The cost of using spreadsheets to calculate ESG ratings

By | 3 minute read | June 18, 2020

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Each year, business sustainability teams embark on a months-long process to collect and report their Environmental, Social and Governance (ESG) data. Many organizations run their annual carbon accounting and ESG ratings calculation process with spreadsheets, which leads to enhanced risk and productivity loss—especially for complex, global organizations that report to multiple frameworks.

Here are the risks you run when using spreadsheets for ESG ratings calculations, and how software can help.

ESG ratings data is stranded in silos across the business

The metrics that are required to calculate ESG ratings must be captured and consolidated from different sources, such as your utility bills (which are often managed by finance), or meter data agents, smart meters and proprietary equipment hardware and software systems (often managed by operations and engineering teams), making them difficult to access. Sustainability software can automate data collection directly from energy retailers, from your equipment (interval meters, sensors and solar PV systems) and from building management systems and building automation systems, helping save time and removing silo barriers.

Manual calculations are time and labor intensive

After you track down your underlying ESG data, you need to manually calculate emission data based on different emissions factors, reporting boundaries and calculation methods, along with metric conversions across regions.

Sustainability software can maintain an emission factor engine for nationally-recognized carbon emission factor data tables such as the Australian National Greenhouse Accounts, DEFRA (UK), US EPA (Climate Leaders), e-GRID USA, IEA National Electricity Factors, NZ Ministry for the Environment and IPCC. In addition, sustainability software can derive emission calculations rooted in internationally accepted standards.

Sustainability reporting platforms like Envizi support multi-country, multi-currency and multi-metric reporting, allow data capture in local units of measure and currencies, and have the ability to convert to standard units.

Risk of inaccurate, incomplete ESG ratings data

Producing financial grade reports for ESG ratings requires auditability at every step in the process, from collection at the source through to the production of reports. Data captured manually increases the likelihood of incomplete data due to manual errors. Sustainability software can ensure that all data captured is linked back to the original transaction, including a robust audit trail for any changes subsequently made to that data.

Difficulty managing boundaries

Baseline emissions need to be recalculated when structural changes occur in the organization that change the inventory boundary (such as acquisitions or divestments). Sustainability software can help users set and refine their organizational hierarchy and create reporting groups to simplify the process for recalculating baselines.

Increased risk of ESG ratings data loss

With spreadsheets, your team can run into problems supporting multiple users concurrently. Version control becomes an issue and can lead to data loss and errors. Files that are not stored and backed up to the cloud regularly also can result in data loss. Finally, there can be multiple copies of the same data files, which creates a risk of users accessing the wrong version.

With sustainability reporting software, all users can access and view their data concurrently, and all changes are tracked back to source and backed up regularly.

Ongoing sustainability performance is poorly understood

Data should be regularly updated to allow comparisons across reporting periods so that organizations can benchmark their performance against their targets. With static spreadsheets it is challenging to monitor and manage your sustainability performance on an ongoing basis. Sustainability reporting software with target tracking capability can enable ongoing performance management.

Poor adaptability year-on-year

Even if you’ve got your ESG rating process under control this year, how poised is your team to adapt as each ESG framework updates? Using a specialist ESG software provider can shortcut the process of addressing new requirements, such as new market-based calculation methods for Scope 2 emissions. Sustainability software providers are often made aware of upcoming changes to reporting mandates and process in advance of the general public, and therefore can embed subject matter expertise into their software.