Climbing the Summit to Environmental Social Governance Reporting

4 min read

Underpin sustainability goals with a robust Environmental Social Governance (ESG) data foundation.

With pressures now mounting from consumers, regulators and investors, sustainability is no longer aspirational. It’s a business imperative for organizations to achieve industry leadership. There’s no stepping around the issue or doing things halfway. It’s time to commit to reducing greenhouse gas and improving Environmental Social Governance (ESG) indicators.

The journey to sustainability can be quite a mountain to climb, fraught with a multitude of stumbling blocks to navigate. Companies need to bring together thousands or even tens of thousands of data sources to get their ESG reporting into shape.

Without the tools to do accurate reporting, many companies are left working with collecting ESG data in spreadsheets with no auditability. Reconciling data from multiple sources — such as audit trails, manual captures and third parties — is a task that by some estimates can take up to six months.

When data is often fragmented and difficult to gather, analyze and report upon, what are leading organizations doing right? At Think Broadcast 2022, learn how to put your sustainability strategy into action. Visit the Think Broadcast site to tune in.

Growing hotter: Investors, ESG reporting and regulations

There’s an urgency to adopt tangible sustainability practices. Amidst the ticking time bomb on climate collapse, the survival of the planet is challenging corporations, governments and citizens to take swifter action.

But more so is stakeholder pressure. Institutional investors are increasingly looking at climate risk and Environmental Social Governance (ESG) credentials as measurements for determining the companies in which they will invest. Those institutional investors use ESG reporting frameworks to compare and benchmark companies to make investment decisions. One such framework, CDP, saw a 35% increase in companies disclosing climate risk data in 2021 over 2020.

Companies looking to satisfy investors’ reliance on ESG disclosures will be faced with new expectations on ensuring quality, consistent reporting. The U.S. Securities and Exchange Commission’s recently established Climate Task Force is now set to monitor for ESG reporting violations. There are new regulations in play, too. In the EU, the Sustainable Finance Disclosure Regulation (SFDR) came into effect in March 2021, and in the U.S., similar proposed legislation is on the horizon.

As these demands and requirements surface, how do you succeed in your ESG reporting when the data is historically fragmented and difficult to gather, held in disparate systems and not subject to the same rigor as financial data?

Getting a handle on your ESG data

Envizi, which was acquired by IBM in January of 2022, is seeing an uptick in interest from organizations looking to close the Environmental Social Governance (ESG) gap in their software portfolio. Its solution automates how companies bring together the multitude of data types and supports major sustainability reporting frameworks.

As Envizi’s CEO David Solsky points out, his company’s solution addresses the first need companies encounter when they start disclosing — establishing a robust data foundation. That’s because data challenges are pervasive and will continue to mount as companies progress to decarbonizing, he explains. Data needs to be integrated into a structure that makes it easy and less time-consuming to report.

There are four parts to building a data foundation:

  1. Fully understanding the range of available data and how to source the data you need.
  2. Organizing the data or identifying issues around data governance and quality so that it’s transparent, trusted and secure.
  3. Ensuring there’s an automated process to guarantee data is stored and accessed properly.
  4. Employing reporting tools that enable data to be exported in a variety of formats to suit all stakeholder requirements.

Once you disclose your ESG data, do you have the confidence you’re doing it right? Imagine confronting not just various sources of data, but other additional challenges that come at each step in the journey to decarbonization (e.g., streamlining internal and external reporting, wrangling audit trails and identifying cost-effective opportunities).

Organizations must engage all the teams that need to buy into the process of reducing its carbon footprint and improving ESG performance. Between streamlining ESG reporting, rallying teams to serve up the right data and accelerating decarbonization, it’s a mountain to climb.

“To do this without a good data foundation and without the right tools, you'll have a lot of people doing a lot of things that they don't enjoy doing,” said Solsky.

Companies need a single system of record (or single system of truth) for ESG data that captures and manages data in a robust way. Data needs trace-to-source capability, and it must be audit-ready just as financial data is. These are the kind of outcomes Envizi delivers.

Worth the effort: Leaders can celebrate their success and reap the rewards

One Envizi customer in the financial services industry that embarked on its journey a decade ago is now one of the global leaders in Environmental Social Governance (ESG) reporting. With net zero targets set for 2030, this organization embraced a decarbonization toolset to keep itself on track. Using automated pathways of data that convert into a standard dashboard, Envizi captured all GHG emissions data from multiple sources and distributed stakeholders. Assisting with the group’s ongoing carbon reduction targets led to a 48.5% reduction in their carbon footprint to date.

Envizi — plus IBM’s broader AI-powered software — helps companies operationalize and scale their sustainability efforts. It automates the feedback generated between their corporate sustainability and ESG initiatives and the operational endpoints used in daily business operations. IBM is uniquely positioned to support sustainability transformations with IBM Garage, an end-to-end model for accelerating sustainability at scale. This feature of IBM Consulting helps enterprises deliver on the promise of becoming a more sustainable enterprise by refining and focusing ideas and quantifying the value of initiatives on measures of business and sustainability.

Achieving good ESG credentials can enhance your brand’s purpose, boost investor and consumer confidence and help avoid fines or other regulatory measures in the future. With an end goal firmly established, companies can now put systems and tools in place to know where they are along the path and see how to travel toward their targets most effectively by making the best use of their existing data.

It’s a journey that’s worth the effort.

Finding a smarter way to navigate your sustainability journey is a major topic at IBM Think this year. Learn how to attend from anywhere in the world by visiting our site.

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