Sustainability trends for publicly held companies

In today’s accounting and auditing landscape, sustainability concerns continue to ratchet up as stakeholders increasingly expect a company’s business strategy, financial reporting, and accounting to align with its sustainability commitments, priorities, and requirements.

Stakeholders understand the impact and dependence of companies on the environment and society, and it is evident that sustainability reporting and disclosure are more than “check-the-box” compliance exercises.

The latest Deloitte Sustainability action report survey data shows that 89% of executives are proactively making strides to hold themselves accountable and drive trust with their stakeholders, better positioning themselves to thrive and differentiate over the long term. Companies are increasingly taking a wider view of risks and opportunities associated with their business—so how can your business evolve and place a greater emphasis on sustainability reporting?

Prioritizing sustainability

As US companies begin to prepare for the Securities and Exchange Commission (SEC) disclosure requirements proposed in 2022, they are shifting from commitment to action to address evolving stakeholder expectations.

Findings from the survey show that 57% of executives have already implemented a cross-functional sustainability working group to drive strategic attention to sustainability—a 36% year-over-year increase since our 2021 survey.

Many companies are taking steps to help enhance internal governance and control environments to prepare for greenhouse gas (GHG) emissions and climate-related disclosures through the annual financial reporting process. Some of these changes include implementing new systems (45%), implementing new controls (37%), and hiring new staff (40%).

These efforts are most commonly led by a chief sustainability officer (42%) or CFO (37%); another 29% of companies involve a chief strategy officer. This strategic attention emphasizes how important sustainability disclosure is—to drive not only preparedness for changing stakeholder expectations and pending regulation but business performance and value as a whole.

Benefits and challenges of sustainability reporting

Integrating sustainability within a company’s strategy can have benefits to sustainable business performance and value. Indeed, executives anticipate stronger stakeholder trust (51%) and elevated brand reputation (49%) as intangible benefits of enhanced sustainability disclosure. On the other side, expected tangible benefits include increased employee retention (52%), improved return on investment (ROI) (52%), and risk reduction (48%).

While many companies are beginning to take meaningful steps toward enhancing their sustainability disclosures, they continue to face challenges with data accuracy and the completeness of sustainability data. In fact, executives list ensuring quality as the top data challenge at 35% in 2022 compared to 25% a year earlier in 2021.

This is reflected in executives’ confidence in disclosing details for Scopes 1, 2, and 3 GHG emissions. Many surveyed are prepared to disclose Scope 1 (61%) and Scope 2 (76%) GHG emissions—cited by a similar profile of respondents in 2021 (58% and 47%, respectively). However, Scope 3 GHG emissions disclosures still seem to be a work in progress, with only a third (37%) prepared to disclose details today. The top challenges surrounding Scope 3 include:

• Lack of confidence in the quality of data from external vendors (51%)
• Lack of data availability (41%)

Optimistically, more than half respondents (62%) believe they are already prepared or currently undertaking extensive preparations for the expected increase in requirements. A majority (81%) of executives report that new roles and responsibilities have been created to accommodate additional disclosure requirements.

Plans to invest in more technology and tools are also a focus for executives, with nearly all companies (99%) expressing willingness to do so to meet stakeholder expectations and future regulatory requirements.

With nearly half (47%) of executives saying their companies are very likely or somewhat likely (52%) to make these investments in the next 12 months, the desire to get ahead of potential disclosure requirements is apparent—and so is the confidence in the business benefits that sustainability disclosure is likely to provide.

Ultimately, regulators’ reporting standards and frameworks may help you direct your sustainability audit, risk management, and reporting activities. But it is up to your organization to go the extra mile that stakeholders are demanding. Is your organization focused on sustainability as a path to long-term value creation?

Deloitte can help you get on track.

The services described herein are illustrative in nature and are intended to demonstrate our experience and capabilities in these areas; however, due to independence restrictions that may apply to audit clients (including affiliates) of Deloitte & Touche LLP, we may be unable to provide certain services based on individual facts and circumstances.
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