ESG reporting to stakeholders is no longer a ‘nice-to-have’; it has become a business priority. Organizations are under increased scrutiny from stakeholders and prospective investors to see the impact of their environmental, social and governance commitments, and it’s clear they must turn their ESG ambitions into action.
Yet providing clear, consistent, and comparable sustainability data to stakeholders is no easy task and getting the reporting wrong can have negative unintended consequences. The current regulatory landscape can be confusing, especially for businesses operating in multiple markets. This is why the introduction of the International Sustainability Standards Board (ISSB) was a welcomed and necessary step to ensuring accountability and transparency is achieved. The goal is that businesses will no longer need to navigate the complex web of measurement frameworks, guidance, protocols, rankings, indices, and standards. Instead, the ISSB aims to simplify the reporting process by creating a global baseline of disclosure standards while reinforcing the responsibility placed on reporting teams to hopefully ensure the delivery of truly accurate ESG disclosures – a win-win situation.
Today, it’s up to leaders to make sure there is a smooth transformation of the ESG reporting processes by reassessing current set-ups and existing solutions – where technology can be an enabler. However, the role of technology is a current challenge: one in five (19%) UK-based ESG practitioners in a Workiva study reported that their organization does not employ technology suitable for managing the ESG reporting process and program initiatives.
So why are businesses missing this opportunity and how can leaders ensure the ESG reporting process is streamlined?
The UK is Lagging Behind in Technology Adoption
Given that delivering transparent and accurate data to key stakeholders is becoming increasingly important, it is clear that there is a need for ESG reporting to be streamlined through technology. Yet, according to our research, only 37% of ESG practitioners in the UK state their organization uses technology and data to make decisions in advancing ESG strategy, compared to 65% of US respondents. This is particularly interesting as ESG maturity and understanding has historically been greater on this side of the pond. This discrepancy indicates that there is significant scope to improve efficiencies and performance in this area.
That’s not to say that UK businesses are unaware of the value that the right technology can bring to their reporting. In fact, it’s the opposite as three-quarters (74%) understand that technology adoption will help validate data for accuracy and a further nine in ten (89%) realize that technology enables teams to map disclosures to regulations and framework standards.
However, the lack of technology adoption is concerning given the wave of new regulations
that are on the horizon. In the UK, recommendations from the Task Force on Climate- Related Financial Disclosures (TCFD) are being added to the existing landscape of social
and governance reporting requirements. Looking wider, in the EU, organizations will need to adhere to requirements stemming from the new EU Taxonomy and the proposed Corporate Sustainability Reporting Directive (CSRD).
With this sense of urgency, it’s clear that adopting technology is important to streamlining processes and supporting teams, while ensuring reporting is board- ready and investor grade. So, what is holding businesses back?
Overcoming The Technology Hurdles
As the interest in adopting technology to streamline ESG reporting continues to grow, so does the importance of addressing the challenges that come with this investment. It is surprising that despite the benefits that technology will bring, one in five (19%) UK respondents revealed that their organization does not employ technology suitable for managing the ESG reporting process and program initiatives. This is due to several barriers that businesses are facing including budget constraints (47%), a lack of understanding of the technology that is needed or available (32%) and difficulty using technological solutions (26%). To overcome these hurdles, businesses will need to focus on the value delivered by technology while providing thorough education across their teams in order to help advance and simplify ESG reporting.
Technology and Transparency Will Future-Proof Operations
To truly future-proof operations and achieve trust will require the seamless integration of people, processes and data – this involves the implementation of technology that enables transparency.
Businesses need to make sure everyone involved in the ESG reporting process is aware that a collaborative and centralized approach will keep the data consistent and watertight, therefore keeping stakeholders happy with investor-grade reporting in the long run.
This can be achieved through three areas: collaboration, centralization and automation. First, everyone involved in the reporting process must be able to work across silos and develop effective channels of communication. Gathering and consolidating data from different parties can be a challenge if the right tools and processes are not in place. Therefore, real-time collaboration will be key. Secondly, data collection will need to involve a centralized platform that integrates work streams and creates consistency and efficiency so organizations can establish a single source of truth. Finally, reducing the risk that comes with manual processes for time-intensive tasks will involve automation. This will help minimize errors and save time so that individuals can focus on value- added tasks to grow their own skills or analyze the findings.
Ultimately, flawless reporting audits depend on having visibility over the entire reporting process. This means greater accountability, traceability and transparency which is achieved through the right technology.
Missing Piece to The ESG Puzzle
Having an intentional approach to technology implementation will help deliver sustainable, long-term value. This will ensure that businesses continue to stay one step ahead with their ESG reporting and will help them to avoid delays, inefficiencies, endemic long-term disruption and bloated operations.
Businesses need to think about how they can achieve transparency and data consistency to make better use of their limited resources. It’s imperative that they are looking at the changes that are arriving now and preparing their operations in advance to build future-proofed foundations for consistent, compliant