Moving on from spreadsheets: the transformation of ESG reporting processes
We found food for thought in a recent survey of US public companies by EY and the Financial Education & Research Foundation on ‘How finance professionals are helping to advance ESG reporting.’ It suggests that the process of collecting, collating and analysing environmental, social and governance (ESG) data remains highly manual.
In response to the question of where ESG information currently resides, asked to select all that apply, 60% of companies said they use a variety of software applications addressing particular ESG topics, while 55% use Excel spreadsheets. Only a very small percentage of companies use ESG-specific or financial reporting solutions. Asked about the level of automation of the ESG reporting process, respondents gave an average score of 3.5 out of 10. On the other hand, 64% expected their finance team to spend much more time and resources to address ESG data collection and governance over the next 12–18 months.
Our broader reflection on these findings is that a transformation in ESG reporting – and thinking – is both needed and underway. For many companies, the collation and presentation of sustainability data has historically been considered a communications activity. As disclosure mandates start coming into force, ESG will be consolidated as an external reporting requirement, falling within the sphere of the finance function and entailing enhanced process, systems and controls. Enhancing the rigour associated with sustainability report preparation will itself increase the quality of this information – and ensuring that these processes are fully digital will further maximise efficiency and quality.
Read more here.