Data overload presents a real challenge to ESG reporting. But with the right practices, IT teams can streamline their collection processes and help ensure sustainability success.
In an age where data overload is the norm, efficient gathering and reporting of sustainability data is no easy task.
Yet organizational sustainability goals rest partly on IT's ability to effectively capture and report data, as well as use the right technology to make that happen. Understanding the best ways to simplify data complexity and find common ground is key.
Here are six essentials to know about sustainability and environmental, social and governance (ESG) reporting data.
1. Learn about sustainability reporting standards
The sustainability and ESG reporting landscape features a number of developing standards and regulations for organizations to follow. These include the European Union's Corporate Sustainability Reporting Directive and U.S. Securities and Exchange Commission climate-related risk disclosure rules.
Such standards are largely investor-focused, said Bjoern Stengel, global sustainability research and practice lead for the Sustainable Strategies and Technologies group at IDC. However, IT leaders should gain an understanding of them to better inform their sustainability and ESG-related decisions.
"It's useful to think about what these metrics are and the role that IT can play in terms of facilitating the data curation and reporting process," Stengel said. This applies to not just carbon emission reduction efforts, but also to social impact and governance efforts.
As ESG reporting demands increase, finding common threads will be critical.
"There is activity inside a lot of very large companies looking at [these regulations] and trying to decide: what are they actually asking us to do?" Stengel said.
Because of the sheer number of standards and regulations -- and the nuances of each -- there's a need to identify the common denominators, said Jim Hietala, vice president of sustainability and market development at The Open Group, a global consortium that focuses on developing technology standards and certifications, headquartered in San Francisco. Mapping out those commonalities helps organizations narrow down the reporting information they need to provide.
2. Don't underestimate data collection complexity
The key to decreasing a company's carbon footprint is information. IT leaders, therefore, are well-positioned to contribute to this effort as the guardians of company data. At the enterprise level, however, this is a complex task given the size, volume, and reach of national and global organizations. Understanding ESG data collection best practices is key.
"A really big challenge is that data is scattered across an organization," said Saskia Hassefras, managing consultant at EcoAct, a sustainability consultancy headquartered in Paris, France. (EcoAct was acquired by Schneider Electric in November 2023.)
In global organizations, data is often collected and stored locally -- and in some cases, manually, she said. There are also a lot of stakeholders involved in the generation and management of this information.
"When IT leaders need to collect that data, they first need to know where it is," Hassefras said.
3. Establish consistent data models for partners
Sustainability and IT leaders need to understand today's carbon footprint before they can reduce it. This requires standardized data models that companies can apply internally to capture relevant sustainability and ESG information.
"Come up with a consistent data model that works for not just your company, but your suppliers, your distribution channel partners, [and] all those companies that are part of your business," Hietala said. For example, the Open Group's Open Footprint Forum is meant to facilitate emissions-related data capture and management through a standardized model that addresses Scope 1, 2, and 3 carbon emissions.
Data model adoption can be a challenge, because this information needs to be sourced internally as well as throughout the supply chain, he said. Integration between ERP and ESG data management systems is also important for data capture. It's also necessary to work with stakeholders along the supply chain on data integrity. This includes establishing common definitions for the data that is being captured and consistent practices for gathering it.
"Getting on the same page within your ecosystem of companies you deal with has to happen," Hietala said.
4. Understand organizational ESG priorities
One big challenge that both IT and sustainability leaders face is determining which technology tools will enable them to succeed at gathering the ESG data that's most relevant to their specific organizations and industries.
Once you get the reporting right, that's not the end of it because then you probably still have to do something about your operations.
Bjoern Stengel, global sustainability research and practice lead, IDC
For example, companies in the financial services sector will have different carbon emissions-related concerns than those in oil and gas, Stengel said.
"There are significant differences in terms of ESG materiality and the topics that your organization should be focused on," he said. "There might be other ESG issues outside the environmental space that you should be paying the most attention to."
Some reporting applications -- which have enabled data visualization through dashboards -- are now offering features that let users extract data from external sources for Scope 3 emissions monitoring, Stengel said. Others are more focused on the "social" in ESG, and some help companies anticipate climate risks.
IT leaders can play a significant role in navigating through all these choices based on their companies' specific needs, Stengel said. Conducting an inventory of the software the organization is already using is a good place to start.
"[It's] figuring out what you have, and what you might need to add on top of that," Stengel said.
Reporting, however, is only one part of the equation.
Technology that operationalizes sustainability -- applications that provide data, often in real time -- can guide organizations through making the necessary operational improvements to increase performance, he said.
"Once you get the reporting right, that's not the end of it because then you probably still have to do something about your operations," Stengel said.
5. Seek tools that align financial and nonfinancial siloes
Many vendors prioritize the financial return on investment (ROI) that their technology offers while treating the sustainability-related benefits as an add-on, Stengel said. Others focus on the sustainability advantages their technology provides without also addressing how they contribute to ROI. For this reason, IT and sustainability leaders should seek out integrated tools that handle both effectively.
"We're moving in a direction where financial and nonfinancial reporting [are becoming] more integrated, where investors are asking about both sides and they're factoring both into their investment decisions," he said. "Getting a solution that has a positive impact on both sides is critical."
6. Engage all necessary stakeholders
Because GHG Protocol emissions reporting spans Scopes 1, 2, and 3, IT and sustainability leaders must work with a large group of stakeholders, both internal and external. This might include the following:
Customer service.
Distribution.
Finance.
HR.
Logistics.
Marketing.
Procurement.
Suppliers.
Supply chain management.
"Essentially, ESG is a business-wide practice nowadays, which means that everyone will have to be engaged in the process," said Luke Skillett, managing consultant at EcoAct.
Getting buy-in from these different players is a primary goal.
"The first obstacle is to engage everyone and have them [all agree] that this is important," Skillett said.
Carolyn Heinze is a Paris-based freelance writer. She covers several technology and business areas, including HR software and sustainability.
