Inconsistent data standards and disparate frameworks can create ESG reporting headaches. Adam Thompson, Sustainable Finance & ESG Reporting Leader at IBM, explains the benefits of implementing a dedicated ESG platform.
A recent assessment of the regulatory landscape across organisations identified over 600 sustainability reporting requirements across over 80 countries. Consistent and reliable Environmental, Social and Governance (ESG) reporting is essential but it can get complicated, especially for larger organisations. It’s all very well making self-assured environmental, social and corporate governance commitments but if you can’t prove you’ve met your targets there can be trouble ahead. For example, more than half of FTSE100 companies have made net zero pledges but quantifying progress can be tricky, especially if there are multiple ESG frameworks at play.
Furthermore, ESG data has generally not been held to the same standards of accuracy as financial data and it’s often spread over disparate, unconnected systems. And then there are the reporting processes themselves. Running your annual greenhouse gas (GHG) accounting on an antiquated spreadsheet, for example, is ill-advised when stakeholder and regulatory scrutiny is so high. Sadly, these sorts of flaws are not uncommon.
A dedicated ESG platform
Organisations have dedicated IT systems for a range of activities, such as HR management and financial accounting – it goes without saying; ESG reporting should not be any different. Implementing a specialised software platform to capture and calculate emissions data, monitor sustainability initiatives and scrutinise supply chain feedback makes the process easier, more reliable and transparent.
This is especially important for the environmental element of ESG reporting, which can often be difficult to track. And with reduced carbon emissions being a topic with reputational ramifications, any slips ups can be costly, especially as your activities are constantly under the spotlight.
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IBM’s 2022 IBV CEO Study paints a detailed picture of how these concerns are playing out in the board room. It found that 37% more CEOs in 2022 rate sustainability as a top priority, compared with 2021, and 83% expect sustainability investments to produce improved business results in the next five years. This area is a major focus across all stakeholders in ESG. It’s not just a regulatory requirement, or about being a good citizen – ESG needs to be heavily embedded in any company’s business strategy. And establishing an ESG data foundation enables companies to go from simply reporting to operationalising sustainability goals.
You’re open to scrutiny
Artificial intelligence (AI) and bots are increasingly being used to evaluate an organisation’s ESG performance through publicly available data; a process known as ‘data scraping’. This presents a new and troubling challenge as this information is largely outside of your control. More worryingly, it is often being used to review and rank performance without referencing context or methodology. The resulting picture can be wholly unrepresentative, but without access to robust data it can be difficult to counter.
That’s why it’s essential to ensure that you have reliable ESG reporting software; a system capable of aggregating fragmented data into a central location where it can be rigorously and methodically interrogated using reliable and consistent tools.
Smart reporting, reliable results
IBM’s Envizi sustainability performance management suite helps organisations to automate data capture and centralise it. As a result, all your responses across multiple internationally recognised frameworks, such as the Sustainable Accounting Standards Board (SASB) and Global Reporting Initiative (GRI), are available in a framework library with one data set and one repository of information. The upshot: trustworthy, uniform ESG insights. In addition to reporting mapping up to existing standards such as SASB it also still offers scalability for new and future standards such as TNFD.
There’s also the IBM Environmental Intelligence Suite, which aims to help organisations prepare for and respond to weather and climate risks that may disrupt business. The software uses existing weather data from IBM, advanced geospatial analytics and AI to deliver detailed climate risk analytics.
ESG reporting is becoming more complex and getting it wrong has very serious implications. IBM’s solution can help organisations overcome these challenges by delivering the dependable data you need. It is also regularly updated in line with new framework requirements to ensure your ESG reporting remains aligned with your evolving market obligations.