Can robust sustainability reporting sprout from better use of technology?

For your ESG ambitions to make a global impact, technology and data must play a central role in all aspects of ESG reporting.

In brief:

• Consumers and investors are increasingly demanding transparent and data-backed ESG reporting from businesses.
• The use of ESG data and technology is imperative to improving the accuracy and transparency of ESG operations and performance.
• Business leaders must research and prioritize technology implementation to strengthen their ESG agenda.
  

The story of how ESG and its importance grew in the business world is quite interesting. What began simply as a way to assess an organization’s sustainability operations is now a competitive differentiator and a force that is steering business strategy. Businesses are striving to implement and report on their ESG initiatives in line with consumer and investor demands, and changing regulations.

The data conundrum: why are organizations slow to leverage the benefits of data in ESG reporting?

Unfortunately, many organizations with strong sustainability ambitions do not possess a centralized ability to collect, analyze or report ESG data. With reporting requirements constantly increasing, a huge volume of data needs to be collected and reported across an organization. After data collection, comes the daunting task of combining datasets from different business functions into something that can be interpreted, analyzed and reported on.

Given the diversity and depth of the data involved in measuring ESG, it is often extremely time-consuming to locate all the data required for analysis disclosure. This is one contributing factor to the lack of frequency observed when it comes to sustainability reporting.

Many organizations tend to release a comprehensive sustainability disclosure annually, often due to the difficulty involved in gathering the data required for one. Here, it is key to remember that the inclusion of the right data and insights makes the difference between an impactful report and one that’s simply extensive.

The urgent need to move beyond spreadsheets

Historically, spreadsheets have been the go-to resource when it comes to collecting and analyzing all ESG-related data. While this is still a viable option for small-scale sustainability strategies, this is no longer a potential approach for larger organizations invested in sustainability.

As data grows more diverse, housing them in spreadsheets can become difficult. And there will come a point when a spreadsheet tool can no longer handle the volume of data you need to report as part of your sustainability and ESG strategy. 

This highlights the need to adopt better technology that can support your growing sustainability agenda. The technology that makes the collection and analysis of ESG data possible should be capable of dynamically handling growing bytes of information, offering rich functionalities that make collaboration easy and presenting possibilities to generate visually engaging dashboards rife with reports and graphs. 

To summarize, the following are the significant challenges business leaders face in making progress on data-backed ESG reporting:

• Not knowing where to start
• Challenges in collecting data metrics
• Lack of clear reporting guidelines
• Time spent on collecting and incorporating the data

If these foundational data problems are not solved, organizations cannot have an accurate understanding of their ESG metrics or deploy analytics to enhance operational performance.

So where to begin? Relying on technology to strengthen analytics capabilities and the ability to accurately report on them with solid data is a great start for easing this complex process.

Key trends accelerating ESG data requirements

High-quality data is the key to helping organizations meet their regulatory burden, increase transparency and accountability, and dispel concerns about incorporating sustainability into the fabric of their organizations and making informed ESG investment decisions. Following are a few trends that are accelerating this need:

• Rapidly evolving regulatory landscape: Due to changes in ESG compliance and government regulations, the required ESG data capabilities are rapidly evolving.
• Massive investment: Due to increased interest in sustainability from investors, businesses are extensively investing in enabling their technological capabilities to collect data from suppliers.
• Challenging operational landscape: Organizations are facing challenges in gathering data from various stakeholders due to a lack of robust systems that can collect and process data.
• Technology innovation: The multi-faceted nature of new, circular business models requires the innovative application of technology in gathering data from data sources.

The need for increased, data-driven focus on Scope 3 emissions

The transformation path for organizations looking to lead in sustainability will ideally be about significantly decarbonizing existing products and services (phasing out or replacing products that perform poorly from a sustainability perspective) while innovating new sustainable products and services.

In line with this, many Nordic companies have committed to ambitious decarbonization targets across Scope 1, 2 and 3 emissions. However, according to a recent EY Survey, Nordic companies have not focused enough on scope 3 emissions yet. This is concerning as Scope 3 is where a majority of the emissions belong, for many companies.

Understanding carbon baselines and committing to decarbonization targets equally across all scopes is essential to build the needed strategies and roadmaps. To succeed with this, organizations must gear their operating models toward a new business logic where data and technology will play a crucial role. This also represents an opportunity for organizations to disrupt their industries, achieving first-mover advantages and influencing regulators.

12 key benefits that data-enabled ESG reporting can unlock

You’ve got great net positive ambitions that align with your business vision and consumer expectations. But why stop there? The correct use of technology and data analytics can give your ESG agenda a winning edge.

An ESG technology platform can help businesses formalize sustainability targets, plan and execute action plans and track progress with key metrics over time. It can also help demonstrate transparency and accountability to the public and regulators by supplying the right data promptly (through annual reports, websites, press releases, etc.). 

The following are 12 key benefits of adopting a “digital-first” focus for your ESG agenda:

1. Cope with uncertainty:
   The data and technology solutions can equip sustainability strategy professionals in optimizing strategic choices and trade-offs.
2. Better foresight:
   Leading with digital helps deploy solutions that scan, sense, and interpret the external environment. This acts as an “early warning” system, helping you act more quickly and decisively than the competition. 
3. Greater agility:
   Data offers the visibility needed to identify opportunities where sustainability can provide a competitive advantage, helping act on those opportunities with confidence and speed. 
4. Reduce subjectivity and guesswork:
   When reliant on technology, strategic decisions and choices are—to a greater extent—guided and optimized using data and scientific methods. 
5. Leverage the upside of disruption:
   Transformative alliances and innovation are technology-driven catalysts for change and can trigger continuous re-evaluation of strategic choices. This ultimately drives the right outcomes for businesses, society and the planet. 
6. Transition quicker, cheaper, better:
   Deliver sustainability ambitions and targets across the entire value chain more quickly and effectively. 
7. Enhance stakeholder experience:
   Incorporating technology enables systems that sense, predict, learn, engage, converse and navigate stakeholders on their sustainability journey. 
8. Empower decision-making:
   With data, businesses can move away from subjectiveness and closer to data-driven decision-making—optimizing sustainability outcomes and impact. 
9. Improve insights in little time:
   Streamlined collection of data ensures informed and timely ESG decision-making. 
10. Derive high-quality controls:
    Data and digital-enabled benchmarks and comparison of governance and operations across business units result in high-quality controls. 
11. Enjoy robust data analysis:
    Efficient and effective data collection and consolidation, and visually engaging representation of collected data can be enabled by technology. 
12. Cost reduction and increased revenues:
    Financial results aligned to ESG metrics and underpinned by large-scale ESG industry risk assessments give an uptick to revenue. 

How can EY teams help?

Organizations face greater complexity and urgency to transition to sustainability. The world is asking for change.​ And business holds the harness to that change, alongside government and society.

The EY organization is committed to helping businesses create value for sustainability as well as helping sustainability create value for the business.​ We call this value-led sustainability. a way of protecting and creating new sources of value – for business, people, society and the world. 

With the collective experience of having worked with organizations in the forestry space, EY teams have rapidly scaled up their technology, data, alliance and innovation offering within their ESG services. These offerings are central to ensuring that the technology and data value propositions become integral to the way organizations think and talk about their sustainability targets.

The deep knowledge that EY teams hold within ESG technology and data, supported by a connected innovation model and a strong ecosystem of alliance partners are key in assisting EY clients in their strategic drive towards a digitally enabled transition to sustainability.

The EY approach to sustainability reporting can be summarized in four steps:

1. Reframe strategy:
   Create a sustainable data-backed strategy that delivers long-term value for shareholders and wider stakeholders, understands risks, and identifies opportunities for competitive advantage to help organizations create and protect value.
2. Accelerate transition:
   Deliver ESG ambitions and targets, execute change projects across the value chain and deliver the underlying business case (in line with financial and sustainability metrics).
3. Govern and operate:
   Embed sustainability governance to deliver effective digitally enabled operations as part of ongoing business operations.
4. Build trust:
   Develop trust with key stakeholders by assuring the impact of sustainability ambitions and initiatives. Use ESG data to meet the demands of regulators, investors and other key stakeholders.