around ESG reporting.”
ESG reporting was noted to be a relatively recent undertaking for most companies. Almost two-thirds (63 per cent) of UK respondents confirmed their organisation began formally reporting ESG, climate/sustainability or corporate social responsibility data in the last two years. Despite this, the UK is ahead of the curve, with just six per cent flagging that their organisation had yet to release a formal report – the lowest of all global respondent groups. Comparatively, around a fifth of respondents in Norway (21 per cent), Sweden (20 per cent and France (17 per cent) had yet to release a formal report.
According to the findings, ESG reporting is being handled by a wide range of departments within organisations, signalling the need for significant cross-team collaboration. Over a third of UK respondents noted ESG reporting and strategy is a responsibility managed by finance (37 per cent), followed by operations & facilities (35 per cent), the ESG/sustainability function (32 per cent) and human resources (28 per cent). Other departments that respondents identified as playing an important role in ESG reporting included investor relations (24 per cent), procurement (22 per cent), legal/compliance (21 per cent %) and marketing/comms (17 per cent).
Formal ESG stakeholder engagement is an ongoing and important process for organisations, with over half (53 per cent) of UK respondents confirming that they review their materiality issues every 3-6 months and 29 per cent stating it occurs annually. Almost two thirds (64 per cent) state that formal stakeholder engagement informs ESG materiality to a significant extent.
While progress is needed across all facets of ESG, tackling the ‘E’ is a major focus for companies. UK respondents predicted that over the next 12-18 months, 43 per cent of their organisation’s internal ESG budget will be devoted to Environmental factors, 29 per cent to Social and 28 per cent in areas of Governance. This was mirrored in the global findings.
The increased proportion of budget set aside to focus on environmental factors reflects respondents’ concerns around the reporting challenges they face. Those surveyed, who hold a range of positions from C-suite, VP, director and manager to individual contributors at these organisations, stated that two of the biggest challenges regarding ESG reporting are calculating greenhouse gas protocols to measure scope 1, 2 and 3 emissions and achieving investor-grade carbon disclosures.
“Stakeholders are calling for more detailed and uniform data related to ESG. With the recent Sustainable Finance Disclosure Regulation (SFDR) directive in Europe, the ESG disclosure rule proposed by the SEC in the U.S., and the Singapore Exchange’s recommended 27 core ESG metrics, the ESG reporting environment is becoming more complex for organisations,” said Mandi McReynolds, Head of Global ESG at Workiva. “In particular, we are seeing companies grapple with how to accurately meet these required disclosures around the ‘E’ in ESG to report GHG emissions with carbon level accounting data.”