Embracing technology to simplify ESG compliance
In an era where corporate sustainability is not merely a buzzword but a business imperative, new reporting directives from the European Union (EU) pose significant challenges for companies aiming to maintain robust Environmental, Social, and Governance (ESG) compliance.
The EU’s Corporate Sustainability Reporting Directive (CSRD) promotes transparency and accountability in the corporate world, but its implementation poses significant hurdles for companies of all sizes.
Simplifying ESG compliance was the focus of a panel discussion at Sustainability Europe 2024, held recently in London and featuring speakers from Thomson Reuters and SAP, a leading provider of enterprise software for business operations. To ease CSRD reporting for ESG compliance, panellists stressed the importance of utilising integrations. The discussion centred around the challenges of CSRD reporting, the evolving role of CFOs, and the transformative power of technology in simplifying ESG compliance.
Leaders say by automating data collection, analysis, and presentation, companies can reduce manual effort, minimise errors, and enhance transparency. Advanced data management systems, data visualisation tools, and artificial intelligence (AI) can streamline the reporting process, providing a unified platform for stakeholders to access accurate and reliable ESG data to comply with the European Sustainability Reporting Standards (ESRS).
“Collaboration is absolutely critical. Whether you’re in scope for ESRS requirements now, or you’re somewhere down the line in the 2028 range, the reality is all of us need to work together to accomplish this,” said Sawyer Knight, Director of ESG strategy and market insights at Thomson Reuters. “We found that both U.S. companies and global companies are having to prepare for this now.”
Highlights:
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Jump to ↓
| What are the challenges of CSRD reporting and ESG compliance? |
| The growing role of CFOs in sustainability reporting |
| Streamlining ESG reporting processes and disclosure |
| The future of ESG compliance includes processes and efficiency |
What are the challenges of CSRD reporting and ESG compliance?
The complexity of CSRD reporting should not be underestimated, as it demands significant resources and specialised expertise. Ensuring compliance with the directive is just the starting point; companies must also focus on maintaining data accuracy and granularity, a task that requires meticulous attention to detail. The time-consuming nature of this process can strain even the most well-resourced organisations, making it a significant hurdle in the path to transparent and effective ESG compliance.
Adding to the complexity is the current lack of clear and consistent guidance on CSRD reporting, which will eventually include non-EU companies with significant EU operations. Companies are often left to interpret broad guidelines, leading to inconsistencies and confusion. This ambiguity can result in varied approaches to reporting, making it difficult to achieve uniformity and comparability across different organisations. The absence of standardised practices not only complicates the reporting process, but also undermines the overall credibility of sustainability reporting.
The growing role of CFOs in sustainability reporting
The landscape of corporate sustainability reporting is undergoing a rapid transformation, redefining the role of the Chief Financial Officer (CFO) in substantial ways. With the growing focus on ESG standards, CFOs are increasingly tasked with ensuring the accuracy and transparency of ESG data. This shift goes beyond simple regulatory compliance; it involves fostering trust and accountability among stakeholders who demand clear visibility into a company’s ESG practices.
CFOs now stand at the helm of sustainability initiatives, playing a pivotal role in aligning ESG strategies with overall business objectives. They are responsible for integrating ESG factors into financial reporting, which requires a deep understanding of both financial and non-financial metrics. This dual expertise enables CFOs to provide a holistic view of a company’s performance, facilitating more informed decision-making and strategic planning. Moreover, CFOs must collaborate closely with key stakeholders, including the board of directors, to ensure that sustainability goals are set, met, and effectively communicated.
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Streamlining ESG reporting processes and disclosure
The CSRD complexity underscores the critical need for corporations to leverage advanced technology to streamline ESG reporting processes, ensuring accuracy and efficiency while alleviating the compliance burden.
The intricate process of ESG compliance can be significantly optimised through the strategic use of technology. By leveraging advanced tools, companies can automate the collection, calculation, and presentation of ESG data, thereby reducing manual effort and minimising potential errors. Advanced data management systems are key to ensuring ESG data is accessible and easy to analyse, allowing for more efficient and accurate reporting.
Standardised reporting frameworks and templates are essential for maintaining consistency and comparability across different reports. These frameworks provide a unified structure that ensures all relevant data is captured and presented in a coherent manner, reducing the risk of omissions or discrepancies. Additionally, data visualisation tools can transform complex ESG data into clear, user-friendly formats that are easily understood by stakeholders. These tools not only enhance transparency, but also facilitate better decision-making and stakeholder engagement.
An ERP-centric, cloud-based, and AI-enabled strategy, as outlined by Adriana Andreea Ursu, Global Sustainability Principal at SAP, offers numerous advantages for CSRD reporting. This approach centralises data management, ensuring that all relevant information is consolidated in one place.
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Adriana Andreea Ursu
Global Sustainability Principal at SAP
The panel highlighted the emerging role of AI and cloud-based solutions in sustainability reporting.
Knight, of Thomson Reuters, emphasised the importance of AI in data analysis and anomaly detection. “AI is going to be key. We found that in some of our research, risk professionals expected it to save them around 7 1/2 hours a week,” he said. However, he also stressed the need for transparency and ethical considerations in AI applications. “The critical piece with AI is that it has to be transparent and also needs to be ethical,” Knight said.
Overall, the integration of technology into CSRD reporting processes can simplify and optimise the various stages involved. By automating tasks, ensuring data consistency, and leveraging advanced analytics, companies can achieve more efficient and effective ESG compliance. This not only meets regulatory requirements but also demonstrates a commitment to sustainability and transparency.
The future of ESG compliance includes processes and efficiency
To simplify the complexities of CSRD reporting, companies must harness the power of technology, panellists said.
The path ahead for ESG compliance is paved with advancements in efficiency and process optimisation, propelled by innovative technology and the evolution of integrations between ERP providers and reporting solutions.
The future of ESG compliance transcends mere regulatory adherence; it involves harnessing technology to drive efficiency, precision, and strategic value. As ESG reporting becomes more intertwined with financial reporting and gains significance in investment decisions, companies that adopt advanced tools and processes will be better positioned to flourish in a sustainable and ethical business environment.
As organisations navigate the evolving landscape of sustainability reporting, they must consider compliance, data accuracy, and the adoption of AI and cloud-based solutions. CFOs and other stakeholders must be involved and work together to make sustainability reporting effective.
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