Business leaders unprepared for changes to ESG reporting requirements

More than 90% of business leaders see ESG issues as a financial imperative but admitted to being unprepared for the reporting requirement changes from entities such as the SEC.

The report, commissioned by Donnelley Financial Solutions (DFIN), surveyed key decision makers to assess focus, change, responsibility and collaboration within the financial, HR and marketing sectors in the US and UK.

The report found that the majority of executives find the current ESG reporting “too burdensome”, with 80% stating they required assistance from third parties.

When asked about the reporting requirements, three quarters said they thought that ESG reporting would increase further over the next three years.

"The global ESG market outlook has gained significant traction in the past few years—and it's still on the rise," said Craig Clay, president of global capital markets at DFIN. "Business leaders are increasingly seeking expertise, insights, and solutions to help them make informed decisions as they are developing their ESG plans and strategies.”

The report also highlighted that while stakeholders believe that reporting results in better decision making and transparency, they are unsure of where to begin, adding that they will likely seek external support in 2022.

More than 80% of decision markers that partner with third-party firms to assist with ESG reporting requirements said it is critical to “driving organizational priorities”.

However, while 69% of business leaders considered themselves to be ESG experts, the survey found that the process involved multiple departments, including HR, finance, marketing, legal, communications and investor relations.

Research carried out by Ernst & Young in September 2021 found that three quarters of institutional investors would divest from companies that had poor ESG ratings.

At the end of January, the SEC reopened a comment period on a proposed rule that requires new disclosures on companies’ executive compensation.

Gary Gensler, chair at the SEC, said: "If adopted, this proposed rule would strengthen the transparency and quality of executive compensation disclosure.”

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