RSM Survey Highlights Sustainability Challenges and Progress in Middle Market Businesses | Image Source: Boltdns.net
CHICAGO, December 6, 2024 - According to the 2024 RSM Average Market Sustainability Survey, mid-market companies in the United States and Canada are making significant progress in meeting evolving sustainability standards. Conducted between August 27 and September 3, 2024, the survey surveyed 412 employees of mid- and not-for-profit companies with annual income between $40 billion and $10 billion. Results indicate a growing approach to sustainability, and 75% of respondents are already taking steps to meet regulatory requirements.
“A decade ago, sustainability was seen as a niche concern,” says Tu Nguyen, RSM Canada economist. Today, it has become a fundamental imperative for companies in all sectors. Nguyen highlights the main findings of the survey, which reveal that companies are crossing a complex landscape of new regulations, including the U.S. Values and Values Commission’s greenhouse gas reporting rule, the California Climate Liability Act and the Anti-Forced Labour and Child Labour in the Supply Chain Act.
Key sustainability compliance challenges
Despite their progress, mid-market companies face significant challenges in achieving sustainability. Training and education staff were identified as the most important obstacle, cited by 39% of respondents. Other challenges include understanding regulatory requirements (34%), managing supply chain compliance (32%) and integrating new technologies with existing systems (30%).
“As there’s a piece of Parcheswork in sustainability regulation, there’s a piece of data on sustainability between organizations,” says Jon Caporio, the leading and leading consultant on sustainability at RSM US. The fragmentation of sustainability data creates challenges for companies seeking to consolidate and effectively communicate information, making the technologies that simplify this process essential to compliance efforts.
Proactive measures and technological investments
Many companies are taking proactive steps to prepare for sustainability regulation. According to the survey, 85% of respondents have adequate controls to meet new needs, while 83% have processes and technologies in place to support compliance. Training initiatives, organizational policy updates and investments in new technologies were the most common measures, with 58%, 52% and 51% of respondents, respectively, indicating these measures.
Technology plays a key role in these efforts. Artificial intelligence and machine learning are the most widely used tools for monitoring and reporting sustainability, used by 45% of respondents. Data analysis platforms (39 per cent) and supply chain management systems (38 per cent) are also very active. In addition, 77 per cent of organizations reported having a project management team to monitor sustainability reporting, reflecting the importance of structured monitoring of regulatory compliance.
Clean energy tax credits
The survey also highlights the increasing impact of clean energy tax credits on average market enterprises. The majority (78%) of respondents are aware of the federal tax credits available for clean energy investments, and 54% of organizations have already invested in such projects. Of those who bought tax credits, 93% cited their availability as an important influence on their decision to invest in clean energy initiatives.
Debbie Gordon, a leader in U.S. clean energy and sustainability tax practices, stressed the importance of integrating fiscal considerations into broader sustainability strategies. The Inflation Reduction Act was essential to promote clean energy adoption. However, navigation on related compliance rules requires close collaboration between tax and operational teams,” he said. Gordon added that more than half of respondents (54%) have formal decarbonization plans, with neutral carbon targets being the most common.
Changing Motivations for Sustainability Initiatives
The survey revealed a number of motivations for sustainability efforts among mid-market firms. Reduced environmental impact (38%), compliance with regulatory requirements (35%) and alignment with organizational sustainability commitments (32%) were key considerations. Support for local communities and ethical business practices have also become key factors, cited by 31% of respondents.
Interestingly, US respondents were more likely than their Canadian counterparts to identify client retention as a motivating factor, 32% compared to 18%. Anthony DeCandido, partner and co-director of RSM sustainability services practice, stressed that these motivations go beyond regulatory compliance. “Key stakeholders, including clients, suppliers and investors, are increasingly focusing on sustainability, which encourages businesses to meet these expectations,” he explained.
The way forward for medium-market enterprises
As sustainability standards continue to evolve, mid-market firms adopt cautious but dynamic approaches. The survey found that 84% of respondents closely monitored regulatory developments, while 56% remained in significant actions until after the US presidential election of 2024. This reflects the desire to align sustainability strategies with the broader political and regulatory environment.
Experts such as Alex Kotsopoulos, co-director of sustainable solutions at RSM Canada, highlight the need for a pragmatic approach. “Media companies are awakening to the reality of these demands, but they are carefully assessing the political landscape before making significant commitments,” he said. The results highlight the importance of balancing short-term compliance needs with long-term sustainability objectives, using technology and external experience to navigate this complex area.
The sustainability of RSM’s average market The survey highlights the significant progress made by companies in addressing sustainability issues. However, it also highlights the need to continue investing in education, technology and multifunctional collaboration to meet the changing demands of policy and stakeholders. As sustainability becomes the cornerstone of the business strategy, mid-market companies are ready to play a crucial role in leading significant environmental and social change.
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