Companies, particularly public-listed firms, are increasingly expected to meet relevant reporting and disclosure requirements. Subject to greater public scrutiny of key environmental, social and governance (ESG) metrics from various stakeholders, particularly from investors and potential partners, many companies now need to provide detailed information about how they are managing their natural, social and human capital, as well as information beyond what is traditionally collected, including on their carbon footprints, business conduct and labour practices.
Collecting, measuring and reporting these non-financial data, however, can be difficult. ESG reporting has evolved quickly over a short period of time, with data quality becoming a key focus, and new criteria, comparable to those for financial data, are emerging. Existing international guidelines, such as the International Sustainability Standards Board (ISSB) of the IFRS Foundation, the Sustainability Account Standards Board, and the Global Reporting Initiative, to name a few, are being consolidated on an ongoing basis.
At the same time, different frameworks are emerging to distinguish between climate, nature and carbon reporting, such as the Taskforce of Nature-Related Disclosures, the Climate Disclosure Standards Board and the Carbon Disclosure Project. ESG reporting remains a complicated and moving landscape for companies to navigate. Employees engaged in the collection, validation and management of ESG-related metrics need to be communicated to and assured of effective controls that can enhance the usability and clarity of such data.
Companies may face the following challenges:
- Not knowing where to start and what data to report first
- Lack of resources to collect the needed data
- Communicating clear reporting guidelines to business units
To ease this complex process, organisations may turn to technology to strengthen their analytics capabilities.
“Globally, the sustainability technology landscape is at a nascent phase, but it is fast evolving,” said Arina Kok, Malaysia climate change and sustainability services leader and partner at global accounting firm Ernst & Young (EY). The key is to find the right technologies to invest in, as companies transform their business models, she said.
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29 August 2022