David Janků (Frank Bold Advisory): Companies are most confused about ESG reporting questions. But these are now absolutely crucial
06. 03. 2023
Reading time: 5 minutes
The task seems clear. From the year 2025, certain companies will have to submit non-financial reports monitoring their (un)sustainable behavior. This reporting will not just serve banks, investors, customers, but, above all, should provide added value for the company’s management and employees with ESG* (something) or Sustainability* (something) in their titles.
They’ll use these reports as a basis for deciding in which direction the company’s sustainable activities will develop further.
To ensure that internal IT doesn’t stew in their own juices and can add value to the business (which is what everyone secretly expects from internal IT), we’ve got 4 tips for you.
This is probably the most challenging step: finding out where the required data are and who administers them. Once you can identify the data, then you can integrate them. For some of them, we may just have the paper form, and we have to do something to obtain them. But whoever can describe them can then also validate whether anything essential is missing from the output.
The goal isn’t a one-off report, but continuous data collection.
It’ll be necessary to match reference data to the ESG report’s key metrics and, in subsequent periods, measure and evaluate how well the key objectives are being met.
High-quality data preparation is absolutely fundamental and will boomerang back to you – for better or worse. So, consistently ask the business the following questions, and don’t be put off:
What are the key metrics?
What are the key variables in the ESG report?
Where do we have the data, in which systems?
Who administers them?
Who knows how they’re structured and can describe them?
How often are we going to update the data?
Which key values will we track with a follow-up workflow that gives alerts for unfavorable developments or abnormal values?
The goal is to get a sense of how many there’ll be, in which form, who’ll be working with them, and what questions will be asked. Together with the business, design the form of the final report and of the data collected in 1 year, in 2 years and in 3.
ESG reporting should give the business feedback on whether they’re on track to fulfil the ESG goals. A one-off report can be replaced by a presentation that someone puts together based on data they’ve collected in Excel spreadsheets from across the company. Continuous reporting, on the other hand, needs a single place where all the necessary data can be stored.
The data platform that’ll be the source for ESG reporting should fulfil the following conditions:
Includes a tool able to recalculate the data and convert it into the required ESG metrics
Makes the data available at all times
Allows data access not to depend on specific people, whose absence would prevent others in the company from working with the data
Eliminates the errors caused by repeated manual data collection; unlike accounting, the data here will often come in different formats and quality, and will need to be validated and treated on the data platform
Accept that, at the beginning, you’ll be integrating data from Excel spreadsheets
The next step that the business should request from IT is the ability to use the data to optimize key metrics, such as the consumption of water, energy and other raw materials to reduce the CO2 footprint.
You can expect ahead of time that the data platform and your chosen tool will eventually be connected to additional systems arising to fulfil specific purposes. For example, this may be data on:
How many people are in the office and how they move around, i.e., you’ll integrate attendance systems
Temperature measurements in the premises at different times – you’ll integrate data from IoT platforms
The operation and consumption of heating and air conditioning over multiple days – you’ll integrate data from building management
CO2 production, water consumption and pay equity from your suppliers
The movement and consumption of materials
Production and disposal
More indicators will be added over time. At the moment, we don’t even know we’ll need many of them. But the data platform needs to account for this, to be flexible and scalable.
In addition to annual reports, which will have a set structure, many people in the business will need selected metrics and indicators to support their decision-making. You can map out who’ll be working with the reports, the data granularity they’ll be interested in, and where they’ll access the data from.
ESG reporting will eventually permeate the entire organization in a similar way to financial or management reporting. It will answer questions such as:
How green are our products and services?
Which manufacturing plants produce the most CO2?
Expect that each company will be unique, will track different metrics and set different goals. A nuclear power plant will pursue different objectives than a meat-packing plant or a company offering IT services.
Autor: Government, Utility & Insurance Division Director, ESG Leader
Article was published in IT Systems 1-2/2023