The key to ESG reporting is hidden in the software

The key to solving the ESG challenge often lies in the right software, but the market can be overwhelming for companies taking the first step on the journey. Here are three tried and tested tips to get you started.

The upcoming requirements for ESG reporting are getting closer, and when the financial statements for 2024 are due, the financial statements must reflect the important requirements for ESG (Environment, Social, Government). New legislation from the EU is being implemented nationally and will make it more comprehensive to produce a correct financial statement that fairly documents the company's sustainability efforts. The list of software providers that can assist in data collection is long and it can be difficult to navigate the market. Many companies risk hitting a brick wall in their search for the right setup. Michael Birkebæk Jensen is responsible for sustainability in KPMG Denmark and works with a number of large clients in this area. If you ask him, it is crucial to have the right software to achieve the reporting goals. Companies are in a place right now where it's challenging to just figure out where to start. Businesses in Denmark are used to reporting, so it's basically about getting an overview and finding the right solution for the individual company.

Together with his team, Michael Birkebæk Jensen advises on just that. He sees three basic steps that should always be taken, when companies tackle the upcoming ESG reporting. "Make it as simple as possible and cut the task to the right size. Is the task just about reporting, or is it also about the fact that we want to follow our development within sustainability in general," says Michael Birkebæk Jensen.

He continues: "Secondly, it is important to get an overview of the existing platforms in the company. It is very easy to make things more complicated than they need to be if you have too many different software vendors in-house. With a bit of luck, this part has already been mapped out and all we need to do is select the right programs."

It is therefore important to identify where the company has deficiencies in relation to its own data basis and whether new software needs to be purchased. Often companies already have well-functioning software that can be used as a data foundation, and it's just a matter of using it correctly. There are often many hidden resources, says Michael Birkebæk Jensen.

Companies must be able to trust that the software they purchase does the job. Finding the right solution takes time and money. "It's important to look at the limits of the solution and decide if this is something you can actually benefit from using. In addition, you have to look at whether it's something you want to use. It's not always the same thing. At the same time, you must also realise that the ESG reporting that companies must adhere to in the future is not a static entity. The requirements will evolve dynamically as legislation changes,” adds Michael Birkebæk Jensen.

This place demands on the IT reality that the company must operate in, and therefore, in his view, it is important to involve the IT department when the choice is made. They are important for the final implementation. Finally, the company must consider factors such as price and delivery reliability, as well as ensuring access to data if e.g. the supplier goes bankrupt or is outsourced.

Almost all companies in Denmark are subject to ESG reporting. Either directly or indirectly as a subcontractor. Therefore, it's important to prepare for the upcoming reality and invest in the right tools. Software and technology must be seen as a catalyst for the green transition and not just as a parking lot for collected data.

“It's about creating a baseline for the company's CO2 footprint and using it as a starting point for further work across production and processes. In this way, we can determine which measures are needed for the company to become greener and at the same time anchor them in the business strategy. This is probably one of the most important things," says Michael Birkebæk Jensen.

In Michael Birkebæk Jensen's department, the focus is on how to technology can be used to solve the challenges of the sustainability agenda. Reporting in different contexts is something most companies are used to, but one of the new things in the ESG context is that data collection and subsequent reporting must now be followed up with action and initiatives to keep the company on track and on target with sustainability initiatives.

It requires system support, and as a business, you can easily get stuck in choosing the right one. This is where our skills and experience come into play on the advisory side, without having to hire the whole of KPMG. We often act as a catalyst to get the company up and running, partly because legislation must be complied with and partly because the sustainability agenda is increasingly becoming a competitive parameter all the way down the value chain," concludes Michael Birkebæk Jensen.