Workiva survey reveals nearly two thirds of UK organisations feel underprepared for future ESG reporting mandates
The reporting platform’s Head of Global ESG, Mandi McReynolds, talks to Harriet O’Brien about the new study
Workiva’s new survey shows that 63 per cent of senior decision makers in the UK feel their organisation is not well prepared to meet ESG reporting mandates and 73 per cent don’t have confidence in the data currently being reported to stakeholders. Conducted in April and May 2022, the study examined 1,300 global organisations’ current processes and confidence in their ESG reporting.
“Stakeholders are calling for more detailed and uniform data related to ESG,” says Workiva’s Head of Global ESG Mandi McReynolds. “With the recent Sustainable Finance Disclosure Regulation (SFDR) directive in Europe, the ESG disclosure rule proposed by the SEC in the US, and the Singapore Exchange’s recommended 27 core ESG metrics, the ESG reporting environment is becoming more complex. In particular, we are seeing companies grapple with how to accurately meet required disclosures around the ‘E’ in ESG to report GHG emissions with carbon level accounting data.”
Only 37 per cent of UK respondents said their organisation uses technology and data very well to make decisions on advancing ESG strategy, showing significant scope to improve performance in this area.
A large number of businesses struggle with the practical elements involved in ESG reporting, comments McReynolds. “While many have taken the positive step of appointing an ESG-specific role to oversee reporting, it takes time to bring the rigour of financial reporting across into non-financial reporting. The fact that the long-awaited Corporate Sustainability Reporting Directive (CSRD) has been pushed back a year reflects this need for businesses to have more time to assemble the right teams and implement suitable technology to enable effective reporting.
“Although ESG investing is on everybody's mind right now,” she adds, “it’s still a relatively new way of thinking. Investment management teams need to be prepared to deal with the complex issues that come with demonstrating being good corporate citizens. Organisations don’t meet their ESG goals overnight, so investors need to stay engaged, meet companies where they are and follow them in their journey towards perfection. Training to understand this evolution, and how the relevance of ESG issues varies from industry to industry, should be more widely available – but the financial industry is still behind the curve.”
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. Yet the most unexpected aspect of the study, says McReynolds, is over long-term goals. “Our research revealed that while a lot of organisations have clear short- and mid-term plans in place to track progress against their ESG goals, very few have concrete plans in place around their long-term goals. Organisations are understandably more drawn to short-term plans and goals where they can outline actionable steps without having to factor in too many data unknowns. There is more anxiety about publishing plans to support long-term goals as these inevitably involve more unknowns – sometimes relying on today’s assumptions rather than tomorrow’s hard facts. This is a logical concern but it is important for organisations to get these long-term plans in place early and flag the potential risks that come with relying on unknown elements.”
What does McReynolds envisage is next for ESG reporting? “Financial reporting is in the middle of a digital revolution. Everybody is re-architecting and modernising their reporting systems. The same will need to happen with ESG if businesses are to access decision-useful data soon enough to inform their strategy. Technology will play a big part in this. For example, data collection needs to become as automated as possible, with little opportunity for human error. However, that won’t happen overnight. We’re seeing the revolution underway with financial reporting, but ESG reporting is still nascent. Organisations will be able to accelerate their ESG reporting progress by tapping into the rigorous technology which has streamlined financial reporting in recent years.”