Shifting Sustainability Reporting from Burden to Benefit
Frank Christensen
Senior Business Consultant
ESG, (Environment, Social, Governance) reporting has progressed from being a non-essential nice-to-have to a necessity, driven by increased interest and demand from investors, customers, consumers along with enhanced legislation and greater granularity in reporting standards. In the rapidly evolving business landscape, sustainability reporting, governed by regulations such as the CSRD/ESRS, is often viewed as a daunting obligation. But the matter should be viewed more positively as the increase in ESG requirement holds untapped potential, not just to comply, but to elevate your business operations and strategic goals. Let us explore how rethinking our approach to sustainability reporting can transform perceived burdens into substantial benefits.
Understanding the Regulatory Demand
The scope of sustainability reporting is expanding. With the European standards for sustainability reporting (ESRS), there are 1,177 data points across 10+2 standards. What is to be reported for each organisation is derived out of the dual materiality analysis. With the introduction of ESRS more companies are now required to report on a broader range of data points, including greenhouse gas emissions coming from the value chain to workforce aspects. Initially, this might seem overwhelming.
Smaller companies, with less than 500 employees, not mandated to report 2024 according to current legislation, will still get increased demands from their customers to report on CO2 emissions and social workforce. These smaller companies will also be mandated to start reporting from the fiscal year 2025. So, time should be invested wisely, and preparation should start as of today.
The Challenges
For many, the increased demands in sustainability reporting come off as an additional burden—an added layer of complexity and workload in the already strenuous task of managing a business. Data might be scattered across various systems, from supplier questionnaires to ERP software, to numerous manual spreadsheets, often with older data and of dubious quality.
The process can seem like nothing more than an annual scramble to compile a large document that checks a regulatory box.
Reframing the Narrative:
From Compliance to Strategic Advantage
- Rethink the purpose
Instead of viewing ESG reporting as a statutory task, businesses can leverage this as an opportunity to scrutinise and refine their operations. It is a chance to ask fundamental questions:
How can this data not only meet regulatory requirements but also enhance our business strategy and operations?
Can we do things differently that will lower the sustainability impact and risks?
How can it help us understand our impact on the community and build better relationships with stakeholders, including employees, customers, and shareholders?
Remember that the regulations are there for a reason. By measuring the sustainability impact, it will be possible to benchmark businesses and for each business it will be obvious where there is a potential for change and innovative thinking.
- Building a robust data platform
Data gathering and integration is key. By weaving together required data from various sources—such as ESG platforms, enterprise resource planning (ERP), supply chain management (SCM), customer relationship management (CRM), suppliers, open data sources and more—a coherent data ecosystem can be established. This robust integration ensures that data is not only centralised but also enables definition and use of well-defined KPIs and automated processes that ensure reliability and less manual work.
- Leveraging technology for insights
With the foundation of a solid data platform, it is time to make use of the data, gather insights, set goals, and follow trends carefully. Such solution is to gain knowledge from the data.
The next step is to employ advanced technologies like artificial intelligence (AI) to mine real insights. AI can analyse vast amounts of data to identify patterns, trends, and opportunities for improvement that might not be visible to the human eye. This capability enables companies to not just report on sustainability but to actively improve their practices—reducing costs, enhancing efficiency, and driving innovation.
The benefits are clear
The benefits of rethinking and investing in enhanced sustainability reporting are plentiful. Companies and organisations can achieve greater operational efficiency by identifying inefficiencies and areas for improvement. They can enhance their reputation by demonstrating commitment to sustainable practices, which is increasingly valued by internal and external stakeholders. Moreover, the process of continuous improvement in sustainability practices can lead to innovation and increased value for stakeholders.
Conclusion
As sustainability reporting requirements grow, businesses have a choice: view it as a burden or embrace it as an opportunity for growth and improvement. By investing in the right technologies and approaches, the data gathered can become a goldmine of insights, driving better business decisions, and fostering a sustainable future. Thus, sustainability reporting is not just about compliance—it is about taking a step forward towards a more resilient and innovative business model.
Shift your business forward
Are you ready to take full advantage of your sustainability reporting and shift the process to an advantage?