Almost nine out of ten ESG experts in the UK say it is a “challenge” to adapt to new reporting requirements, according to research published this week.

In a survey, 89% of British ESG practitioners cite the hefty demands of reporting according to new regulations, including the EU’s Corporate Sustainability Reporting Directive (CSRD).

EU companies must apply the CSRD for the 2024 financial year. UK subsidiaries of European companies will have to apply the new disclosure requirements. British corporates with EU listing will be required to do likewise.

In the EU, 87% find the reporting rules a challenge, according to polling by Workiva, the software company.

Meanwhile, 98% of those questioned say they are ‘confident’ in the accuracy of their ESG data, though 83% say collecting the right data is also a challenge.

However, there appears some divergence between executives and managers over the “diligence” applied to ESG reporting. According to the research, 62% of executives “strongly agreed” their organisations applied the same diligence to ESG reporting as in financial disclosures. Only 32% of managers could say the same.

Paul Dickinson, a Workiva ESG Advisory Council member and founder chair of the Carbon Disclosure Project (CDP), says: “There is a disconnect here, one that suggests existing ESG reporting practices must mature to satisfy regulatory requirements.”

Most companies, 81%, say they will comply with the CSRD even where they are not one of the roughly 49,000 companies within the scope of the rules.

Dickinson says he believes companies are complying because ESG practitioners are “preparing for a market where assured integrated reporting is the de facto global norm.” The report suggests CSRD may emerge as a “gold standard”.

The global picture

There are reporting developments around the world. Not only has the EU passed the CSRD but it has also now voted in the Corporate Sustainability Due Diligence Directive (CSDDD) which mandates reporting on human rights and environmental impact.

In the UK, new sustainability reporting regulations are currently under development, with news expected later this year. The rules are expected to be built around standards issued last year by the International Sustainability Standards Board, part of a body that has previously focused on setting a single set of financial reporting standards for use around the world.

In the US (around 30% of respondents in the Workiva survey are from North America) sustainability reporting, though undertaken voluntarily by many large companies, has proved highly controversial. ESG has been labelled part of the “woke mindset” by politicians on the right, while recent efforts by regulators at the Securities and Exchange Commission to introduce new climate-risk reporting rules are on pause as legal challenges play out.

ESG and sustainability reporting were never going to be easy. It’s a whole new disclosure paradigm. Workiva’s survey shows that, although there may be some pain involved, companies appear largely committed.