Survey: Improving ESG reporting isn’t easy, but more than 9 in 10 companies are prioritising it

ESG has become the newest way to talk about sustainability issues in the workforce, and more importantly, how companies are holding themselves accountable to their stakeholders. To that end, Workiva’s 2024 ESG Practitioner Survey has surveyed 2,000 finance, sustainability, and risk professionals to hear about their perspectives on ESG, and integrated reporting.

The professionals in this study were all involved in ESG reporting, and only employees of organisations with at least 250 employees and $250 million in annual recurring revenue were surveyed. 

Workiva is a cloud-based platform that aims to simplify complex reporting, compliance, and data management for organisations.

It puts financial reporting, ESG, and governance, risk, and compliance (GRC) teams into one environment in order to streamline the reporting process. 

For this survey, Workiva partnered with Ascend2, a research-based marketing firm that conducts surveys and studies to provide insights into various aspects of digital marketing.

What’s all the fuss about ESG?

ESG itself is not a new phrase. It was coined back in 2004, making it 20 years old this year. However, the phrase recently gained a lot of traction, likely due to increasing awareness of environmental and social issues among the public. Companies have thus been increasingly shifting their management practices to be more conscious of such issues. 

Suffice to say, ESG frameworks have become crucial to a company’s image — they assess a company’s effect on the environment, social, and governance dimensions. 

The environmental dimension is as its name sounds, and assess how a company interacts with the natural world around it. This looks at a company’s carbon footprint, waste management, and energy efficiency.

The social sphere is more complicated, looking at how companies treat their employees, suppliers, customers, and the communities where they are located. This includes aspects such as ensuring that their workforce is diverse and inclusive and that they follow labour laws and regulations.

Under the governance component, the interior of a company is assessed. It looks at the quality of a company’s leadership, the effectiveness of its internal controls, and its adherence to laws and ethical guidelines. 

Some components of ESG frameworks do overlap, which is inevitable due to the complicated and intersectional nature of these issues. For example, the social and environmental sphere overlap in assessing how companies treat the community that they operate in — companies should not be polluting these communities, even if they are not where the company’s main HQ is, and should also be engaging them in a positive manner. 

ESG is not easy

The survey shows that 87% of ESG practitioners find it challenging to adapt their reporting processes to the new regulations. Of these regulations, those surveyed found it most difficult to adapt to new ESG mandates and also found the volume of requirements to be a concern.

Changes to regulation and stakeholder demands for transparent and credible data put pressure on ESG practitioners to update their company’s reporting processes, causing 59% of respondents to agree that ESG regulation has disrupted their company’s reporting processes. 

But what’s so hard? 

Although the term ESG has been around for a while, ESG regulations themselves are ever-evolving, adapting as the term itself is studied in more depth. 

Last year, the European Union’s Directive in Corporate Sustainability Reporting (CSRD) came into motion. This directive is the most comprehensive ESG regulation to date, having extensive and detailed ESG reporting requirements, a broad scope, and necessitates companies to invest considerable resources to fulfil its obligations. 

Furthermore, the EU’s recently approved Corporate Sustainability Due Diligence Directive (CSDDD) requires companies to integrate human rights concerns and environmental impacts within their governance. Companies will have to collect data from organisations in their supply chains.

Another difficulty that companies face is the gap in perception between executives and managers. Executives were on average 23% more satisfied with their companies approach to ESG reporting than managers were.

Resultantly, new ESG regulations have forced thousands of companies both inside and outside of the European Union to rethink long-held reporting practices.

Doing it anyway

Despite these difficulties, 98% of those surveyed are confident in the accuracy of their ESG data, and 81% of the companies not subject to European Union regulations still intend to comply with their ESG regulations.

The reason is simple: competitive advantage. By adhering to the CSRD, a company shows itself to be transparent and accountable, and indicates to stakeholders that the company is attempting to improve its environmental and social impact while adhering to global standards.  

“Regardless of regulation, ESG practitioners see value in accurate and transparent reporting. The overwhelming majority agree that obtaining assurance over ESG data increases the likelihood that a company will achieve its goals,” said Tensie Whelan, Director and Distinguished Professor of Practice at NYU Stern Center for Sustainable Business. Whelan is also a member of Workiva’s ESG Advisory Council.

Data from investors backs up this claim, with a vast majority of investors being more likely to invest in companies that invest in their ESG reporting practices.

88% of institutional investors are more likely to invest in companies that are integrating their financial and ESG data, while 88% of inventors are more likely to invest in companies that obtain assurance of ESG data.

As a result, 9 in 10 companies will prioritise ESG reporting in the next few years.

It’s clear that following ESG regulations provides companies with a considerable number of benefits, benefits that outweigh the cost of changing their reporting processes.

Adapting and overcoming

As the adage goes, modern problems require modern solutions. Companies are increasingly turning to technology for help struggle with their reporting processes, companies are also turning to technology for help.

According to the report, those involved in ESG reporting know that technology will be crucial in setting up their company’s reporting practices for long-term success. However, the present level of technology is insufficient, and companies must update their technology. 

Over 90% of these companies are undertaking or planning digital transformation projects to improve various aspects of their reporting processes, including reducing data complexity, integrating technology, and enhancing workflow and internal processes.

In particular, the report calls out how much companies are trying to improve technology, with the aim of encouraging collaboration across their various teams. 

Although integrating finance, sustainability, and compliance processes are difficult, those surveyed believe that such collaboration is ultimately a net positive, as it will enable individuals to focus more time on value-added work outside of reporting. 

Still, discussions about incorporating new technologies would not be complete without AI. 

82% of respondents believe that AI will make their jobs easier in the next five years, and a larger proportion of respondents believe that AI will increase the efficiency of ESG and sustainability reporting in the same amount of time. 

“Though ESG reporting presents challenges for corporate reporting teams, across disciplines, ESG practitioners are confident in their work and aligned on the top challenges before them,” said Whelan. 

“The challenge lies in identifying tools that will yield a measurable and positive return on investment.”