It’s that time of year again – With only three and a half months left in 2022, it’s time to start exploring 2023 corporate sustainability reporting trends and tips. From possible SEC-mandated climate disclosure to the downfall of carbon offsets, there’s a lot to cover. In this article, we’ll be sharing our prediction for the trends that will shape corporate sustainability reporting in 2023. We’ll also include our top tips to help your company’s sustainability reporting go smoothly.
7 Major Corporate Sustainability Reporting Trends to Watch in 2023
1. Possible SEC mandatory emissions reporting
In March 2022, the U.S. Securities and Exchange Commission (SEC) issued a new regulatory proposal that would mandate climate disclosure within financial reports. The proposal was originally expected to be passed over the summer. However, the SEC ultimately extended the public comment period on the proposal until June 17, 2022, meaning the proposal is now expected to pass by the end of 2022.
If the proposal is passed, it will be the first time that publicly traded businesses will be required to measure and disclose greenhouse gas emissions in a standardized fashion. It is important to note that this proposal is not an anomaly: It is part of a growing trend of stakeholders raising concerns about the sustainability of businesses and the risks that climate change may pose to their investments. As a result, we expect to see more mandatory reporting measures passed in 2023 and beyond.
Check out our full guide to the SEC proposed mandates here.
2. Sustainability reporting is becoming more popular with both investors & consumers
The Governance & Accountability Institute (G&A), a leading consulting firm on sustainability and ESG, found in a 2021 report that 92% of S&P 500 companies published a sustainability report in 2020, up from 90% in 2019. This shows that corporate sustainability reporting has been adopted as a best practice by the largest U.S. public companies. The reason for this? Investor and consumer pressure.
For example, a major 2021 study of over 10,000 people across 17 countries showed that sustainability is becoming increasingly important to consumers. The Global Sustainability Study 2021, conducted by Simon-Kucher & Partners, revealed that more than a one third of the population is willing to pay more for sustainable products or services. The study also found that globally, sustainability is rated as an important purchase criterion for 60 percent of consumers. Finally, and most important for companies to note, the study found that the younger generation is much more invested in sustainability than the older generation, meaning that the importance of sustainability won’t be fading anytime soon.
The best way for companies to share their sustainability initiatives and efforts is sustainability reporting, the results of which can be shared formally with investors and informally with consumers via social media and other marketing channels.
3. The digital transformation will shift how sustainability reporting is done
Traditionally, the digital transformation has meant the adoption of digital technology by an organization with the goals of improving efficiency, value, or innovation. But increasingly, the digital transformation is being utilized by companies to increase sustainability. Case in point: A report by ABB found that 72% of respondents to its recent survey cite sustainability as the reason they are increasing their spending on digital technology, and 96% of decision-makers say digitalization is “essential to sustainability.”
We predict that, in 2023, companies will see the value of digitization not only for increasing their sustainability, but for reporting on it as well. Digital energy and sustainability management platforms are able to automate the process of utility, energy, and sustainability data collection, auditing, and analysis. And by directly integrating with sustainability reporting frameworks, such platforms can streamline the process of reporting for companies, making an otherwise tedious and error prone process quick and accurate.
4. There will be increased focus on corporation’s supply chains
A 2016 report by McKinsey estimates that 80 percent of consumer goods companies’ emissions comes from their supply chains. In order to achieve sustainability and net zero goals, it is clear that companies will need to focus on reducing emissions in their supply chains.
In 2023, we expect to see sustainability reporting frameworks focus increasingly on scope 3 emissions. Scope 3 emissions, also referred to as value chain emissions, often represent the majority of an organization’s total GHG emissions, according to the U.S. Environmental Protection Agency (EPA). In addition, we estimate that reporting frameworks will ask more detailed questions about companies’ supply chains, not just in terms of emissions but waste and energy use as well.
5. There will be a major crack down on greenwashing
A quick search for “greenwashing examples” on Google brings up countless results of companies who have been caught making false or misleading sustainability claims. However, the days when companies could get away with greenwashing are quickly coming to an end. For example, fast fashion company Boohoo recently came under fire for promoting a sustainable clothing line with reality star Kourtney Kardashian. The backlash came mainly from young, Gen Z consumers on Twitter, showing that the younger generation is aware of the term and ready to take companies to task for the offense. As a result, we expect to see sustainability reporting frameworks taking measures to crack down on greenwashing by asking more questions and requiring more specific data sets.
6. Carbon offsets will take a backseat to other emissions reductions efforts
Previously, carbon offsets were a major way for companies to prove their sustainability and net zero initiatives. Now, however, carbon offsets are coming under fire (most recently by Last Week Tonight host John Oliver) for being an easy out for companies looking to claim they are sustainable while taking little tangible action. Heavy use of carbon offsets can now get your organization accused of greenwashing. As a result, carbon offsets will fade into the background in 2023 and be replaced by more concrete ways of reducing emissions, like implementing energy efficiency projects, investing in renewable energy, etc. What does this mean in terms of sustainability reporting? Companies that persist in excessive use of carbon offsets may receive lower grades on assessments or be rejected for some certifications.
7. Building performance standards are on the rise across the country
For example, in New York City, Local Law 97 has set emissions limits on buildings over 25,000 square feet (with certain exceptions). Buildings that fail to comply will face severe penalties once the law goes into effect. Meanwhile, Boston has passed the Building Energy Reporting and Disclosure Ordinance (BERDO), which will require all Boston buildings over 20,000 square feet to achieve net zero carbon emissions by 2050.
These performance standards are part of a growing trend of climate legislation (which on a national scale has manifested as the Inflation Reduction Act). In 2023, we expect to see more mandatory climate legislation passed, both at the state and federal level.
4 Tips for Corporate Sustainability Reporting in 2023
1. Ensure you have accurate, quality data
In 2023, accurate, quality sustainability, energy, and utility data will be crucial. Without it, your company will struggle to comply with the possible SEC reporting and any local building performance standards. In addition, accurate data allows your company to understand what is going on within its supply chain, determine what energy efficiency and sustainability initiatives to implement, and avoid greenwashing.
2. Use sustainability reporting results to drive initiatives, improvements
Avoid simply reporting, receiving your results, and then moving on. Sustainability reporting is not just for optics – it gives your company great insight into areas where it can improve. Once you receive your results, go over them with the leaders and drivers in your company and determine what improvements you can realistically make.
3. Disclose the good and bad to avoid greenwashing
If your 2023 sustainability reporting results are not as stellar as you would like, don’t shy away from sharing them anyway. Sharing an abridged version of your results could get your company accused of dishonesty/greenwashing. It is better to acknowledge the issues and mention in your company report how you will address them with tangible actions.
4. Make sure you have all your information and data gathered before you start reporting
The last thing you want is to be searching through Excel spreadsheets for data sets while a reporting deadline looms. Make sure you have all your utility, energy, and sustainability data in once place, whether that is one spreadsheet or an software platform. Extra tip: Make sure the data is audited for correctness as well. This will help prevent errors and delays in reporting.
How WatchWire Can Assist Your Company With Sustainability Reporting
WatchWire is an integrated energy and sustainability management platform that streamlines, automates, and standardizes your sustainability reporting process. WatchWire collects, audits, analyzes, and stores all your energy, water, waste, and emissions data in one place, providing a single source of truth for your organization. With multiple integrations to LEED Arc, GRESB, ENERGY STRAR Portfolio Manager, TCFD, and more, standardizing your sustainability reporting process is possible. WatchWire also provides real-time data monitoring, so you can see how well your sustainability measures are working and provide the most recent energy and emissions data to your investors.
To discover more about WatchWire and its capabilities, you can visit our website, blog, or resource library, request a demo, or follow us on LinkedIn, Instagram, or Twitter to keep up-to-date on the latest energy and sustainability insights, news, and resources.