Much has been realized within the sustainability landscape, especially in the year 2024, as companies from different sectors of the economy seek to embed ESG into the center of their respective operations. According to Deloitte’s 2024 Sustainability Action Report, nearly 98% of executives have moved their ESG goals forward over the past year alone, showcasing a new strategic turn in how businesses cope with the integration of ESG.
The report indicates one significant trend where, with the realization emanating among companies of the need for ESG, such companies continue to make efforts of weaving the same in business strategies. This transition is coming alive with cross-functional ESG working groups, specialized roles flourishing in the office of the chief sustainability officer, and ever-growing investments in sustainability reporting.
Integrating ESG: A Strategic Shift
One of the key highlights from the report is that ESG working groups are being established across companies. These are regular meeting groups for overseeing and driving sustainability initiatives; it’s fast becoming a standard element in the corporate landscape. In particular, the growth of specialized roles, including appointment to CSOs and ESG controllers, underscores at an accelerated level the strategic importance that companies are placing on sustainability.
That change, according to Kristen Sullivan, Audit & Assurance Partner, Sustainability and ESG Services at Deloitte & Touche LLP, indicates more than just a passing trend: “The fact that dedicated ESG teams are being established and the number of specialized roles are rising shows that there’s really just a deeper commitment around weaving in sustainability into corporate workflows.” It is not a trend; it truly is a sea change in how a company can operate. ESG is now part and parcel of business strategy considerations as much as anything else—not an afterthought.
Benefits and Challenges of ESG Reporting
It also represents that companies are more and more looking inwardly and outwardly for benefits associated with their investment in sustainability reporting. A majority of companies surveyed—51 percent—said they expect robust ESG reporting to bring about improved efficiencies, reduced risks, and improved stakeholder trust. That is important, as it suggests developing recognition of the fact that good ESG practices are not solely about compliance or public relations but may create real business advantages.
Good ESG performance is being commercially recognized, with businesses beginning to derive benefits in terms of brand reputation, talent acquisition, and higher pricing. What is important is that these benefits are external to the firm, since the firm operates increasingly under competitive pressure in its environment where customer and investor expectations are high regarding sustainability performance.
Contrasted with these developments, the report picks out data quality as a significant remaining challenge for companies. Some 57 percent of respondents identified data quality as the top challenge, while 88 percent ranked it in their top three challenges. In particular, this holds true for Scope 3 GHG, where the accuracy of measuring and reporting remains an issue at large.
Indirect Scope 3 emissions occur in the value chain of a company and are notoriously difficult to track and quantify. Yet, currently, only 15% of companies report them, while regulatory pressure mounts. This gap underlines how complex ESG data is, and how tough it is for companies to ensure reporting is accurate and comprehensive.
Addressing the Data Challenge
As companies continue investing in more resources and infrastructure to help build up their ESG reporting, how well they will address the quality-of-data problem remains a question. The report has gone on to underscore that though much progress has been realized in building up ESG capacity, comprehensive sustainability still has a long way to go. Companies are still wrestling with the intricacies of ESG reporting, especially when it comes to data accuracy and including Scope 3 emissions.
The Deloitte report highlights that though there is a growing commitment to sustainability, much more work needs to be done. Companies realize the benefits of ESG reporting but must overcome major challenges in order to fully materialize the potential held by their sustainability initiatives. That means continued investment in data quality, transparency, and development of robust systems to measure and report ESG metrics will define the way forward.
Conclusion
The 2024 Deloitte Sustainability Action report reflects a world of business that is both committed to sustainability and, at the same time, struggling with numerous challenges. Although there is encouragement regarding long-term achievements, companies must be able to address data quality if they want to unlock their ESG efforts.
This is the business environment in which companies are baking ESG deep into their core operations; the challenges overcome will be very critical. How difficult might that journey be? Seeing a path to full sustainability, companies can achieve their goals and be a force for good in a more sustainable future with further focusing and investing.
Source: Deloitte 2024 Sustainability Action Report