As sustainability becomes a mainstream consideration in the private and public sectors, companies are under rising pressure to disclose data on their sustainability risks and opportunities.
But disclosing and reporting on sustainability factors is enormously time- and data-intensive, and can quickly consume a large portion of a sustainability team’s resources.
For companies committed to reporting accurately and frequently on their sustainability measures, a sustainability data management and reporting platform is an essential investment. Sophisticated software can handle end-to-end data collection and analysis, and provide valuable insights.
(For the purpose of this article, the terms ‘ESG’ and ‘sustainability’ are used interchangeably.)
Why is sustainability reporting important?
Sophisticated sustainability data management and reporting software can lead to more efficient processes, allowing ESG teams to respond to multiple reporting demands and meet the information needs of internal and external stakeholders. These efficiencies also reduce reporting costs, improve disclosure reliability, improve compliance management, and add value to the ESG process.
Beyond mandatory disclosure requirements, there are many reasons for companies to invest in ESG and sustainability reporting.
Responsible investment
Investors need quality data to integrate ESG considerations into their investment decisions as responsible investing is on the rise. There are now more than 5,020 signatories to the Principles for Responsible Investment (PRI), a UN-backed, international network of investors committed to seeking appropriate ESG disclosures from entities in which they invest, and integrating those ESG factors in their investment process. The PRI signatories represent assets under management (AUM) worth USD121 trillion.
Responsible procurement
In 2021, more than 13,000 companies reported to the CDP (Carbon Disclosure Project), a non-profit organization that facilitates environmental impact disclosure from companies and cities. Frequently, companies respond to the CDP at the request of their business customers; 2020 saw a 24% increase in large-scale purchasers asking their suppliers to report environmental data through CDP compared to 2019, and 2020-2021 saw approximately a 50% increase in the total number of suppliers requested to disclose through CDP.
Responsible consumption
According to NielsenIQ, 82% of Canadian households cited sustainability as an important factor in their purchasing habits. The report also stated that consumers are more aware than ever of greenwashing practices.
Responsible employment
Employees are becoming more selective about the companies they choose to work for. According to an IBM study, 68% of job candidates are more likely to accept a job offer from an environmentally sustainable company.
Why use sustainability data management and reporting software?
There are many reasons why companies can find it difficult to report on and implement their ESG strategies, including:
- Complex data gathering: Collecting and processing data from relevant departments and suppliers is a time-consuming manual process. According to a 2020 interview by Novisto, the vast majority of companies are unsatisfied with their current process for collecting data.
- Multiple reporting frameworks and requests: Surveyed companies responded that they receive 10-15 different reporting requests per year. With more than 600 ESG reporting schemes around the world, companies are finding it difficult to stay on top of expanding and changing requirements.
- Data quality and assurance challenges: According to KPMG, 49% of institutional investors indicate that consistent data quality is one of the biggest challenges when integrating ESG factors into the investment process.
- Inability to assess ESG risks and opportunities: In the last seven years, more than $600 billion of S&P 500 company market capitalization was lost to ESG controversies (such as environmental impact, labor rights, and corporate governance scandals), according to Bank of America. Risk management is a key part of ESG initiatives.
This information disconnect can erode investors’ trust. According to PwC, only about one-third of investors are satisfied with the quality of existing reports; the majority believe that most sustainability reports are not reliable, relevant, and complete enough to use as a basis for decision-making.
Ineffective and inefficient management of ESG information becomes a bigger problem as regulations intensify. These regulations will subject more companies to mandatory disclosures across specific standards, as well as compulsory audits. Without centralized sustainability data management and reporting software, companies run the risk of overwhelming ESG teams and putting themselves at risk of inaccurate or incomplete disclosure.
Top 3 features to look for in sustainability data management and reporting software
The current complex process of ESG reporting demands a holistic data management solution that serves as an ERP (enterprise resource planning) and SOR (system of record) for sustainability. When ESG teams harness the power of a software system that can integrate all the necessary steps to collect, analyze, and report data, staying on top of sustainability reporting and regulatory compliance becomes far easier.
A focus on good data management practices
Sophisticated sustainability data management and reporting platforms should offer the following features and functionalities:
- Data that is aligned to the standards and frameworks needed to report to consumers, investors, business partners, and regulators
- Up-to-date, contextualized guidance for evolving sustainability reporting practices, regulations, and standards
- Automated data collection linked to a centralized system of records
- Data collection that follows the best practices for quality assurance and audit
- A System of Record (SOR) for quantitative and qualitative data with supporting references and documentation
- Outbound APIs (application programming interface) connected to third-party data providers
- Streamlined reporting through workflow automation, role assignments, and status monitoring
Streamlined reporting processes for stronger narratives
By using a centralized repository, workflows can be automated to consistently respond to all kinds of sustainability reporting requests, and surveys. A customized report builder allows for structuring internal or external reports using data in alignment with major standards such as GRI and SASB, resulting in relevant and compliant narratives that connect sustainability and financial performance. Output can include internal and external reports, RFPs (requests for proposals), and third-party questionnaires.
Dashboards and analytics
A sustainability data management platform makes it easy to analyze data, then extract and present ESG insights. Once information is entered into the system, it can be processed into customized and comprehensive business intelligence dashboards with visualization engines that include tables and benchmarks. Benchmarking allows for detailed comparison among related companies and advanced gap analysis.
Looking for sustainability management software?
Whether you’re just getting started on your sustainability journey, or you’re working from spreadsheets and legacy tools and looking for more sophisticated sustainability data management and reporting, Novisto can help you conquer your data and reporting challenges.To learn more about what our ESG data management and reporting software can do for your organization, request a demo today.
