How can you know how sustainable you are if you do not have data?
How to measure sustainability if you do not have data?
Not many companies have a sufficient understanding of the different types of data they need to collect to fulfil disclosure requirements.
By 2025, many European companies will be obliged to include in their annual financial reports disclosures on their sustainability, revealing information on their impact on the environment, society and approach to governance (see The European Commission’s proposal for a Corporate Sustainability Reporting Directive). However, as of right now, not many companies have a sufficient understanding of the different types of data they need to collect to fulfil disclosure requirements. And only a handful of companies are aware that most required data cannot be retrieved from their current bookkeeping systems alone.
When hearing about ESG data, people often associate them with information about a company's CO2 emissions, consumption of energy and how many trees the company has planted to offset their contributions to climate change. However, the datasets needed for a meaningful ESG report demonstrating the real impact of the company and highlights of place for improvement are much more complex. The complexity usually comes from the need to transform concepts such as employee well-being into measurable and comparable data points. To help companies, various international disclosure standards (such as GRI, for example) provide methodologies for potential disclosures.
However, these data points are not only helpful when looking back on the accomplished tasks and past performance. Even more important, they are suitable for setting new sustainability goals for the company and tracking their progress, ideally regularly throughout the year. Of course, data gathering on this scale requires much human effort to keep it up to date. Luckily, some technical solutions already allow us to do it almost automatically, and sometimes the easiest solution is a typical dashboard many companies already use for tracking their business targets and KPIs. ESG data is no different in this regard.
To create an ESG dashboard, a company needs to clearly understand and define what kinds of data they need for their ESG report, and that depends on a materiality assessment. So, first, understand what is essential for you and define data sources for getting needed information. Only then may professionals create a dashboard from many different data points that usually are located in different systems across the IT universe of the company.
This takes time! But in order to be prepared for upcoming reporting requirements, the best time to start is now.
Ieva Kustova, Head of ESG & Sustainability, KPMG in Latvia
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