With the imminent arrival of mandatory ESG reporting such as California’s SB-253, Europe’s CSRD and USA’s proposed SEC rule, it’s clear that corporates need to do their research when selecting the building blocks for their ESG data and management ecosystems.
Organizations are navigating a swathe of vendor platforms from Carbon Reporting, ESG Management and ESG Reporting, to big tech firms bolting on Sustainability or ESG offerings, together with numerous consulting firms offering their approach to shaping the new technology landscape required inside the business.
It takes time for an organization to launch an RFI, assess the layout of the market and move through the various RFP stages, then implement the selected approach. All this against the backdrop of fast approaching deadlines. That’s a lot of market activity in a storm of new products, new AI capability and refocused consulting services.
What impresses us is the care with which we are seeing these RFPs tackle a huge range of needs. They are not only looking at immediate needs for reporting but also at what’s needed to improve performance on the most material issues for the company. This can cover a range of risk-specific functionality, e.g. carbon, climate, cyber or ethics.
Need for a clear data strategy
But despite the breadth of these material needs, the common denominator across all of them is the need to access the right data. Typically, 40% of total requirements on RFPs boil down to accessing, validating, transforming, integrating, and mirroring data from verified sources. Only when the data strategy is clear can the subject matter expert workflow take over to execute the ESG strategy, engage the right business users and meet reporting deadlines.
Looking at the detail of these RFPs reveals some key learnings.
- The organizations that make their data management needs explicit in RFPs are thinking not only about reporting but also about performance management and improvement, e.g. more real time access to energy usage, supply chain risk assessment data exchange, more activity-based than spend-based Scope 3 figures.
- ESG teams are aware of their data gaps and blind spots. Many companies already have GRC, EHS or Carbon Accounting systems in place but they rely on manual data entry. ESG leaders know they need to integrate them better, both with each other and with other business systems, e.g. pulling ES&G data from multiple systems into their Corporate Reporting platform or integrating contractor/supply chain data into carbon and EHS tools.
- There is too much reliance on manual processing of ESG. New ESG controller requirements are driven by the need to digitize and automate the identification of ESG data sources with robust audit trails; that show with integrity where the business has touched the data, who made changes, supporting documentation and other internal controls.
- Data accuracy, completeness and ease of verification are a concern for ESG teams who now need to manage and report on a huge number of new data points, e.g. for CSRD reporting. Being able to trust the data and view its level of readiness at different stages on the journey to disclosure is a must.
- ESG controllers are already using their preferred disclosure platform of choice, so the ability to map data from source through management system all the way to Disclosure Reporting system is becoming vital to align new ESG processes with existing financial assurance processes.
Organizations that focus on their data strategy first are setting themselves up well for future ESG needs and ultimately to perform against their challenging ESG goals. Those that understand that ESG is a data challenge first and foremost, get the complexity and know they need the right approach to bring it all together, whatever their IT and vendor landscape currently looks like.
