Two thirds of UK organisations feel underprepared to navigate the evolving ESG reporting landscape
Global survey of ESG practitioners details top reporting challenges and opportunities
Nearly two thirds (63%) of senior decision makers in the UK feel their organisation is underprepared to meet their environmental, social, and governance (ESG) goals and regulatory reporting mandates, according to a new global survey released by Workiva Inc. (NYSE: WK). Further, 73% don’t have confidence in the data currently being reported to stakeholders, despite 59% of UK businesses having appointed an ESG-specific role to oversee reporting.
These and other findings of the survey examined 1,300 organisations’ current processes, collaboration and confidence in their ESG reporting. Respondents involved in their company’s ESG reporting and strategy were polled from across finance, ESG, sustainability, HR, compliance, operations, and legislative affairs.
“ESG reporting requirements are constantly evolving and businesses are faced with increasing complexity and risk when consolidating disparate financial and non-financial data to cohesively report on their ESG performance to stakeholders,” said Julie Iskow, president & COO at Workiva. “The survey results indicate how ESG practitioners from a range of industries across North America, Europe and APAC are tackling the challenges and opportunities around ESG reporting.”
Evolution of ESG reporting
ESG reporting was noted to be a relatively recent undertaking for most companies. Almost two-thirds (63%) of UK respondents confirmed their organisation began formally reporting ESG, climate/sustainability or corporate social responsibility data in the last two years. Despite this, the UK is ahead of the curve, with just 6% flagging that their organisation had yet to release a formal report – the lowest of all global respondent groups. Comparatively, around a fifth of respondents in Norway (21%), Sweden (20%) and France (17%) had yet to release a formal report.
According to the findings, ESG reporting is being handled by a wide range of departments within organisations, signalling the need for significant cross-team collaboration. Over a third of UK respondents noted ESG reporting and strategy is a responsibility managed by finance (37%), followed by operations & facilities (35%), the ESG/sustainability function (32%) and human resources (28%). Other departments that respondents identified as playing an important role in ESG reporting included investor relations (24%), procurement (22%), legal/compliance (21%) and marketing/comms (17%).
Formal ESG stakeholder engagement is an ongoing and important process for organisations, with over half (53%) of UK respondents confirming that they review their materiality issues every 3-6 months and 29% stating it occurs annually. Almost two thirds (64%) state that formal stakeholder engagement informs ESG materiality to a significant extent.
Apprehension around the ‘E’ in ESG
While progress is needed across all facets of ESG, tackling the ‘E’ is a major focus for companies. UK respondents predicted that over the next 12-18 months, 43% of their organisation’s internal ESG budget will be devoted to Environmental factors, 29% to Social and 28% in areas of Governance. This was mirrored in the global findings.
The increased proportion of budget set aside to focus on environmental factors reflects respondents’ concerns around the reporting challenges they face. Those surveyed, who hold a range of positions from C-suite, VP, director and manager to individual contributors at these organisations, stated that two of the biggest challenges regarding ESG reporting are calculating greenhouse gas protocols to measure scope 1, 2 and 3 emissions and achieving investor-grade carbon disclosures.
“Stakeholders are calling for more detailed and uniform data related to ESG. With the recent Sustainable Finance Disclosure Regulation (SFDR) directive in Europe, the ESG disclosure rule proposed by the SEC in the U.S., and the Singapore Exchange’s recommended 27 core ESG metrics, the ESG reporting environment is becoming more complex for organisations,” said Mandi McReynolds, Head of Global ESG at Workiva. “In particular, we are seeing companies grapple with how to accurately meet these required disclosures around the ‘E’ in ESG to report GHG emissions with carbon level accounting data.”
Technology is needed to advance ESG reporting
Given the increasing importance of delivering transparent, accurate data to key stakeholders, there is a clear need for ESG reporting to be simplified through technology. Three out of four (78%) UK respondents noted that technology was important for compiling and collaborating on ESG data, as well as validating data for accuracy (74%) and mapping disclosures to regulations and framework standards (89%).
Despite this, half (51%) of UK respondents do not feel individual departments within their organisation have the tools necessary to provide data for ESG reporting. In fact, one in five (19%) reported that their organisation does not employ technology suitable for managing the ESG reporting process and programme initiatives. Almost half (47%) of those UK respondents put this down to budget constraints and 32% stated they don’t fully understand what technology is available or needed.
Only four in ten (37%) UK respondents said their organisation uses technology and data very well to make decisions on advancing ESG strategy – showing a marked discrepancy with the US (65%). This indicates there is significant scope to improve efficiencies and performance in this area.
“To navigate this era of change in ESG, businesses must be forward-looking and flexible in their planning. Regulators, investors, customers, and other stakeholders have identified what’s essential now, but this is only part of what will be essential for tomorrow’s reporting,” added Iskow. “Technology, which enables seamless integration between teams in one centralised platform, will be key to streamlining the reporting process long term and delivering transparent reports that can meet these evolving demands to further boost employee, investor and wider stakeholder trust.”
ESG reporting delivers positive business value
The survey revealed that UK companies are seeing business value in their current ESG reporting. Seven in 10 stated that their organisation’s ESG reporting has already generated a positive impact across customer retention and recruitment (73%), insurance/credit agency engagement (73%), cost savings (74%) and resulted in a reduction of long-term risk (75%). The majority of UK respondents also noted that ESG reporting has improved employee morale (69%), employee recruitment efforts (71%), as well as investor and stakeholder relationships (72%).
“While challenges around communicating ESG corporate value to stakeholders still exist, the findings show clear positive outcomes for businesses who prioritise ESG reporting,” added Iskow. “Organisations must implement actions that allow them to keep pace with the current and future demands from regulators, investors and other stakeholders for trusted, transparent data and ESG forward-looking business goals.”
About the survey
Workiva commissioned Coleman Parkes, an independent research agency specialising in B2B technology, to conduct primary research amongst businesses in the energy (including oil & gas), financial services, manufacturing, retail & wholesale, food & beverage, construction, technology, telecoms, professional services, real estate, and transportation industries via an online survey.
Respondents whose main or secondary job responsibility includes their company’s ESG reporting and strategy were surveyed between April 14 – May 6, 2022. These respondents resided in 13 global markets, including the US, UK, Germany, France, Spain, Sweden, Netherlands, Denmark, Norway, Italy, Switzerland, Austria and Singapore (with an even split of 100 surveys in each market).
For more information, view an infographic with key findings or download the full survey results here.
About Workiva
Workiva Inc. (NYSE:WK) is on a mission to power transparent reporting for a better world. We build and deliver the world’s leading regulatory, financial, and ESG reporting solutions to meet stakeholder demands for action, transparency, and disclosure of financial and non-financial data. Our cloud-based platform simplifies the most complex reporting and disclosure challenges by streamlining processes, connecting data and teams, and ensuring consistency. Learn more at workiva.com.
