Business leaders are gearing up to comply with proposed climate disclosure rules, even before they become U.S. law, according to a survey by PwC US and Workiva Inc. The survey, Change in the Climate, released this morning, polled 300 senior-level decision makers with knowledge or responsibility for ESG reporting at U.S.-based public companies with at least $500 million in annual revenue, and found that 70% of respondents are not waiting for the U.S. Securities and Exchange Commission (SEC) to finalize the rules and will proceed with compliance regardless of when they become law.
However, readiness for compliance varied across companies. Even business leaders who reported feeling prepared for compliance also acknowledged that there will likely be significant challenges, including deadlines, resourcing, technology, and budget. Many leaders anticipate that independent assurance will be a necessary component of meeting deadlines with investor-grade, transparent, and trustworthy data. Seventy percent of executives reported their companies already seek voluntary, independent assurance – and will continue to do so – even if it is not required for reporting scope 1 and 2 greenhouse gas emissions.
While 68% of executives reported their companies already use technology for ESG reporting, 85% expressed concern that their companies do not have the right technology in place to support the level of reporting required in the proposed rules, despite almost all anticipating it will play an important role in meeting potential new requirements. These concerns highlight the need for companies to invest in ESG reporting technology and people to meet these challenges.
Many companies have already begun prioritizing reporting and taking proactive measures in anticipation of the proposed rules becoming law. All executives surveyed shared that their companies have taken at least one action in anticipation of the rule becoming law, with many taking more than one. The most common actions include investments in ESG reporting technology (40%) and people (33%), as well as accelerating (35%) or establishing, if necessary (33%), climate ambitions or goal timelines.
As business leaders prepare to comply with the proposed rules, they recognize the importance of ESG reporting, with 95% of leaders saying their companies are prioritizing ESG reporting more now than before the rule was proposed. However, four in ten business leaders admit their companies are not fully prepared to meet the expected disclosure requirements. Leaders believe the proposed rules set clear expectations around what data and information needs to be disclosed, but they expect to need more time once the rule goes into effect.
The proposed climate disclosure rules highlight the need for companies to begin tackling their ESG data and reporting strategy now to meet investor demands and get ahead of the final rules from the SEC. As Julie Iskow, president and chief operating officer at Workiva, noted, “Having the right technology, people, and timelines will be critical to complying with the proposed rule changes and other stakeholder demands for ESG transparency. ESG reporting is complex, requiring the ingestion, capture, management, and reporting of financial and non-financial data from many disparate sources. The more that ESG reporting is integrated into the decision-making processes of companies, boards, and investors, the more important it is that the information is trustworthy.”