Deloitte’s 2024 Sustainability Action Report pointed to a significant change in the global sustainability landscape. Most organizations now have greater clarity on what’s expected of their companies to report the financial effects of climate-related risks on their business and strategy. Companies are making ESG reporting a strategic priority, with established crossfunctional ESG councils meeting often and chief sustainability officers (CSO) generally leading the collaboration across the organization in overseeing disclosure.

Key findings

The survey, conducted among 300 executives at public companies, revealed several key findings.

Increased focus on ESG disclosure

The increasing regulatory landscape and heightened investor expectations are driving a surge in ESG disclosure efforts.

• Regulatory pressure: The overwhelming majority (99%) of companies are preparing for increased disclosure requirements. The primary regulatory and standard-setting drivers include the Corporate Sustainability Reporting Directive (CSRD) and the supporting European Sustainability Reporting Standards (ESRS), California’s three climate laws, SEC’s climate disclosure rule, and the International Sustainability Standards Board (ISSB) standards that are set to be adopted into regulation in many jurisdictions around the world.
• Strategic importance: Ninety-eight percent of respondents are reporting some level of progress toward their sustainability goals and targets in the past year. ESG disclosure is increasingly seen as a strategic imperative, with companies recognizing its impact on reputation, investor confidence, and long-term sustainability.

Challenges in ESG data management

Companies face significant challenges in collecting, managing, and analyzing ESG data. Even as many companies continue to invest in resources and infrastructure to strengthen strategic focus and reporting processes and controls, additional complexities often become more visible, such as industry or geographic-specific considerations, consistency in application of measurement methodologies as reporting standards continue to evolve, and a deepened understanding of assurance considerations, among others.

• Data quality: Data quality emerged as the top challenge for ESG data, cited by 57% of respondents. Issues such as data accuracy, completeness, and timeliness hinder effective reporting.
• Data collection: 88% of companies identified data collection as one of their top three challenges, highlighting the difficulty in gathering and consolidating data from various sources.

Investments in technology and talent

To meet the demands of ESG reporting, organizations are investing in technology and developing specialized talent.

• Technology adoption: 74% of companies plan to invest in new technology or tools to improve their ESG disclosure capabilities. This includes data management platforms, reporting software, and analytics tools.
• Talent development: 77% of respondents are creating new roles and responsibilities to support enhanced reporting processes and controls. This reflects a growing need for specialized ESG expertise within organizations.

Cross-functional ESG governance

Cross-functional ESG governance is crucial for driving progress and ensuring sustainability initiatives are integrated into core business strategies. A large percentage of respondents now have a CSO who collaborates across the organization in overseeing their ESG reporting, with an increase of 13% since the December 2022 report. Additionally, based on observations, Deloitte has seen the rise of ESG controllers taking on elevated responsibilities for disclosure in many organizations.

• ESG councils: A significant number of companies (52%) have established cross-functional ESG councils or working groups to drive strategic attention to ESG.
• Governance effectiveness: The presence of these councils is correlated with greater progress in sustainability goals and targets.

“The creation of dedicated ESG teams, the rise in specialized roles, and investments in sustainability reporting, all indicate a strategic shift toward embedding sustainability into their core operations,” said Kristen Sullivan, Audit & Assurance Partner, Sustainability and ESG Services, Deloitte & Touche LLP.

“While challenges still exist, the commitment to sustainability is becoming more evident as companies continue to unlock the potential of ESG insights.”

Don’t take a ‘wait and see approach’

Deloitte’s report underscores the growing importance of ESG disclosure and the challenges companies face in meeting these demands. By addressing data quality issues, investing in technology, and developing strong ESG governance, organizations can position themselves for long-term success in the evolving sustainability landscape.

Organizations that have been taking a “wait and see approach” to climate-related risk and reporting may find that they have catching up to do in order to prepare. Many of those who took early action are reporting significant progress and may already be realizing some of the internal and external benefits that can result from a deeper understanding and measurement of ESG risks and impacts, said the report.