We have reached a critical milestone in ESG data management and reporting, with expectations for the verification and assurance of ESG data approaching those of financial reporting. That’s why many organizations are taking steps to align existing ESG reporting processes and responsibilities with those of their financial reporting functions.
We’ve gathered input from finance functions responsible for ESG – Controllers, Internal Auditors, SEC Reporting and CFOs to name a few – across the Nasdaq Network to help you navigate a crowded market to identify your best long-term partner for ESG information:
1. Put the burden of tracking and staying on top of reporting changes on a vendor purpose-built for ESG
Unlike 10-K financial reporting, which has been standardized for years, the ESG and sustainability reporting landscape continues to evolve rapidly.
- Ensure your partner is committed to the long-term support, maintenance and update of evolving reporting frameworks and standards such as TCFD (Task Force on Climate-related Financial Disclosures), SASB (Sustainable Accounting Standards Board), ISSB (International Sustainability Standards Board) and European Union reporting requirements. With dozens of systems in widespread use today, it is neither easy nor practical for an internal ESG team to stay ahead of changes.
- Check that your partner will translate and supervise the impactful assessment and ranking questionnaires, including (but not limited to) MSCI, Sustainalytics and the Corporate Sustainability Assessment for potential inclusion in the Dow Jones Sustainability Indices.
- Find a partner that meets the needs of stakeholders in your organization. Effective ESG technology streamlines both financial reporting and sustainability, not one or the other. Selecting a platform that meets the needs of stakeholders in your organization – a platform with end-to-end capabilities for collecting, managing, auditing and disclosing ESG data – will drive effective adoption and deployment across the many teams contributing to ESG disclosures. Marketing, public affairs, corporate secretary and many other functions will additionally benefit from a centralized resource.
2. Prepare your disclosures for audits
Prepare for potential changes in regulatory requirements with technology capabilities today
- Create role and workflow functions that enable internal editing, review and approval, as well as facilitating both internal and external audit for data access and review.
- Requires activity logs with date/time stamps and uploaded references so auditors can seamlessly track your audit trail.
- Check that you benefit from an easy, year-on-year rollover of your data, making it easy to compare what has changed and reflect changes in reporting requirements.
3. Automate as much ESG and sustainability data collection and flow as possible
Bring as many data collection and certification processes as possible into a centralized system to reduce the risk of manual errors and ensure complete, accurate data is collected in a timely manner.
- Evaluate whether your partner can support the many locations where you report ESG information. ESG reporting in regulatory documents such as the 10-K is paramount, but your organization uses ESG data in RFP responses, marketing materials, communications, recruitment and questionnaires. Mitigate the risk of disparate data sets by finding a partner that focuses on the entire ESG landscape.
- As site-level data collection remains a key source of environmental ESG data, ensure your partner can extract source data, such as energy consumption, from utility bills via an API or bulk upload and translate it into emissions data ready for report.
- Prioritize a solution that can support both a data warehouse (subject to quality controls) to streamline your team’s efforts and also connect data requests so your team can quickly identify similarities between reports and ensure the consistency of your data and messages organization can guarantee. Be the hero to your subject matter experts by minimizing administrative work and duplication.
4. Have a dedicated customer support team of ESG experts for setup and ongoing account support
- Confirm that you can call your supplier directly for assistance on ESG-related topics, such as recent changes to reporting requirements and insight into upcoming reporting deadlines, and that industry knowledge is built into the platform. Ask for details on how often the team receives training and development on ESG trends and reporting frameworks.
- Request that the team of ESG experts leading your installation stay with you throughout your partnership. This ensures that the knowledge shared during the introductory phase of your implementation carries over into your ongoing use of the platform, and that your supplier truly understands and supports your unique business needs.
In summary, it is critical that companies begin implementing the same data integrity, audit and assurance capabilities for ESG reporting that they use for external financial reporting. However, Equally important to the similarities between the future of ESG and financial reporting are the key differences. ESG continues to evolve and requires a long-term commitment from solution providers to invest in the expertise and tools that help companies stay ahead. Don’t fall victim to the current “land grab” among technology providers looking for a piece of the ESG pie, but instead find your best partner to help you achieve your strategic ESG goals.