The demand for transparency in the way companies operate is stronger than ever. Investors and corporate stakeholders are increasingly aware of this positive trend. Companies that demonstrate strong ESG (environmental, social, and governance) performance are more attractive to savvy investors than those that don’t.
Maybe you’re familiar with the phrase: “What gets measured gets managed”. It holds true, and it’s particularly relevant to ESG reporting in 2023. What gets measured gets managed, and what gets managed can be improved.
Why Does ESG Reporting Matter?
By measuring and managing ESG issues, your company will be better positioned to reduce your ESG risk profile and improve your financial performance. Having access to accurate data that is reliably managed with an ESG reporting software will allow you to improve your reporting and make better decisions — thus improving financial performance and increasing your overall value in the market, and ultimately contribute positively to the environment and society.
Stakeholders are becoming increasingly aware of the fact that a company that properly manages and reports on ESG data and sustainability-related issues is more likely to succeed over the long term due to improved efficiency, cost savings, and a better corporate reputation. These factors influence investment decisions and are becoming more prevalent. According to the Harvard Law School on Corporate Governance, more than a quarter of investors said ESG was central to their investment approach in 2021, and those numbers continue to rise.
Environmental and Social Impact
As companies measure and manage their impact on the environment and society, they can see a path to reducing their negative impacts and reap the benefits of adopting responsible and regenerative practices through their entire chain of supply. This in turn creates value for the environment and society as a whole.
ESG and sustainability reporting deal with the disclosure of ESG data on a company’s performance in relation to its impact on environmental, social, and governance issues. The range of data that may be included in an ESG report is vast. It takes time, energy, and resources to collect and accurately analyze that data on a corporate scale. ESG reporting software makes it a more manageable task.
What is ESG Software?
ESG data management software helps you collect, analyze, and create reports on your ESG-related data. When done manually, it is a complex and time-consuming process with plenty of opportunities for error. An ESG or sustainability software automates and manages the process, which significantly reduces time spent producing ESG reports or filling out questionnaires and leaves less room for human error. ESG software enables you to work with large data sets and create reports in a fraction of the time it would take to do so manually.
While the types of data may vary , one of the benefits of using ESG data management software is that it can be customized to track various metrics based on the priorities and needs of the business.
Types of Data Analyzed
The following broadly-defined types of data can be collected using ESG software:
Environmental: energy and water use, greenhouse gas emissions, waste management, and other environmental impacts
Social: company diversity and inclusion, human rights, animal rights, community engagement, data related to the supply chain, and other social issues
Governance: ethics and transparency, risk management, corporate governance, and other governance issues
These data points are also analyzed in terms of their financial impact. Data can be assessed quantitatively using numerical data, and qualitatively using subjective data such as a brand’s reputation and relationship with its stakeholders and communities.
In the absence of regulation, many companies opt for a preexisting ESG framework to guide them in structuring their report and its contents. Companies may choose to use an industry or topic-specific standard alongside an internationally-recognized standard such as those of the Global Reporting Initiatives (GRI) or the Sustainability Accounting Standards Board (SASB) to shape their report.
Key Features of ESG Reporting Software
Key features of ESG Reporting Software include the following:
- Custom reporting
- Communication and collaboration with stakeholders and team members
- Integration with other systems
Let’s dive into the benefits of using ESG reporting software that includes these features.
Benefits of ESG Reporting Software
Efficiency and accuracy
ESG reporting software drastically reduces the amount of time and resources it takes to create an ESG report, thus allowing your team to spend their valuable time on other priorities.
Automating the collection and analysis of data greatly reduces room for human error. Data is collected in a single repository so you can build a secure system of record that is accurate, consistent, and up-to-date — and makes your data auditable. The reliable nature of the information provided by an ESG reporting software also makes for better decision-making and risk management processes.
Communication and transparency
ESG software makes it easier for an organization to communicate their performance levels and stay in control of their ESG narrative. Instead of relying on spreadsheets and legacy tools, you’re able to provide a clear, comprehensive, and sophisticated overview of how all the data works together in a visually appealing way.
When data is presented in a clear format, it’s easier to understand and to use to make decisions. It increases the confidence in your brand, and, because of the positive trend of stakeholders demanding transparency from companies, it also improves your reputation in the market.
The market continues to trend toward transparency. Companies that are straightforward in their efforts and honest in disclosing which areas their organization excels in, and which areas have room for improvement, send a signal to stakeholders that they are responsible in their business practices as they actively strive for positive change.
Better reporting capabilities
Better data collection naturally leads to better reporting. An ESG software allows you to create customized and standard-compliant sustainability reports to better understand key performance indicators at a glance. It enables you to manage and track internal data as well as external data, which makes it easy for you to see how your company performs in comparison to industry benchmarks and third-party data sources.
Charts and graphs bring your data to life in order to visualize how your organization is performing in different areas of ESG, determine which areas should be prioritized, and track and improve your performance over time.
Cost efficiency and increased revenue
The use of ESG reporting software can lead to improved cost efficiency and increased revenue in a number of ways.
Strong ESG performance can lead to a better reputation, and as a result, increased brand loyalty. Many consumers today will go out of their way to purchase from a company that’s known to make an effort to be socially and environmentally responsible. According to Dr. Andreas von der Gathen, co-CEO of Simon-Kucher, 50% of consumers rank sustainability as a top five value driver.
As the market continues to trend toward transparency, it’s best to get ESG reporting figured out sooner rather than later. Don’t wait around and risk damage to your brand due to a perceived lack of transparency on the part of your organization.
ESG reporting is also expected to play a key role in attracting and retaining top talent. 72% of the world’s workforce will be made up by Millennials and Gen Z by 2029. These generations are known to view environmental and social concerns as a higher priority than previous generations. Companies that fail to showcase high ESG performance risk alienating a large percentage of today’s top talent — which would lead to a loss of innovation, productivity, and revenue.
How to Choose an ESG Reporting Software
There are a number of factors you’ll want to keep in mind when deciding on which ESG reporting software to invest in for your organization.
The first step is to determine what your organization’s needs are and what metrics you would like to track. It should support all the major reporting standards.
Other factors to keep in mind include:
Data collection and management: Choose a software that is able to collect, analyze, and enable you to use your data. It’s important that your data is accurate, consistent, and auditable. It should also be stored in a secure repository to maintain its quality and integrity.
Collaboration: Collaboration, communication, and transparency allow your team to “speak the same language” and take control of your narrative when it comes to ESG, so you can build trust in your stakeholder relationships.
Reliable insights: ESG reporting software makes your data easy to analyze with analytics and dashboard capabilities. Choose a tool that can turn your data into a visual component such as a table or graph so you can see how your business is performing at a glance.
Reporting: A customized report builder will allow you to generate ESG reports that contain narrative to support and contextualize your quantitative performance data in compliance with the major standards such as SASB and GRI.
Customization: Be sure you’re able to track the specific ESG metrics that are relevant to the needs and priorities of your business.
Integration: Check that the software you’re considering is able to integrate with all the different software platforms that your business already uses. For example: will it integrate with your HR software?
Ease of use and support: The software should provide an intuitive interface and a good user experience. Choose a solution that provides dedicated customer support and a high-touch onboarding plan to ensure your team is set up for success.
Looking for ESG Software?
Managing and reporting on their relevant ESG issues is going from a “nice to have” to a “must have”. Consumers and investors expect organizations to integrate ESG into their strategies and have a clear ESG reporting system in place.
With an ESG data management software like Novisto, you can better collect your data and measure and track your performance, manage your issues, and enhance your communication with stakeholders. If you’re ready to create value out of your ESG data, Novisto can help. Request a demo today to learn more about what our ESG software can do for your company.