Expert Insights for ESG Reporting Success

Environmental, Social, and Governance (ESG) reporting is a hot topic. Organizations are rising to meet the challenge, due in part to increased board level scrutiny, but also because of heightened regulatory attention on environmental stewardship and social responsibility metrics. In fact, a recent survey by PwC found that 70% of companies intend to start complying with upcoming U.S. Securities and Exchange Commission (SEC) regulations requiring public companies to report climate related-risks and emissions data – regardless of when it becomes final.

At the Trust ’23 Data Integrity Summit, Precisely Chief Revenue Officer Patrick McCarthy hosted a panel discussion aiming to demystify ESG reporting and provide guidance on how to harness trusted data for meaningful sustainability outcomes. Mikkel Skougaard, Director of ESG Reporting at Verisk Maplecroft, a leading global risk intelligence and consultancy firm, specializing in sustainability, resilience, and ESG, kicked off the discussion by framing the topic around the shift from voluntary reporting to regulatory obligations. Many organizations are seizing the opportunity to align their data management practices in support of full parity between financial reporting and the non-financial metrics embodied by the latest ESG standards.

“The notion that non-financial data should be subject to different treatment than financial data is changing fast,” he said. “Many of the companies we work with are asking themselves ‘if non-financial matters are financially material, then why should non-financial data be treated any differently than financial data?”

Forward-looking companies recognize this reality and are preparing new ways to approach reporting processes, allocating more resources to ensure non-financial reporting is subject to the same conditions as financial reporting. “Companies are increasingly understanding that they must take measures to ensure that they have robust data governance embedded, that the correct approvals, controls, and IT systems are in place, and that they have the right levels of resource and seniority of staff available.”

A second opportunity revolves around the fact that ESG reporting increases a firm’s focus on its entire value chain. With greater visibility both upstream and downstream in the value chain, decision-makers can gain a better understanding of how to create value and manage risk effectively.

Finally, there is a large opportunity associated with improved reporting. Compliance with regulations and internal mandates pushes companies to better align their data management and ESG reporting processes, which in turn improves the overall quality and trustworthiness of the organization’s reporting moving forwards.

The Global ESG Reporting Challenge

Currently, there is no single global mandatory standard for ESG reporting. Different jurisdictions are determining varying requirements while some global stardards are evolving in parallel, with the aim that governing bodies throughout the world will eventually align around a more common approach.

Matthew Rusk, Head of North America for Global Reporting Initiative (GRI), an independent standard-setter that provides the world’s most widely adopted sustainability reporting standards used by over 11,000 organizations globally, explains: “It’s really important that we have that global common language and latency across these different jurisdictions to be useful in making good business decisions because reporting is a means to an end. There is a lot of business benefit when an organization goes through the process of stakeholder engagement, and of collecting more data and insights about the organization’s impact on the world.”

The global challenge is to aggregate thorough and rigorous principles, metrics, and protocols that stand up to due diligence in such a way that they can serve a wide array of stakeholder groups, including regulatory bodies and policymakers. It requires a common language that creates consistency and allows for internal controls and assurance processes to establish the trustworthiness of the data upon which ESG reports are based.

Data Integrity is Critical for Effective Sustainability Reporting

Today, virtually every jurisdiction around the world is developing its own body of reporting practices. Complying with such a wide array of reporting standards is a big ask. The development of global standards is very important.

As the process moves forward, companies must also grapple with the accuracy, consistency, and context of the internal data they use in their ESG reporting. To be successful, companies must clearly understand where their ESG data came from, including its lineage. They must know how each performance indicator is calculated and understand the factors that influence metrics across various standards and different industries.

Matthew Rusk warns that if companies choose to go their own way with ESG by creating their own standards and mechanisms to drive the process, they will undoubtedly end up with a series of metrics and reports that have little context with respect to what everyone else is doing.

ESG Reporting: Advice from the Experts

So, what are the key steps that organizations should be taking for effective ESG reporting processes? For Verisk Maplecroft’s Skougaard a good place to start is to ensure that non-financial data is treated the same way as financial data. He explains, “No-one expects you to go from ‘zero to hero’, but I recommend that clients try to adapt the approach so that the same governance systems are put in place, and processes like data collection are automated in the same way.”

Secondly, it’s critical to ensure that ESG reporting is being powered by accurate, consistent, and contextual data, as well as being supported with the right expertise. He further explains, “Developing a data-driven ESG report is the most important factor, but this needs to be supported with high-quality contextual narrative in order to unlock maximum value.”

Rusk’s advice is to get started right away in laying the foundation for effective ESG reporting. “This has already become business-as-usual for many organizations,” he argues. “61% of the US Fortune 500 produced some kind of report and approximately 67% of the global Fortune 500. ESG reporting is already happening; it’s being driven today by elevated stakeholder expectations.” Those who start now, he argues, will be better positioned to drive value from the process, gaining deeper insights into all aspects of their business and its corresponding value chain.

Rusk points out that ESG reporting is “a journey of a thousand steps,” but that most organizations are already taking many of the necessary measures such as data collection with respect to legal, environmental, health, and safety concerns.

Getting Started with ESG Reporting

Accurate, effective, compliant ESG reporting starts with trustworthy data. At Precisely, we work with companies around the world to establish and maintain data integrity – the cornerstone of trustworthy reporting and insights.

To learn more about the benefits of a proactive ESG reporting strategy, download our free eBook, Unlocking Real Business Value from ESG and see how data integrity helps companies realize the full business potential of ESG through better data and reporting.