In an effort to standardize sustainability reporting, regulators in the United States are taking steps to require organizations to disclose climate-related information. The Securities and Exchange Commission has issued guidance mandating climate disclosures for publicly traded companies, while California has implemented emission disclosure laws impacting both public and private organizations. With other jurisdictions also moving towards stricter regulations, it is becoming increasingly important for businesses to prepare for ESG reporting requirements.
Despite the increasing regulatory pressure, a survey revealed that less than one-third of enterprise organizations had established ESG reporting frameworks by the end of 2023. Many companies are still in the process of developing their frameworks, while others do not have any in place. This highlights the urgent need for businesses to make progress in their environmental reporting efforts in 2024.
Preparing for ESG reporting can be a time-consuming process, especially when it comes to gathering lease data, which plays a significant role in a company’s carbon footprint. The dynamic nature of these datasets requires businesses to ensure that their reporting is accurate and up to date. With the SEC already scrutinizing environmental statements, companies that provide false ESG disclosures may face legal consequences and damage to their reputation.
Key players in ESG reporting include the Office of Finance, which plays a crucial role in driving business initiatives and strategic decisions that impact a company’s core objectives. However, a significant number of companies do not disclose the links between climate-related impact and financial performance in their financial statements. Finance teams will need to collaborate with other departments to determine benchmarks and reporting processes for ESG reporting requirements.
Real estate teams have a crucial role to play in ESG reporting, as they have the highest level of visibility into a company’s portfolio. Despite this, many senior real estate executives have reported little to no involvement in ESG reporting. It is essential for real estate and operational executives to prioritize investments in technology, people, and processes to manage lease-related expenses effectively. By maintaining strong real estate management practices, these teams can support finance in creating transparent and accurate ESG tracking and reporting.
In 2024, organizations will face increasing pressure to prioritize ESG reporting as more stakeholders become involved and new reporting mandates are issued. Companies that delay ESG reporting efforts may struggle to catch up, while those that prioritize collaboration between finance and real estate teams will be better positioned to achieve compliance and work towards a sustainable future. The involvement of key players within the organization will be crucial in navigating the evolving landscape of ESG reporting requirements.
