According to an RSM survey, 75 percent of mid-sized companies have begun preparing to implement climate-related regulations. But a still-larger majority – 84 percent -- said they are “monitoring developments before acting on them.” And 56 percent said their organization was waiting until after the U.S. presidential election before taking further action.
These are some of the findings of The RSM Middle Market Sustainability Survey 2024: US and Canada. The survey, which included 412 professionals at middle market companies and nonprofits in the United States and Canada, was conducted between August 27 and September 3, 2024. It targeted organizations with annual revenue of $40 million to $10 billion and respondents who influence their organization’s sustainability or corporate social responsibility decisions. The sustainability regulations addressed in the survey were the SEC’s climate-related disclosure rules (see SEC Adopts Landmark Climate Change Disclosure Rules, March 2024 Update); California’s Climate Corporate Data Accountability Act (see California Outflanks the SEC on Climate Disclosure, October 2023 Update); Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act; the European Union’s Corporate Sustainability Reporting Directive (see E.U. ESG Disclosure Requirements Will Affect Many U.S. Companies, October 2023 Update); and the European Union’s Corporate Sustainability Due Diligence Directive.
Key of the survey findings include:
Challenges. The top five challenges respondents identified to compliance with sustainability regulations were training and educating staff (39 percent); understanding regulatory requirements (34 percent); managing supply chain compliance (32 percent); data collection and management (31 percent); and integrating new operations with existing ones (31 percent).
Decarbonization plans. Just over half of survey respondents (54 percent) said their organization has a written decarbonization plan in place. Of those with written plans, 61 percent have a carbon-neutral plan, 49 percent have a carbon-offsetting plan, 39 percent have science-based targets, and 33 percent have net-zero plans.
Executive responsibility. Almost three-quarters (71 percent) of respondents reported that their organization has a senior executive whose primary responsibilities include establishing and achieving a vision for sustainability. Seventy-seven percent of respondents said their organization has a dedicated project manager/project management team to support sustainability reporting.
Budget. Sixty-nine percent of respondents reported that their organization has a budget dedicated to compliance with one or more of the sustainability regulations addressed in the survey. Of those who reported having such a budget, 79 percent expect the budget to increase in the next fiscal year; 21 percent anticipate it will increase substantially, while 58 percent think it will increase somewhat. When asked why they expect budget increases, factors mentioned included ensuring the ability to meet regulatory requirements, supporting business growth/expansion, responding to inflation/rising costs, and supporting strategic sustainability initiatives/investments.
Technology. Forty-five percent of respondents reported using AI and machine learning for tracking and reporting on sustainability initiatives. Thirty-nine percent use data analytics platforms and 38 percent use supply chain management systems.
External assistance. Most respondents (69 percent) believe they will need outside help to comply with ESG regulations and 34 percent have already hired external consultants for compliance preparation.
The high level of middle market preparedness for sustainability reporting reflected in RSM’s survey results is somewhat surprising. Audit committees of mid-market public companies might want to consider how their organization compares with these findings. At the same time, the survey respondents’ theme of wait-and-see before taking further action makes sense. As many respondents seem to have anticipated, the U.S. election outcome is likely to significantly impact the future of the SEC’s climate disclosure rules.
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