ESG may face headwinds in several areas, but the hard work of sustainability reporting continues moving forward. Deloitte’s 2024 Sustainability Action Report finds that more than 50% of companies have now established cross-functional ESG working groups – with an additional third planning to do so in the future. Additionally, governance of ESG reporting is increasingly falling on executive leadership and company boards reflecting the heightened attention paid to ESG. However, alongside the positive trends comes some troubling news: companies are not ready for Scope 3 emissions reporting, even those that have grown their ESG capacity in other areas. According to the survey:
“While most respondents are currently reporting on Scope 1 (74%) and Scope 2 (53%) GHG emissions, only 15% are currently preparing and disclosing Scope 3 GHG emissions. While the final SEC climate disclosure rule does not specifically require Scope 3 GHG emissions reporting, CSRD, the California Climate Legislation, and IFRS S2 do. While respondents with an already established cross-functional ESG group are more likely to be disclosing Scope 1 GHG emissions (80%), they are not more likely than responding companies without one to be preparing and disclosing Scope 2 or Scope 3 GHG emissions.”
The lack of reporting on Scope 3 GHG data isn’t for lack of trying. Low reporting rates reflect inherent difficulties of gathering and reporting data across a company’s supply chain – including customers/consumers. 57% of executives surveyed cite data quality as their highest ESG challenge, with 88% citing it as one of their companies’ top three challenges. Sustainability professionals are working against the clock with EU and California Scope 3 reporting requirements on the horizon. The ability to gather reliable supply chain emissions data remains a daunting task and hopefully emerging technologies and best practices can help companies reach compliance in time for regulatory deadlines.
Our members can learn more about climate disclosure trends here.
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