Businesses not prepared to comply with ESG regulation
August 25th, 2023
A disconnect between executives and their employees on ESG regulation could mean companies are still not ready to abide by emerging requirements, a study by software-as-a-solution provider Workiva and consultancy PwC.
The 2023 Global ESG Practitioner Survey found 62% of C-level executives strongly believe their companies apply the same level of diligence to ESG reporting as they do to financial reporting, but only 32% of managers and senior managers share the same sentiment.
Similarly, 87% of executives say their organisations have appointed someone to an ESG-specific role, compared with just 68% of managers who say the same.
Alex Edmans, professor of finance at London Business School, who developed the survey, said: “What struck me from the survey results is the dichotomy between practitioners of all levels agreeing they find value in ESG reporting while managers in the trenches are saying their companies are not applying the same diligence to ESG reporting as they do to financial reporting.”
ESG reporting regulations are being introduced by regulators all around the world, with the EU moving forward with country-by-country reporting for multinational corporations operating in the bloc by 2025.
In the US, the Financial Accounting Standards Board (FASB) recently released draft plans calling for more comprehensive income tax disclosures for public companies.
While this disparity suggests that businesses are not fully prepared to comply with regulations, the survey also found increasingly businesses are seeing the value in ESG reporting.
Some 90% of survey respondents stated that in the next two years having a strong ESG reporting program will give their organisations a competitive advantage.
Companies that have been reporting on ESG for longer were also more likely to have realised a return on their ESG initiatives.
Meanwhile, organisations that have been reporting on ESG for five years or longer are more likely to say ESG has generated cost savings compared to those that have been reporting on ESG for two years or fewer.
Last Updated: 25 August 2023