How to improve your ESG reporting?
ESG (environmental, social, and governance) reporting is a requirement for many publicly traded companies. But it can be challenging to track all the relevant data and compile it in a way that’s meaningful and digestible.
That’s where custom ESG reporting software comes in. This type of solution will assist your company track and report on its ESG data in a more efficient and accurate manner.
In this post, we will discuss the benefits of ESG reporting solutions and suggest how to choose the right provider for your needs.
Why is ESG reporting important?
Modern investors and customers are taking note of companies’ environmental, social, and governance policies as they demonstrate the brand’s mission, social attitude, and environmental anxiety. According to a Global investor survey, 79% of investors consider ESG an important factor when making an investment decision. Also, 49% of investors indicate they would refuse to invest in businesses that don’t implement sufficient ESG practices.
Additionally, ESG reporting has already become mandatory, or will become mandatory in the near future, in the majority of developed countries of the world.
From April 2022, the UK has required large enterprises in the banking, insurance, and trade sectors to provide TCFD (Task Force on Climate-Related Financial Disclosures) reports. .
In Canada, financial institutions will have to report climate-related financial risks starting in 2024.
In the USA, it is expected that large companies will report on environmental effects by the fiscal year 2023.
Understanding the importance of ESG reporting, companies want to create and display it in the proper form. However, many businesses are still struggling with how to produce accurate and useful ESG reports and what reporting standards to follow.
That’s where custom ESG reporting software can come in handy. Applications like this can help companies to streamline their reporting process, making it faster and easier to compile data and identify trends. In addition, such software can also help companies to better understand their ESG performance and identify areas for improvement.
Best ESG reporting frameworks
There are currently no strict requirements to report ESG data for investors or the government. Organizations are free to choose the format that is most convenient for them. On the one hand, this is useful, because no inconsistencies may arise. On the other hand, it’s confusing, because companies are not sure what information to display.
To help companies make correct ESG reports, world organizations have created different ESG disclosure frameworks. The better options are listed below:
GRI (Global Reporting Initiative)
Developed by a team of experts from the UN Global Compact, GRI is designed to help organizations measure and report their environmental, social, and governance performance.
GRI covers a wide range of topics, from climate change to human rights, and it’s been used by organizations all over the world. Plus, it’s constantly being updated to reflect the latest best practices in ESG reporting for enterprises.
SASB (Sustainability Accounting Standards Board)
SASB was founded in 2011 as a public-private partnership by a group of CEOs, investors and environmental leaders. Their goal was to develop and promote standards for sustainability reporting that would be useful for both public and private companies.
SASB framework is unique in that it doesn’t rely on one-size-fits-all metrics. Instead, it allows companies to tailor their reporting to their specific industry and sector. This makes SASB especially useful for businesses with complex supply chains or products that span multiple industries.
TSFD (Task Force on Climate-related Financial Disclosures)
TSFD was created by the Financial Stability Board, an international group of regulators and financial institutions, in order to help companies disclose their climate-related risks.
If you’re looking to make your company more sustainable, the TCFD is a good place to start. It provides clear and concise guidance on how to report your climate data, and it’s been endorsed by over 700 organizations including banks, insurers, and asset managers.
CDP (Carbon Disclosure Project)
The CDP is a reporting ESG framework that focuses on climate change and the environment. It covers areas such as emissions, energy, water, and waste.
One of the great things about the CDP is that it’s global in scope. This means that it can be used by companies all around the world to track their environmental performance.
If you’re looking for ESG reporting requirements that focus specifically on climate change and the environment, then the CDP is a good option to consider.
DJSI World (Dow Jones Sustainability World Index)
DJSI World is a member of the DJSI family of indices evaluating the sustainability performance of trading companies. It’s a comprehensive framework that covers all aspects of ESG tracking, data management, and reporting.
DJSI World has become a benchmark for the world’s largest investors who look to adhere to a socially conscious investment strategy. With this in mind, many organizations struggle to comply with DJSI World scoring to attract bigger investments for faster business development.
Custom ESG reporting software development
ESG reporting is becoming increasingly important for organizations of all sizes. However, many companies find that the off-the-shelf ESG platforms aren’t quite right for their needs. Developing custom ESG reporting software may be the perfect solution in this case.
Define what kind of data you want to track
The first step in developing custom ESG reporting software is to define what kind of data you want to track. This could be anything from greenhouse gas emissions to water use to community engagement. Below you can see an example of the data that should be included in the modern ESG report.
Decide on the structure of your report
There are two main ways to structure an ESG report: hierarchical and matrix. Hierarchical reports list data in a top-down manner, with the most important information at the top. This type of report is best for organizations with a simple structure. Matrix reports, on the other hand, list data in a grid format, with columns representing different data sets and rows representing different entities. This type of report is best for complex organizations with multiple subsidiaries or entities.
Consult with domain experts
Now that you have a better understanding of what should be in your environmental, social, and governance report, it’s time to find a software development team to help you generate it. At this stage, you will need to decide on the features of your software, IT infrastructure, and third-party integrations.
At Erbis, we usually implement enterprise ESG solutions in the cloud. In most cases, we choose AWS as it offers a variety of tools, affordable prices, and secure technologies.
As for the ESG software features, the three basics are data gathering, processing, and reporting. Given this, it is essential to make your software extract information from different sources, such as:
- carbon and environmental accounting assets
- supply chain documents
- energy resources
- utility invoices
- stakeholder surveys
- social progress declarations
- HR reports
Further, the ESG software must analyze the obtained data and arrange it in a convenient visual format. Here, ESG developers may suggest you use AI/ML mechanisms to enable faster data processing and more valuable insights.
How can technology help improve ESG reporting?
There is no one-size-fits-all solution when it comes to improving ESG reporting. However, technology can help streamline the process and make it more efficient.
Some of the ways that technology can help include:
- automating data collection and analysis
- generating custom reports specific to your company’s needs
- facilitating collaboration between teams
If you’re considering automating ESG reporting tasks, it’s important to partner with a reputable vendor that understands your needs and can provide custom software that meets your specific requirements.