This blog is dedicated to unpacking what business leaders must be aware of and consider on their ESG journey. Read on for a clearer view of how ESG-related data challenges can be resolved with a smarter, more efficient collection and consolidation approach.
There has been a shift in the way businesses do business. It’s a need for a more conscious approach. This shift includes a push towards stronger and more impactful environmental, social, and governance (ESG) reporting for large complex enterprises.
For stakeholders at all levels, a demand for more transparency and accountability about a company’s ESG performance isn’t just a fad. It’s a real and increasingly important aspect of how organizations serve their markets today.
Given its complexity, ESG governance isn’t easily achieved. Typical difficulties in ESG reporting for large complex corporate entities include:
- Identifying metrics – establishing which metrics are material and will serve as most indicative of true progress toward achieving ESG goals and regulatory compliance
- Collecting and consolidating information – how to successfully and efficiently collect and consolidate data
- Data quality and accuracy – how to ensure data integrity is unquestioned
- Resource adequacy – how to make the best use of limited resources available to report, manage and monitor ESG performance
- Communications – how to establish the right communications strategy for engaging all stakeholders to show progress towards ESG commitments
While all of these are important areas, we’re narrowing our focus. Here’s a look at the challenges you may be experiencing on your ESG information collection and consolidation journey.
ESG Challenges in Collecting Information
Once an organization has identified metrics to be measured and reported, the focus shifts to gathering information. Depending on the metrics being measured and reported, ESG information is likely to come from multiple and disparate sources. These include internal departments, various locations, suppliers, and third-party data providers.
While important, collecting information is often time-consuming and resource-intensive. Even more so when information is not readily available or standardized. Let’s consider a typical series of events for an organization collecting ESG information:
- Identify the metric to be reported
- Identify the components of the metric – for example, value and units
- Identify if there are calculations, transformations, combinations, or conversions required
- Identify the location of the information – both from a geographical perspective (what parts of the business), and systems – and which systems contain components that contribute to a metric
- For the systems – identify accessibility to the systems
- For each source, determine the format of the data, and compare it to the metric to be reported
- While working through this process, always be considerate of data privacy matters.
In most large organizations, there’s a painful reality. All or part of this collection and transformation process is manual. And this is true even in the most progressive organizations. Solutions are just not fully automated.
Given the unique nature of every organization’s data management ecosystem, the right change would be significant. Automating the collection and consolidation of information in a traditional IT project structure would be a transformative project with a substantially positive impact on any business.
A matter of integrity
Ensuring the accuracy and completeness of the information collected can also be an obstacle. While not always the case, ESG data may be incomplete, outdated, or inconsistent across different sources. And where data integrity is questionable, inaccurate reporting and erosion of stakeholder trust often follow
Consider an organization trying to report Scope 2 GHG emissions for their 200 office and retail locations. They will need to:
- Gather information on power consumption from 200 locations
- Identify a system or multiple systems where the information may need to be taken from, for example, monthly utility bills
- Transform ESG information from the utility bills to make it useful to calculate estimated GHG emissions by running the power consumption through a GHG calculator (which will require different conversion factors depending on the location)
- Guarantee that all calculations at the 200 locations are in a consistent output format
- Verify that all information is current
As you can tell, our enterprise has the mammoth task of accessing 200 different sources of information monthly. It must perform 200 separate and potentially different calculations, and then validate, summarise, and prepare the data to be used further.
Automating this entire process would offer a level of efficiency, timeliness, and accuracy any business can benefit from. And of course, this would all be auditable.
Consolidating ESG Information
Having collected and transformed basic information into high-quality, consistently consumable data, it then needs to be consolidated into a single report. The difficulty of consolidating will depend on the quality of data available to be consolidated.
There is a very active market for ESG reporting software. Most platforms perform well when there is good data available for input. And therein lies the challenge with most platforms today: they tend to require pre-formatted data to be input, through API, uploads, or manual entry. There’s a strong reliance on the quality of the input to ensure effectiveness. Most platforms may also require some sort of signoff from the preparer or responsible party.
Solutions to Overcome the Challenges
Gartner’s Emerging Tech: Business Value Patterns for Sustainability and ESG Software report echoes the challenges of managing ESG data. It identified the complexity of data collection and reporting as the most common business challenge facing adopters of sustainability and ESG software solutions.
What should you consider as you try to find a feasible solution? There are several options, and here are three most business leaders explore:
Adopt a centralized data management system
This system can move data to a central source, standardize data from different sources and ensure consistency across the data. It can also help automate data collection and consolidation, reducing the time and resources required for ESG reporting.
While seemingly helpful, this kind of solution comes with three caveats. First, using it can be time-consuming. Second, it’s expensive. Third, your output is only as current as the oldest data upload.
Automate data collection and consolidation
This can include using artificial intelligence (AI) and machine learning (ML) to analyze and standardize data from different sources. It can also include using software tools to automate the collection and preparation and consolidation of ESG information.
The challenge: many moving parts. The complexity of your ecosystem can become an obstacle should anything break or stop working along the line.
Data from source: leverage r4apps
r4apps has the capability to access all the data, and virtually combine, transform, calculate, validate, and standardize data from different sources. Your data can then be passed to any other software such as a reporting tool. This solution has the benefit of being quick to implement, and scalable to changes in the business. And what was previously complex, manual, and resource intensive, becomes an automated and intelligent process that saves your business precious time.
Conclusion
Collecting and consolidating ESG information can be a significant challenge for large complex enterprises, but it needn’t be. While there’s a sea of solutions available today, paying attention to what your business needs to be able to achieve on its path to ESG excellence should never be compromised. Automating data collection and consolidation challenges can be overcome with the right technology, creating a world of opportunity for your organization to move faster and more efficiently.
Solve your most complex data collection and consolidation problems
Transform your IT space into a well-oiled and highly-efficient machine capable of so much more. Speak to us about automating your ESG data collection and consolidation processes for peak enterprise performance.
