Accounting
How Different Industries are Making Strides Towards ESG Preparedness
Beyond adhering to regulatory requirements, integrating ESG into overall corporate strategy can create business value, and companies across sectors are recognizing the opportunity to contribute to a more sustainable future.
Aug. 07, 2023
By Deloitte.
Environmental, social, and governance (ESG) considerations continue to transform today’s financial landscape as many companies are taking meaningful steps toward enhancing sustainability disclosures, and as a result seeing long-term business benefits. Beyond adhering to regulatory requirements, integrating ESG into overall corporate strategy can create business value, and companies across sectors are recognizing the opportunity to contribute to a more sustainable future.
As detailed in Deloitte’s, “Sustainability action report,” companies are shifting from commitment to action in their ESG reporting. It is becoming clear that those making proactive strides to hold themselves accountable may be better positioned to thrive long term. The report also explores ESG preparedness in specific industries such as financial services (FSI), consumer product, life science & health care (LSHC), and technology, media & telecommunications (TMT).
Financial Services Industry
According to the FSI specific ESG analysis, 94% of FSI participants indicated that their company is making extensive or limited preparations to get ready for future regulatory and disclosure requirements, and another 3% say they are already prepared.
While the FSI industry is making strides in ESG reporting, they’re also experiencing some challenges. For example, a main challenge FSI executives noted is ESG data quality. Collectively, 66% of respondents cite availability, aggregation, and review as their main challenge when it comes to ESG data, and 34% indicate they don’t trust its accuracy or completeness. This speaks to a greater need for companies to invest in the right advanced tools to capture ESG data accurately. Hence, it’s not surprising that almost all FSI executives (95%) say they’re very likely or somewhat likely to invest in technology and tools to enable more timely and higher-quality disclosure in the near future.
Consumer Products
A dedicated commitment to ESG within an organization starts from the top down. Many consumer product executives who participated in the consumer industry specific ESG analysis indicated that their companies are starting to treat ESG as an integral part of the business with 64% saying their companies have an ESG or sustainability committee at the board level. While most consumer-focused companies are taking meaningful steps toward enhancing sustainability disclosures, there are still challenges that need to be addressed. Industry executives reported several challenges with ESG data, particularly regarding its quality, with 59% of respondents collectively citing availability, aggregation, and review as their main challenges with it. As a result, most consumer product executives plan to invest in new tools and technology (98%).
“As more companies consider ESG a strategic importance, their focus has shifted to prioritization and integration,” says Wendy Ralston, Audit & Assurance Partner, Consumer Products & Retail ESG Lead Champion. “This not only contributes to their disclosure preparedness—it can embed ESG priorities into their DNA.”
Life Sciences & Health Care
The LSHC sector has experienced some significant changes, especially within the last three years. From working with external stakeholders to ensuring access to health care to making sure that LSHC companies are using the latest technology to innovate, the LSHC sector is focused on an assortment of new priorities, with sustainability reporting drawing increased attention.
Health is interrelated with ESG goals; therefore, it is imperative that the industry takes ESG preparedness seriously to stay ahead of the curve. According to the LSHC specific ESG analysis, 58% of life sciences and health care executives expect enhanced ESG reporting to help them attract and retain talent. Compared to other industries, the report indicates that the management responsibility for ESG disclosure looks different with 52% of LSHC respondents saying a chief sustainability office leads ESG disclosure within their organization.
“Building trust is a vital pathway to demonstrating the value that life sciences companies and the rest of the health care system bring to society while also being accountable to shareholders and stakeholders for their impact on the environment,” says Melissa Cloniger, Deloitte Audit & Assurance Partner.
Technology, Media & Telecommunications
According to the TMT industry specific ESG analysis, TMT executives are working to drive a strategic ESG approach within their organizations. Fifty-four percent of TMT respondents report that their company already has a cross-functional ESG council, committee or working group, while 42% say they are in the process of establishing one. TMT executives are also gearing up for future regulatory and disclosure requirements. At 69%, TMT ties with consumer products as the industry most prepared to disclose details of their Scope 1 GHG emissions.
“Technology, media and telecommunications (TMT) companies have a unique opportunity to drive positive social and environmental impact through their products and services,” says Christie Simons, Deloitte’s US TMT Industry Leader, Audit & Assurance Partner. “Especially since they permeate other sectors with their capabilities.”
Private Companies and ESG Reporting
Private companies are joining the discussion as well, as they recognize the relevance and benefits of ESG. With increased ESG reporting, private company leaders expect a shift in their business outcomes.
In a separate Deloitte report, “The business case for ESG reporting for sustainable private companies,” 52% of private company leaders believe that increased ESG reporting will attract talent and retention while 51% believe that it will enhance trust with stakeholders. With private companies increasing their ESG efforts, it may indicate that ESG has entered the mainstream and is likely here to stay.
“While conversations around ESG reporting have been largely focused on public companies, private companies are also starting to see the benefits,” Lauren Pesa, Deloitte Audit & Assurance Partner, Accounting & Reporting Advisory. “Whether seeking to raise capital or hoping to drive increased efficiencies, the need for ESG disclosures will not solely fall on public companies. Private companies that are ahead of the curve may be better positioned to thrive long term.”