Survey: Most financial executives are lost on how to report ESG data

Many executives think that they must forgo revenue and profit for the sake of society and the planet. That is not always the case, though more guidance must be granted to help companies tap into their ESG-driven potential, says Jens Laue, global lead for ESG measurement and analytics at Accenture. 

Data show that ESG-driven companies aren’t taking hits. A recent Accenture survey of more than 700 chief financial officers across several countries found a direct correlation between a company’s ESG measurement, management and talent capabilities and its ability to see sustainability as an opportunity. 

“This means companies with strong ESG capabilities can leapfrog their peers by identifying and acting on sustainability-related opportunities more quickly,” the report states.

“Over the long term, a successful sustainability program can reduce costs by making production cycles more efficient and cutting energy use and material waste,” says Laue. “It can also increase revenues by opening access to new customer segments or markets.”

Many agree sustainability is a major focus but are lost on how to achieve it

A rapidly evolving regulatory landscape demands that companies factor in environmental and social issues when operating, though many struggle to align their sustainability objectives. And with the CSO’s job becoming increasingly more critical and complicated, many are unsure where to turn. 

Accenture found that some 90% of finance executives agree that sustainability issues will be a major focus over the next five years, though only 10% believe they’re well prepared to report on climate-change-related risks.

And executives are bracing for mandates. Some 85% of those surveyed predicted an increase in disclosure requirements within the next three years. 

“Most regulators have introduced phase-in reporting requirements for specific ESG success metrics that are more difficult and/or time-consuming to collect,” says Laue. 

Are government regulations outpacing the private sector? Potentially, though some organizations are developing reporting standards to help CSOs navigate sustainability disclosure. The Global Reporting Initiative and the International Sustainability Standards Board are developing sustainability-related disclosure standards that are expected to facilitate better comparability of ESG data.

“Perhaps one of the more powerful ways for the public sector to support companies is in providing a clear sense of direction and a stable regulatory environment that can help business and leader confidence as they embark on new strategies spanning over several years.” 

The data dilemma 

One of the primary challenges of ESG reporting is data acquisition and verification. To comply with disclosure requirements, CFOs need to have the right processes and technologies in hand to collect relevant data. 

The process is complicated by disparate standards across the industry. This lack of guidance can impede comparability and make firms feel lost on what to include. It can also allow companies to selectively include favourable data, skewing reports. 

Accenture found that 73% of companies operate in the “transitional” phase, meaning they are moving towards closer integration of ESG data into their management systems but have not yet completed the process. 

“Cost and labor are obstacles when it comes to sustainability data collection. However, in the emerging world of generative AI, technology has a role in dramatically reducing the load to structure management information and create reports, freeing up teams to act on the strategic insights they contain,” says Laue. “Further obstacles are the lack of experience within the companies to deal with comprehensive ESG reporting frameworks, lack of automation, access to data in global subsidiaries and specifically along the value chain outside of the company’s own operation.” 

Pressure to perform

Accenture found that most (78%) finance executives feel pressure from at least three different stakeholders to take more action on sustainability issues. This pressure is coming from governments, regulators, and board members, they said. 

“While this increasing pressure can be challenging, it presents an opportunity to leverage new technologies aimed to help organizations quickly gather better information, make smart decisions, create value from sustainability, and keep pace with new rules and regulations,” Laue said.  

The bottom line

Sustainability and profit are not negatively correlated – in some cases, making ESG-driven decisions can help your bottom line. And with the increasing intensity of environmental regulations, companies must commit to identifying efficient and accurate ways to collect and sort ESG data to ensure they’re reporting correctly to both regulators and stakeholders.