Improving ESG data production for better company decision-making
An interesting new report from the UK Financial Reporting Council’s FRC Lab addresses how companies can collect and use environmental, social and governance (ESG) data to support better decision-making. It offers a number of recommendations and questions for boards to consider relating to three elements of ESG data production: motivation, method and meaning. These cover, for example, questions of what data companies need, whether the right systems and tools are in place, and how to embed data-centric decision-making.
For us at XBRL International this is a useful reminder that companies’ approach to ESG need not simply be geared to meeting a reporting obligation, but can nourish healthy outcomes for companies themselves – and that digital, connected processes for data collection, management and disclosure offer both efficiencies and synergies. Our thoughts are echoed by Josephine Jackson, Chair of the FRC ESG and Climate Group, who says: “High-quality data is critical to high-quality decision-making. Improving the systems and processes for the production of ESG data, as well as embedding a joined-up approach to data collection will result in better decision-useful information. In turn this will lead to more relevant and reliable disclosures for all users who rely on companies for clear reporting of ongoing performance and future prospects.”
At the same time, we were reminded of the relatively lax controls on ESG data in comparison to financial information – potentially increasing the risk of getting things wrong – by a recent US survey. It found that only 9% of companies have given finance departments primary responsibility for overseeing ESG reporting and tracking, and 44% report that ESG data is not housed and shared using a secure platform.