New regulatory requirements for sustainability reporting and environmental reporting, Social and corporate governance(ESG) lead to significantly increased complexity, but also to greater importance of the topic. In this context, the Corporate Sustainability Reporting Directive (CSRD) plays a decisive role by encouraging companies to make their sustainability practices transparent.
But how well prepared are companies for these requirements and what challenges and opportunities arise from the new regulations? Based on the latest findings from the March 2024 Workiva ESG Study, which surveyed more than 2,000 sustainability officers and executives, this article looks at the current challenges, opportunities and the impact of technological innovation on ESG reporting.
Workiva ESG Study 2024
Key messages of the Workiva study
The key findings of the Workiva ESG study are as follows:
- Global ESG regulations are starting to take effect: 87% of ESG professionals find it challenging to adapt their reporting processes to new regulations.
- Integrated reporting is becoming the new gold standard: 81% of companies that are not subject to CSRD nevertheless intend to comply with it.
- Confidence drives accountability, which drives performance: 88% of ESG practitioners believe that confidence in ESG data increases the likelihood of a company achieving its goals.
- Major challenges undermine existing confidence: 98% say they have confidence in the accuracy of their ESG data, but 83% also agree that collecting accurate data to meet CSRD requirements is a challenge for their organization.
- Practitioners are transforming reporting processes: 92% of companies are investing in technology to improve collaboration within reporting teams.
The biggest CSRD challenges for companies
Compliance with ESG requirements (e.g. the CSRD, the EU Taxonomy and the CSDDD) presents many companies with significant challenges that cut across different departments. The biggest concern for those responsible for finance, sustainability and compliance is the high volume of regulations. This is perceived as the main burden, mainly because it is often accompanied by the need to comply with multiple global sustainability standards (e.g. GRI, IFRS). In addition, obtaining the data for specific data points is a challenge.
Quality initiatives, unclear regulations and the need for third-party data verification make reporting even more difficult. A lack of technology and the challenges posed by the need to coordinate different teams are further hurdles that create additional difficulties for companies in the context of CSRD compliance. This complexity illustrates how comprehensive the CSRD requirements are and how important careful planning and implementation is for companies.
Challenges in obtaining data for the CSRD report
Although 98% of sustainability managers are confident about their data quality the Workiva survey reveals significant challenges with regard to the data associated with the CSRD requirements. After all, EFRAG’s list includes over 1,100 data points.
83% of respondents consider the collection of specific data to meet CSRD requirements to be a difficult task for their organization. Adapting ESG and sustainability reporting processes to new regulations is seen as challenging by 87%, and 79% find verifying this data within their reporting processes problematic.
In addition, 77% of practitioners find it difficult to obtain third-party assurance in order to meet CSRD requirements. The survey also highlights that 81% of respondents find collaboration between the different departments and teams involved in ESG and sustainability reporting challenging.
These survey results from the Workiva ESG study underline the complexity and the extensive efforts that organizations must make to comply with the new legal requirements. In any case, it is advisable to take an early look at what data the company actually has to report. This statement can only be made after the double materiality assessment has been carried out.
Opportunities for sustainability reporting
According to the study, sustainability reporting offers companies considerable opportunities:
- Competitive differentiation: An overwhelming majority of 88% of professionals agree that a strong ESG report gives their organizations a competitive advantage. This belief is reinforced by the fact that 89% of companies say they prioritize ESG reporting more than in previous years.
- Attractiveness for investors: This strategic prioritization is also reflected in capital market attractiveness This is particularly the case for companies planning an IPO. Here, 46% of companies planning an IPO see a clear advantage in strong ESG reporting compared to only 37% of privately held companies not planning an IPO. This data underlines how important it is for investors that companies can provide reliable and consistent ESG reports.
- Increased value and better decisions 8 out of 10 respondents agree that integrated financial and ESG/sustainability data enables better decision-making and has a positive impact on a company’s long-term value creation.
- Improving corporate reputation: Effective CSRD reporting can improve the perception of a company by external stakeholders such as customers, potential employees and the general public. Companies that communicate their commitments to sustainability and social responsibility transparently can significantly increase their brand strength and reputation.
- Risk management: Sustainability reporting, or the upstream double materiality assessment, enables companies to better identify and manage risks, particularly those related to environmental issues, social conditions and corporate governance. This helps to minimize long-term operational and legal risks.
- Promoting innovation: The need to achieve sustainability goals can encourage innovation in products, services and business models that both reduce environmental impact and offer social benefits.
The importance of technology for CSRD reporting
The importance of technology for ESG initiatives is increasingly recognized by companies, as the survey results of the Workiva study make clear. Here are the key points:
- Investment in technology: 89% of companies plan to increase their budget for ESG-related technology in the next three years. This underlines the expectation that technology will play a key role in the long-term success of sustainability reporting.
- Importance of technology: 87% of practitioners believe that access to technology and data is critical to making strategic decisions for their company’s future sustainability strategy.
- Technology requirements: The survey shows that most sustainability officers emphasize the importance of technology in various areas of ESG reporting:
- 95% for assigning reports to regulations, frameworks and standards.
- 96% for compliance with new regulations.
- 97% for compiling data from multiple sources.
- 97% for analyzing data and gaining insights to improve decision making.
- Transformation necessary: The results suggest that a comprehensive transformation is needed to meet the demands of modern ESG reporting. The number of respondents who recognize the importance of technology has increased compared to the previous year’s survey, indicating a growing recognition of technology requirements in ESG.
These points make it clear that companies are increasingly investing in technologies that not only support compliance, but also enable more efficient data analysis and processing, which in turn leads to more informed strategic decisions. However, the CSRD study by Ubirch reports a very fragmented ESG software market. For a better overview of the software landscape, we have created a CSRD tool overview and a software selection guide. In addition to investing in technology, employees should also be trained in specific CSRD training courses.
Information on the Workiva Study 2024
The global Workiva “2024 ESG Practitioners” survey brings together insights from over 2,000 financial, sustainability and risk managementprofessionals. The questions are specifically aimed at ESG and CSRD reporting. Participants, defined as individuals actively involved in ESG reporting, represent a wide range of roles from senior management (25%) to sustainability managers (28%) to operations team members (20%). The study focused on employees of organizations with at least 250 employees, with most people (46%) employed by companies between 501 and 5,000 employees.
The study participants come from North America, the EU, the UK and Asia-Pacific. The survey was conducted in collaboration with the founder of the Carbon Disclosure Project (CDP) and the Director of the NYU Stern Center for Sustainable Businessand developed with the support of Ascend2.
What is Workiva?
Workiva is a technology company specializing in reporting solutions. By integrating data management, collaboration and real-time editing capabilities, Workiva helps organizations produce financial, ESG and compliance reports efficiently and accurately. This is done in a cloud-based environment that facilitates access to and management of company data, improving both internal and external reporting.
Conclusions of the Workiva ESG study
Several important conclusions for companies and sustainability managers can be drawn from these study findings:
- Importance of compliance and assurance: Companies should view ESG compliance and data assurance as an opportunity to enhance their credibility and performance.
- Proactive adaptation: Despite the complexity and challenges, it is important that companies proactively adapt and improve their reporting processes in order to be prepared for future requirements.
- Investing in technology: The use of technology, such as the top 10 ESG software solutions, can make a significant contribution to improving the efficiency of ESG reporting and strengthening internal collaboration.
- Preparing for future requirements: The fact that many companies are voluntarily complying with CSRD, even if they are not required to do so, shows that a proactive approach to ESG standards is increasingly becoming the norm.
These points make it clear that sustainability reporting, especially in the context of CSRD, is an increasingly important aspect of corporate management that requires both strategic planning and continuous adaptation and technological support.
