Companies are facing the data challenges of sustainability

No shortage of ink has been spilled about the increase in sustainability reporting requirements looming for companies. Between the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD) and new global sustainability standards developed by the International Financial Reporting Standards (IFRS) International Sustainability Standards Board (ISSB), companies must disclose more information than ever about the impact of both their activities and, in some cases, that of their supply chains, on the environment, social issues and governance practices. However, one detail that is often overlooked in these discussions is the enormous data challenge associated with these new reporting requirements.

For example, under the CSRD, companies will have to report according to the European Sustainability Reporting Standards (ESRS). These standards, developed by the European Financial Reporting Advisory Group (EFRAG), provide a detailed taxonomy for exactly how information should be digitally tagged and shared so that it can be universally accessible and interoperable for all companies, government agencies and other interested parties. stakeholders, who may need to access it. To this end, the legislation also requires that the data be made available through the European Single Access Point (ESAP) to facilitate access to publicly available information relevant to financial services, capital markets and sustainability.

Ready for the data flood

The end result of all this will be a massive increase in the amount of data being reported and cataloged on everything from carbon emissions to perceived human rights risks in global supply chains. For the CSRD alone, companies will report data on climate change, pollution, water and marine resources, resource use and impacts on the circular economy, impacts on biodiversity and various aspects of worker safety and human rights. It’s a staggering amount of information that will pose challenges for businesses, both in terms of accessing the necessary data and organizing and tagging it appropriately to meet reporting standards. Not to mention the task of interpreting and making sense of all that data once the fire hoses open!

In fact, I recently attended a conference session in which a panelist predicted that in three years, the amount of sustainability data on the market could be five times greater than the entire universe of financial data currently available.

This raises a number of questions for the companies that need to start collecting, organizing and tagging their sustainability data, and for all investors, analysts, watchdogs and consultants who want to gain meaningful insights from it, about how they will manage the sustainable data. flood of new information. Fortunately, the European approach, anchored in a standard reporting taxonomy using XBRL, will make the process somewhat comparable. In the US, the Securities Exchange Commission’s (SEC) Climate Related Disclosure Standards, which are currently on hold, also takes a similar approach. However, it is still unclear how other reporting requirements and approaches will vary from jurisdiction to jurisdiction.

Spotlight on data management

Accordingly, data management and the ability to accurately capture real-time information from all aspects of a global operation and its supplier and supplier networks have become a key focus for sustainability and regulatory compliance teams.

This same pattern plays out at every level of the company. Companies need to be able to know with pinpoint accuracy exactly what is happening at every point in their global supply chain, from raw material sourcing to transportation and manufacturing, and they must be able to capture the associated data in near real time. To survive in this environment, companies of all sizes must be able to not only collect and analyze data from across the organization, but also manage the data collection process to ensure they get a complete, unbiased, and accurate view of the entire landscape.

As we continue on this path toward increasingly granular sustainability reporting requirements, we expect data quality and volume to become the top priority for C-suites everywhere. Fortunately, the evolution of these new demands coincides with a golden age of innovation in data analytics and cloud-based tools for housing and deploying that data. The challenge now is finding ways to leverage that innovation to provide the answers companies need to stay competitive in this new era of increased data transparency regarding sustainability disclosure requirements.

Back To Top