Only a quarter believe they are ready for increased sustainability reporting requirements

Survey finds many unprepared for incoming legislation on sustainability reporting, with substantial requirements coming into force in the US and Europe over the next three years

A survey by Bain has found that just 24% of companies think they are prepared for rising sustainability reporting demanded by incoming legislation.

Executives are hoping that technology can provide many of the answers to incoming legislation as nine-in-10 (88%) think that improvements in digital technology will underpin their ability to capture critical data in the supply chain.

However, even with this recognition, it seems that a relatively small proportion have the right kind of systems in place currently, meaning major investment will be required in the coming years into own and third-party systems. Bain noted in its analysis that: “Only about one-third of the executives we surveyed with high sustainability ambitions believed that they have the technology necessary to deliver on them.”

Similarly, a Reuters Events, Supply Chain industry survey found that reporting capabilities are limited, which will create barriers to compliance. The research found that 51% could only report on Scope 1 emissions and 23% said that they can capture Scope 3 emissions (upstream and downstream emissions resulting from supply chains). A further 13% could not report on their emissions to any of the scope standards.

Efforts will need to be increased in this area, as substantive legislation is now scheduled to come into place over the next three years and beyond.

From 2026, companies with revenues above $500 million will need to report on Scope 1 and Scope 2 emissions in California, and Scope 3 emissions by 2027. They will also need to report climate-related financial risk on an annual basis, as well as what they are doing to mitigate that risk.

In the EU, major legislation being designed currently include the Corporate Sustainability Due Diligence Directive (CSDDD), the Ecodesign for Sustainable Products Regulation and a provisional agreement for a 90% reduction in CO2 emissions from heavy-duty vehicles by 2040.

Under the Under the CSDDD, due to enter force in 2027, large companies operating in the EU need to know what is happening in their supply chains, as failure to find and remove practices such as child labour and deforestation is expected to lead to fines. The Ecodesign for Sustainable Products Regulation, also provisionally set for 2027, will require products to have embedded information on their production process and contents through Digital Product Passports.

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