More and more companies are disclosing their ESG data, but confusion remains about how it is disclosed.

More and more companies are disclosing their ESG data, but confusion remains about how it is disclosed.

Public companies in the United States are increasingly disclosing sustainability information, but many say they find it difficult to report fundamental climate data that many regulators around the world will likely require under new mandatory reporting standards.

Nearly two-thirds of respondents said their company discloses environmental, social and governance information, up from 56% the year before, according to WSJ Pro’s annual survey of sustainability leaders this spring.

However, there was little consensus on which framework to use and respondents highlighted three basic types of information as their three biggest environmental reporting challenges: greenhouse gas emissions, environmental risks, climate change and energy management..

The proportion of companies disclosing sustainability and ESG information was 63%, up from 56% last year. Those not yet reporting this data but planning to do so were 16%, up from 25% last year. About a fifth of respondents said their organization had no plans to report on their progress, a figure virtually unchanged from last year. In summary, a quarter of private companies plan no ESG reporting, while only 7% of public companies think the same.

Regulators around the world are finalizing rules that would require companies to publish standardized information after years of voluntary and patchy ESG reporting, based on a multitude of frameworks. California’s governor said he would soon sign that state’s requirements into law. Rules from the U.S. Securities and Exchange Commission are expected later this year. European regulations are already in place and many other countries are also working on standards. The International Sustainability Standards Board hopes its climate framework, completed last summer, will become the global benchmark.

Although it is mainly public companies that are subject to mandatory requirements, even private companies face increased scrutiny of their sustainability and ESG policies from stakeholders, including shareholders, eco-conscious consumers and consumers. environment, suppliers, insurers and lenders.

Mandatory disclosure requirements will create some standards, but for now there remains little consensus on which reporting framework to use, with almost a quarter of respondents saying they rely on more than one framework.

The top five global climate reporting frameworks were the most popular among public companies: 44% of respondents said they use the United Nations Sustainable Development Goals reporting guidelines, followed by the Global Reporting Initiative (40%), the Task Force on Climate-Related Financial Activities. Disclosures (40%), the CDP system (34%) and new rules from the International Sustainability Standards Board (33%). Six percent said they were not yet doing so, but were planning to do so, while 7% were not considering doing so.

The situation is quite different for private companies: 45% do not publish ESG information and more than half of them do not plan to do so. The two most used standards are a self-developed framework (28%) and the UN SGDs (22%).

Respondents were asked which areas of sustainability they found most difficult to measure and report on. Nearly half of respondents said greenhouse gas emissions were their biggest environmental reporting challenge, 45% said reporting on climate risks, and about a third had difficulty with management. Energy.

The top three social and human capital issues, chosen by about a quarter of respondents, were supply chain management; data security; and employee engagement, diversity and inclusion.

Managing the legal and regulatory environment was the main governance reporting challenge. Small businesses (33%) found this more difficult than larger entities (28%), perhaps because larger businesses have in-house legal and compliance support.

Public companies cited greater reporting challenges than private companies in virtually every area, likely because listed companies face stricter reporting requirements and investor pressure. These requirements are expected to increase with the new mandatory climate reporting requirements.

The most likely sustainability information to publish was about employee diversity, equity and inclusion, at 47%. The least likely were biodiversity at 16% and so-called scope 3 emissions at 17%, which are those from a company’s supply chain and customers. Measuring biodiversity and type 3 emissions is often difficult, while workplace diversity is relatively easier to track.

“Scope 3 emissions are by definition outside of a company’s direct control, making them almost impossible to measure and even difficult to estimate,” said Maria Ghazal, senior vice president of corporate governance at the Business Round table.

Organizations generally have better knowledge and control over emissions from their own operations (scope 1) and indirect emissions from purchased energy (scope 2), than with scope 3 emissions. Sixty-one percent One hundred of the public companies surveyed have published their scope 1 and scope 2 emissions, around a quarter plan to start doing so, with the remaining 13% saying they do not intend to disclose this information. Private companies published less information: only 26% disclosed their scope 1 and 2 emissions, while 30% said they planned to do so. Forty-three percent said they had no plans to release the data.

Write to David Breg at david.breg@wsj.com

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With a penchant for words, Eleon Smith began writing at an early age. As editor-in-chief of his high school newspaper, he honed his skills telling impactful stories. Smith went on to study journalism at Columbia University, where he graduated top of his class. After interning at the New York Times, Smith landed a role as a news writer. Over the past decade, he has covered major events like presidential elections and natural disasters. His ability to craft compelling narratives that capture the human experience has earned him acclaim. Though writing is his passion, Eleon also enjoys hiking, cooking and reading historical fiction in his free time. With an eye for detail and knack for storytelling, he continues making his mark at the forefront of journalism.
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