ESG disclosure onslaught puts sustainability chiefs in a bind

ESG reporting has become "a resource burden" for many sustainability leaders, new research finds

ESG disclosure onslaught puts sustainability chiefs in a bind

Chief sustainability officers (CSOs) around the world have been grappling with an overwhelming influx of ESG disclosures, according to a global survey conducted by EthicsGrade. This inundation has raised concerns about the potential for greenwashing, where companies exaggerate their sustainability efforts. 

The survey revealed that CSOs, responsible for compiling data from various departments to provide accurate ESG responses, are struggling to keep up with the surge in ESG disclosure requests. 

“Despite publicly available reports, many ESG disclosure requests are still received, and valuable resources are spent on sourcing, analyzing, and consolidating information for each request,” said Tess Buckley, AI ethics senior analyst at EthicsAnswer, a SaaS platform from EthicsGrade. “We must find a way to support CSOs in streamlining ESG reporting and alleviating the burden of ESG disclosure to decrease the risk of greenwashing.” 

Despite the increase in executive-level CSOs, from 9% in 2016 to 28% in 2021, these sustainability leaders are finding it challenging to manage reporting and its impact. 

“It became apparent through this research that ESG reporting is necessary for business operations, yet it is a resource burden for these dedicated professionals,” Buckley said. 

ESG inquiries surge 

The number of ESG inquiries directed at companies has surged in recent years, with CSOs spending at least 50% of their working hours on these requests. This diversion of focus from improving ESG practices to reporting on them has emerged as a common frustration among CSOs. 

The survey found that, on average, CSOs receive approximately 50 ESG surveys per year, each containing around 50 questions. Responding to these surveys consumes about half of their working hours. 

“The purpose of ESG disclosure is to ensure companies’ sustainability efforts are genuine,” Buckley added. “However, in our conversations with CSOs, it became clear that the relentless bombardment of ESG-related inquiries has given rise to greenwashing and what was referred to by many as the ‘burden of ESG disclosure.’” 

Many of the surveyed CSOs expressed concerns about the potential consequences of not having the resources to respond to ESG disclosure requests, including potential financial repercussions, a loss of customer trust, and diminished investor interest. 

While hiring dedicated personnel is one option, it can be costly. The survey also found that some CSOs were uncertain about the risks associated with not responding to disclosure requests but felt compelled to make this decision due to resource constraints.