Companies Face Challenges In ESG Reporting Despite Progress

The 2024 sustainability landscape has seen companies making considerable efforts to integrate Environmental, Social, and Governance (ESG) principles into their core operations. According to Deloitte’s 2024 Sustainability Action Report, 98 percent of executives have reported progress towards their sustainability goals over the past year. This progress reflects a strategic shift in companies, marked by the formation of cross-functional ESG working groups, the rise of specialised roles like Chief Sustainability Officers (CSOs), and a focused approach to embedding ESG within corporate strategies. 

The report highlights a concentrated effort in ESG capacity building, with companies establishing ESG working groups that meet regularly to oversee sustainability initiatives. There has also been a notable increase in the appointment of CSOs and ESG controllers, further indicating a strategic shift towards integrating sustainability into corporate workflows. Kristen Sullivan, Audit & Assurance Partner, Sustainability and ESG Services at Deloitte & Touche LLP, commented, “The creation of dedicated ESG teams, the rise in specialised roles, and investments in sustainability reporting all indicate a strategic shift towards embedding sustainability into their core operations.” 

Organisations are increasingly recognising the internal and external benefits of investing in sustainability reporting. Over half (51 percent) of the surveyed companies expect to see greater efficiencies, lower risks, and enhanced trust with stakeholders as direct benefits of ESG reporting.

Additionally, companies anticipate external gains, such as improved brand reputation, talent attraction, and higher pricing abilities. These findings underscore the growing recognition that robust ESG practices not only mitigate risks but also enhance overall business performance. Sullivan added, “While challenges still exist, the commitment to sustainability is becoming more evident as companies continue to unlock the potential of ESG insights.” 

However, despite these advancements, data quality remains a significant hurdle. The report reveals that 57 percent of companies identify data quality as their top challenge, with 88 percent ranking it among their top three concerns. The complexity of ESG data, particularly in accurately measuring and reporting Scope 3 greenhouse gas (GHG) emissions, continues to be a significant challenge. Currently, only 15 percent of companies disclose Scope 3 emissions, despite growing regulatory pressure to do so. 

As companies continue to invest in resources and infrastructure to strengthen ESG reporting, addressing these data challenges will be crucial to realise the benefits of their sustainability efforts fully. The report emphasises that while significant progress has been made, the journey towards robust ESG integration is ongoing, with many companies still working to meet the demands of comprehensive ESG reporting. 

The 2024 Deloitte Sustainability Action Report illustrates that, despite notable strides in ESG capacity building, significant challenges remain.

Companies recognise the tangible benefits of ESG reporting, but the road to comprehensive sustainability is fraught with complexities, particularly regarding data quality and Scope 3 emissions. As businesses continue to embed ESG into their core operations, overcoming these challenges will be vital to unlocking the full potential of sustainability initiatives.