Global regulators have begun to enforce disclosure requirements and scrutinize environmental, social, and governance data and claims. The impetus for these changes: the institutional acknowledgment that these data points are material and that more complete, comparable, and useful data must be made readily available for investors and key stakeholders. As companies of all shapes and sizes catch on to these changes, they are spending precious time and resources — not always effectively — trying to figure out how they can build future-proof ESG data processes.
At Caesar, this has led us to adopt the mantra that yesterday’s processes won’t work tomorrow. Similar to the unprecedented threats posed by climate change, we are on the verge of one of the most significant shifts in market regulations since the establishment of the SEC.
The proof is right there in front of us, in where companies are allocating their resources.
Deloitte recently surveyed 300 executives at public companies and found that 99% of respondents were planning to invest in ESG data and reporting tools. The takeaway definitive: old, manual ways of building and managing ESG programs — yesterday’s processes of tracking data in spreadsheets, storing correspondences in emails, and playing it fast and loose with claims in reports — are not suitable for the next evolution of ESG. To move into a future that is heavily regulated and scrutinized, companies will need to rethink how they build their ESG data programs, from the ground up. That means evaluating or re-evaluating the tools ESG teams are equipped with to meet the demands of formal, mandatory regulation.
Today, the ESG disclosure process begins with identifying material issues and topics, then deciding which of the many standards to adhere to, collecting that data, creating a narrative, and finally publishing a report - a slightly simplified characterization of a complex business unit. For most companies, this process is highly manual in nature — we think that’s a big reason why so many companies underperform against their stated goals.
To build a robust, future-proof, ESG platform, companies need to integrate technology into their existing programs to boost transparency and oversight, ensure standards compliance, enable timely audits, maintain institutional knowledge, and ensure prudent controls are in place.
The lack of trust in today’s ESG data is the most glaring hole in today’s ecosystem. Companies can improve the quality of their ESG data through the digitization of their collection process, enabling radical transparency into how the data is collected, calculated, substantiated, and approved. This is a critical aspect of corporate disclosures and a sorely missed piece of today’s ESG ecosystem.
The next step in providing transparency and oversight into the collection process is the ability to quickly audit the data. Building on the same principles, companies are going to be required to have 3rd party verification of their disclosures and statements. Previously a heavy burden when processed manually, having all of your information, the paper trail, and backup documentation stored in one location to simplify the entire audit review process.
We are heading towards a more rigorously enforced adherence to standards. Where companies could get by in the past by loosely adhering to frameworks and standards, regulators are pointing towards TCFD, ISSB, CDP, and GRI as ways that companies must disclose their ESG data. This bridge from voluntary to mandatory requires companies to ensure they are in full compliance with these standards. Having a digital infrastructure that is already in adherence can provide a heightened level of compliance out of the box.
Companies inevitably lose critical information and knowledge when they start a process from scratch every year. By maintaining an internal system of record for your ESG data, companies can easily replicate historical work and reduce the opportunity for misstatements or re-calculations due to turnover or changes in responsibilities.
Corporate ESG reporting is transitioning from a check-the-box exercise to becoming more akin to financial reporting. This means better checks and balances to ensure anomalies are properly identified and addressed to either catch errors or identify outliers to better understand performance.
Lastly, the beauty of a digital transformation strategy for corporate ESG programs is not only minimized risk for companies and a more efficient market for investors. Digitizing ESG program management can produce almost instantaneous savings, eliminating the wasted time and money previously spent on manual and resource-intensive processes. Collecting data through a few clicks allows your employees to act on insights, rather than constantly chasing data and barely meeting deadlines.
At Caesar - our software platform digitizes corporate ESG data management programs, saving precious time and energy throughout the data collection process while unlocking all the benefits of a purpose-built ESG solution. The practices enabled by Caesar don’t serve to only minimize regulatory and reputational risk; they also consistently yield the decision-useful data needed to advance corporate performance.