Challenges in ESG Reporting

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Sustainability Reporting – what challenges to expect

 

Sustainability Reporting is now common and we are seeing companies have progressed in their reporting maturity over a short period of time.

Generally, the purpose of Sustainability Reporting is to demonstrate performance as well as for companies to build reputation as a ‘Sustainable Company”.

Before companies get excited to be self-labeled as ‘Sustainable’, there is a key factor that companies need to govern and manage to ensure a Sustainability Report is able to meet its purpose and objective.

                                                

DATA

Data demonstrates performance. This is how companies can build reputation through transforming data and presenting it through success and aspiring stories. To derive this, it starts by establishing a robust data collection and management governance and procedure.  This can be a complicated and tedious process.

These includes the following:

·         Identify WHAT needs to be collected

·         Identify WHO to be involved in the process

·         Identify WHERE to obtain the information

·         Identify HOW to effectively collect and manage data from end to end

 

Ideally, the aim is to establish a robust and credible data management standard operating procedures (SOPs).

 

Identify WHAT needs to be collected

The data required to be reported would depend on the reporting framework or standards chosen as well as the outcome of the materiality assessment, but this may not be ideal in application as different metrics have different reporting boundaries, which represent the description of where an impact occurs arising from an organisation’s operational activities or relationships with other entities.  It is crucial for reporters to take the effort to understand the reporting boundary of any given issue. For instance, office building energy use, specifically energy consumption for heating and electricity can be either Scope 1 or Scope 2 GHG emissions depending on whether the energy used is provided that own company or purchased from an external provider or source. In the case of heating, there may be on-site combustion at own premises or offices or other facilities, in which case the emissions from fuel use for heating would belong under Scope 1 emissions. If, however heating is provided by an external provider then the emissions from the purchased heat would be reported under Scope 2.

               

Reporters should also consider the possibility that not all the data collected is necessary to be disclosed as it is. To take the same example as above on the GHG emission, regardless of whether the said emission is Scope 1 or Scope 2, the data is just considered as ‘activity data’ which would need to be further multiplied with the relevant emission factor for the purpose of reporting.

 

 Identify WHO to be involved in the process

Much of the data required for ESG reporting is likely already available within the organisation. However, since this data may not be part of a formal collection process, it is needed to identify the data managers responsible for it. Begin by interviewing those data managers who are likely to have some of the information needed for ESG reporting. When discussing data requirements, provide a clear overview of the expectations and alignment with regulatory requirements and reporting standards, as administrative staff may know other relevant data owners and can help identify additional data managers. This step is particularly crucial if organisation has multiple facilities, buildings and assets. The more complex the organisation is, the more data managers needed to be involved in the reporting process.

 

Identify WHERE to obtain the information

Once have identified all the data managers, it’s essential to map the business processes from which they gather the data. For certain data points, such as Social data from HR, the source will be clear. However, it’s important to document the location of all data sources to ensure consistency and continuity.

It's crucial to document all data sources to ensure that personnel changes don’t disrupt the continuity of ESG reporting. Disruptions caused by staff turnover in ESG reporting are a common issue for companies, often because data source documentation wasn't performed during the initial report creation. When the data manager familiar with the relevant data sources for a particular ESG issue leaves, reporting for that issue can come to a standstill.

 

Identify HOW to effectively collect and manage data from end to end

Documentation requires efforts and time, but it is worth and critical that you do this for each indicator to be reported:

• Is the data or information sourced from internal or external?
• Is the data sourced from single data point or to be consolidated from multiple business sources?

• Who is the current data manager or do they partially own data with other data managers?

 

By keeping an up-to-date document detailing how each indicator is reported, you can ensure the continuity of your reporting process. While this may seem like an obvious step, it's often overlooked by first-time reporters, as its importance becomes clear only when it’s time to prepare the next report a year later. When preparing your first report, always keep in mind that this will be an ongoing, annual process moving forward.

  

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