The Challenges of Corporate Sustainability Reporting
The Challenges of Corporate Sustainability Reporting
Corporate sustainability reporting has become a mandatory prerequisite for companies to have success in the society we live in today. With over 450 of the largest 500 publicly traded companies in the world issuing sustainability reports, and over $20 trillion committed in socially responsible investing practices, companies are recognizing the need to track, manage, and disclose corporate sustainability now more than ever.
While the practice of sustainability reporting is growing in popularity, the current processes for producing, validating, managing, and reporting sustainability data are inefficient and present companies with unnecessary challenges.
Current Reporting and Rating Frameworks
One of the main culprits of the complexity of corporate sustainability reporting is the myriad of reporting frameworks and surveys that exist. For a company to be considered to have a strong corporate sustainability reporting practice, it needs to disclose to four to five frameworks and dozens of surveys.
The key frameworks include, CDP (formerly the Carbon Disclosure Project), the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the Task-Force on Carbon-Related Financial Disclosures (TCFD).
Investors want to see companies disclose along these frameworks with more regularity. BlackRock, for example, has been one of the strongest advocates for increased sustainability disclosures, and began voting against board members and management teams this year through proxy votes at companies that are not disclosing to and making progress on SASB and TCFD related disclosures.
Reporting in accordance to these frameworks is only part of the disclosure process. Companies also receive requests from investors and other stakeholders to respond to surveys. The results of these surveys either feed into sustainability ratings or publicly traded indices.
The list of surveys continues to grow, too. The majority of fortune 500 companies disclose along at least four out of the five frameworks above and most of the surveys, leading to a large number of data points to track, manage, and disclose.
The proliferation of disclosure frameworks and surveys has led to a number of challenges faced within corporate sustainability teams. The most salient pain points are centered on the manual collection of sustainability data, the overlap of frameworks and the resultant fatigue, and the need audit or validate data information. Currently, sustainability teams manage internal databases largely in excel files or google docs, a process that requires individuals to manually manage and keep track of hundreds of data points. But it is much more than just the hard data, companies need to track explanations, back-up files, who provided the data, and who provided sign off. Using these spreadsheet tools to collect sustainability data is simply a task they are not optimized for, and leads to intensified inefficiencies felt across the organization.
Processes to collect and manage the data that goes into a sustainability report or survey response are typically manual in nature. Most companies use excel to create an internal repository of all metrics that they use to track and collect information. This process by definition from the beginning as someone on an internal sustainability team has to carefully transpose hundreds of questions into excel just to start the process. Once started, the workflow to collect data with excel spreadsheets has inherent manual inefficiencies as the sustainability team members have to manually update and keep tabs on all of the broad array of sustainability responses simultaneously to ensure that information is collected on time.
Framework Overlap and Fatigue
With all of the frameworks and surveys mentioned above, companies are often asked similar questions multiple times across the different frameworks and surveys. This repetition results in inefficient re-creation of work that is unnecessary and driven by competing frameworks. To make matters more complicated, it is difficult to confirm that answers to one set of questions are consistent to responses previously submitted elsewhere because of the lack of simple access to sustainability information based on how it is stored. These repeated tasks and the sheer quantity of metrics needed to collect result in fatigue to all parties involved. The added fatigue and frustration only serves to make the process more painful and inefficient, slowing down the needed production of sustainability data and inhibiting the ability to manage it. This frustration is largely the result of a lack of internal infrastructure to sort and categorize sustainability data sets by topic and type of response to streamline and simplify the data collection and management.
Largely due to the manual nature of data collection as described above, a substantial difficulty in sustainability reporting is in validating the data collected. A growing number of companies that disclose sustainability data are seeking external validation, in the form of an assurance or light audit for their reports. This process can be quite painful or impossible given the lack of line of sight into data ownership and review through traditional methods of collecting data. Most companies have a multiple reviewer sign off policy that is difficult to implement when the data sets are collected over emails and embedded into shared excel files. While the state of regulation for sustainability reporting is still a ways away in the US, the demand for external assurance is high for sustainability data. Without a strong audit trail for data sets, it is difficult to even take that first step of assurance.
There are reasons to be optimistic that the complexities of the frameworks will be reduced: the leading frameworks recently came together and committed to working together to find a unified reporting standard. However, the unfortunate reality is that more reporting frameworks are continuing to sprout into existence. The Big Four accounting firms, for example, recently released their own customized framework on how to disclose sustainability information in public filings. The potential convergence of sustainability frameworks is a step in the right direction, however, for the foreseeable future there will still be a plethora of sustainability frameworks and surveys to actively manage. Unfortunately, that leaves a number of pressing challenges that cause internal pain points for companies.
Corporate sustainability teams need tools and resources at their fingertips to institutionalize the sustainability data collection process.
This is what Caesar Sustainability is building, a product to:
- Automate the unnecessary manual complexities that lead to the inefficiencies describe above
- Define novel workflow processes that produce timely data sets that are defensible, trusted, and useful
- Produce and store sustainability with ease to drive actionable strategy in real time
Find out more: www.caesarsustainability.com