Activists or accountants?: Are sustainability professionals stuck in reporting mode?

Back in 2023, sustainability data and technology company ESG Book analysed the World Business Council for Sustainable Development’s (WBCSD), Reporting Exchange platform, which covers more than 2,400 ESG regulations covering more than 80 jurisdictions worldwide, all of which are updated in real-time.

The analysis found that ESG regulations globally have increased by 155% in the past decade, with 1,255 ESG regulations introduced worldwide since 2011. In comparison, 493 regulations were published between 2001 and 2010. Since the turn of the millennium, there has been a 647% in ESG regulations.

This should be a welcome trend. International standards and the shift to mandates are widely regarded as important to equip investors with the comparable, accurate, detailed information they need to manage risk and reduce the environmental impact of their portfolios. It additionally places sustainability at the heart of key internal functions such as finance and can act as a way to get the boardroom aware of sustainability, in the case of mandated disclosure requirements.

Yet sustainability teams, still very much nascent compared to other long-standing departments such as finance, are often small and therefore face challenges in collecting and providing this information. Time and resources are of the essence and a sustainability function that has historically been looking ahead to the future and delivering climate action may well find itself trawling through data in order to comply.

More recently, data collected from 5,000 global C-suite executives by an IBM survey highlighted that many businesses are allocating more budget to the sustainability department, but that finance is more likely to be spent on reporting than actual innovations to solve climate challenges.

The survey found that spending on reporting exceeds spending on sustainability innovation by 43%. Indeed, many organisations are viewing sustainability as an accounting exercise rather than a radical transformation of how the business operates.

“An organisation’s approach to sustainability may be holding it back,” IBM’s global managing partner of sustainability services Oday Abbosh says. “There is no quick fix. Sustainability requires intentionality and a shared corporate vision. Sustainability needs to be part of the day-to-day operations, not viewed only as a compliance task or reporting exercise.”

Many sustainability professionals will say that reporting feels like a year-round task as the disclosure requests ramp up. However, IBM’s survey found that only 31% of businesses actually incorporate the insights from the data collected into any operational improvements.

In short, reporting is largely viewed as a compliance exercise.

Onerous data

Building on this notion, a recent poll of UK-based sustainability professionals has found that more than half find reporting requirements too complex.

Conducted by facilities management giant Mitie and based on the insights of more than 500 businesses, the survey found that fewer than one in five said that they believe existing approaches to corporate sustainability reporting are effective.

The survey found that a proliferation of different mandatory and voluntary disclosure schemes has left a significant minority (38%) lacking clarity about which information they need to report, and in which formats.

Three in ten of those polled by Mitie feel they are not equipped to comply as legislation becomes stricter. Six in ten worry that their company could either be penalized or face reputational damage from non-compliance.

It’s reached the stage now where some are starting to view reporting as a burden. What was once a way to uncover hotspots for action, and appeal to investors and stakeholders is quickly becoming a time sink that is keeping sustainability professionals looking backward, rather than forward at key milestones for sustainability targets such as 2030 and 2050.

“Taking things that often start on a voluntary basis, making them better, is, I think, often a better way than trying to mandate perfection,” WBCSD’s managing director Claire O’Neill tells edie.

“Because we’re getting to such a high level of disclosure in the public markets, there is now an interesting question around whether companies are staying private to avoid it.

“Are we actually driving companies to be less transparent because the regulatory burden has become too onerous? I don’t know. What I do know is that a number of friends who are chief sustainability officers are now saying they have to produce more than a dozen reports and they’re not sure who actually reads them.”

Greenstalling and external fears

In recent years businesses have been eager – perhaps too eager – to promote their commitments to sustainability. While this has helped many businesses strategise their approach to climate action in order to boost reputation and redefine purpose had has led to a substantial increase in greenwashing risks, so much so that the EU is building an entire legislation package to cut down on unsubstantiated green claims from corporates.

Businesses will soon be required to back their claims up with third-party verified data, and some terminology, such as ‘climate-neutral’, will be banned altogether.

This has led to concerns from some green groups that businesses will go quiet on their commitments, fearing allegations of greenwashing and ultimately not providing any data to showcase their progress. This emerging issue is known as “greenstalling.”

Greenstalling is an approach whereby businesses intend to do the right thing by drastically ramping up decarbonisation efforts, but ultimately get stuck in “analysis paralysis” where they can’t find the right approach to doing it for fear of criticism. Read edie’s feature on the topic here.

So not only are businesses stuck in reporting mode to comply with frameworks, but there is also a very real concern that some may abandon the data once it has been collected, for fear of reputational damage. As disclosure ramps up and guidance on green claims continues to formulate, the risk is that businesses are crowded into a role that is about communicating sustainability rather than delivering it.

“It is a big mindset shift,” Carlsberg Marston’s Brewing Company’s sustainability manager Laurence Cox tells edie during a recent SustyTalk.  “Big commitments are still important, they still galvanize people, and get buy-in from the business. But really what it is now is about how do we get there? How do we progress further and ultimately we can’t just be chipping away at a tiny bit. We need to be transforming in a lot of senses.

“You can’t just do things the way that they’ve always been done. I kind of see it as a balancing between your different priorities. There’s going to be times where you need to really focus on meeting regulations and that’s just going to take all of your time. There are going to be times when you need to go into deep analysis to come up with your strategy to come up with your position on something.

“These are actions that are going to allow you to achieve those goals or allow you to push beyond regulations. When I look at dividing my time or the time that the people that I’m working with I’m always making sure we don’t forget about making progress and pursuing the projects themselves, because otherwise you’ll just be speaking about commitments and you’ll never actually get anywhere with them.”

Cox notes the importance of making sure a business is compliant on the reporting front, but also how setting up working groups internally can help build capacity and passion for the delivery of projects. It is about taking sustainability out of the sustainability department and relinquishing some of the control.

Short-term pain for long-term gain

One such framework that can help sustainability exit its silo is that of Climate Transition Plans. Many UK businesses will soon be subjected to a mandate on climate transition plan publications in the coming months. Indeed, the UK has set up the Transition Plan Task Force to shape a ‘gold standard’ for these plans.

The Task Force has recommended that corporates publish plans this year, and then an update in 2026. In 2024 and 2025, information material to the plan should be included in financial reporting. Advice has also been provided on what, exactly, the plans should cover.

While some sustainability professionals may wince at yet more reporting and disclosure requirements, Transition Plans are largely viewed as a vehicle to enable the delivery of net-zero targets moving forward.

Whether it is formulating a Transition Plan or gathering data and insights for frameworks such as ISSB, TCFD, CDP, TNFD and/or annual reports, the key message is that not just treating this as compliance is key to help unlock drivers in the future. Short-term pain for long-term gain.

“We see this all the time that organisations are paralysed because of so many [external] drivers,” Anthesis’ chief executive Stuart McLachlan tells edie. “Some are self-imposed, voluntary regulations and some are governmental and we understand that organisations need to be able to navigate the compliance part of the journey but that they need to be able to navigate that in parallel with delivery and finding opportunities for value creation.

“In terms of what we see coming down the pipeline we think this is going to become even more challenging. But this is the big stick, this is what gets people out of their places of safety into the journey and can help to accelerate organisations in that journey.

“Businesses need to try and get ahead, rather than chasing their tails trying to deliver on compliance for minimum costs and having a very short runway to be able to meet standards. But this can unlock value creation, because they’re going to see what their organisation is doing and where they’re headed. They’ll uncover operational efficiencies, build more resilient supply chains and are going to see brand enhancement and reputational strength.”

So, are sustainability professionals stuck in reporting mode? For many yes, although the increase in disclosure does open the door for more resources, bigger teams and integration of the sustainability agenda across the company.

Will this get worse before it gets better? Most likely yes. The increase in ESG disclosure and reporting requirements shows no signs of slowing down. It is important to note, however, that many of the bigger frameworks are trying to standardise disclosure requests – ISSB is taking up the mantle of TCFD, for example. However, getting to grips with this approach now puts a company in good stead in the eyes of the investors and other stakeholders. Reporting may feel like a burden now, but it should open more doors internally and externally to start delivering on sustainability roadmaps.

“There’s going to be far more regulation and far more focused on compliance which you know can be a big burden on sustainability teams or the wider business, but actually using that regulation to then push a little bit further as well,” Cox says.

“Business has to do that anyway, it’s a great way to get it on the agenda of senior people. It’s a great way to get more budget. It’s a great way to bring it to the attention of the business. We’ve got to do this regulation anyway, so let’s look at the opportunities of it. Not just seeing it as red tape that is going to cost us and it’s going to take time.”

“I think it’s really important that organisations see this not just as more regulation where they’ve got to tick boxes and go back to business as usual,” Mclachlan adds. “They’ve got to see this as the start of a journey that is now inevitable, and if they’ve got to step into that journey, into this transition zone to truly drive change.”