Most large companies are gearing up their ESG data and reporting capabilities, with the vast majority planning to increase investments on sustainability-related software and workforce capabilities over the next few years, yet while most feel confident that they are ahead of the curve in these areas, nearly half report that they are still using spreadsheets to manage their ESG data, according to the results of a new survey released by professional services firm KPMG US.

For its new study, KPMG US surveyed 550 board members, executives and managers at public and private companies, including around two-thirds with revenues greater than $1 billion, mostly in North America and Europe, and across a wide range if sectors.

The survey found that as regulatory pressures build for organizations to disclose sustainability information, scaling up ESG capabilities is emerging as a key priority for many companies, with 90% of respondents reporting plans to increase their investments in ESG over the next three years, with the top investment areas including dedicated ESG personnel at 43%, followed by ESG-specific software (40%), employee training and education (38%) and data collection and management tools (37%).

According to KPMG, the study revealed a disconnect between companies’ perceived ESG reporting capabilities and their actual preparedness. Most notably, while 83% of respondents reported that their organizations were ahead of peers on sustainability reporting, many appear to continue to rely on highly manual data collection, with spreadsheets reported by a wide margin as the top ESG data management system used, at 47%, while 38% reported using ERP systems with ESG modules, and only 37% using specialized ESG software solutions and 33% using ESG data management solutions.

While nearly half of companies continue to rely on spreadsheets for their ESG data, however, most report plans to further build their ESG reporting capabilities in the near future, including 58% who reported that they plan to improve their data analysis and consolidation using artificial intelligence and machine learning over the next three years, and 49% that said that they are currently providing employee and management training to enhance ESG reporting quality.

KPMG U.S. Climate Data & Technology Leader Tegan Keele said:

“Artificial intelligence and machine learning technologies can help organizations gain valuable insights from disparate data and make more informed decisions, but AI and ML are not a silver bullet for sustainability reporting or for setting a strategy that adds value to the business. Judgment calls like which data to use, which sources to collect the data from and the type of controls that need to be in place require a cohesive strategy that should be driven by the organization and informed by the technology rather than driven by it.”

In addition to meeting compliance requirements, the survey found that many organizations also view building ESG capabilities as a key tool for enhancing organizational performance, with “improving ESG data management and reporting capabilities” reported as the top way, by 45% of respondents, to enhance the integration of sustainability goals with overall business objectives.

Similarly, 83% of companies expect to increase ESG responsibilities in non-ESG roles over the next three years, with the most valuable skills and capabilities in this area including ESG data analytics, supply chain sustainability management, ESG risk assessment and management, and carbon emissions management and reporting.

KPMG U.S. ESG Audit Leader Maura Hodge said:

“Timely and accurate reporting of sustainability information is key for businesses to meet regulatory reporting guidelines. However, compliance alone should not dictate an organization’s strategy – focusing on the core elements of ESG that will drive financial value over the long-term is paramount.”

The report also explored some of the key barriers facing companies in their efforts to integrate a sustainability strategy into their broader business goals, with “insufficient resources or capacity to collaborate effectively” emerging as the top challenge, reported by 44% of respondents. Digging deeper into this barrier, the survey found that 21% reported difficulty in measuring the return on investment for ESG activities, and 19% cited budget constraints or competing priorities.

Another key challenge to sustainability integration cited by respondents was internal silos and limited communication between departments. Notably, in order to achieve better coordination, over three quarters of respondents said that they expect to see organizational restructuring to better align sustainability goals with overall business strategy, including 33% who anticipate a “major restructuring.”

KPMG U.S. ESG Leader Rob Fisher said:

“Sustainability touches every part of the business, making it very difficult for large organizations to organize around and very easy to have a ‘check the box’ mentality and focus solely on compliance. The organizations that view new reporting requirements as more of an expansion of their broader sustainability strategy and who continue to invest in the right people and technology to make progress on that strategy will be better positioned to both realize and communicate the full value sustainability initiatives can bring to their business.”

Click here to access the report.