FinanceDecember 19, 2022

Unlocking ESG performance data value beyond reporting

Read this blog to learn more

We have seen a significant shift in the way in which environmental, social, and governance (ESG) data has been perceived in recent years. It has gone from being an 'add-on' to being a vital opportunity for corporations to boost their competitiveness. As consumers become more discerning about environmental, social, ethical, and responsible business practices, organizations are increasingly starting to realize that reporting ESG data can have significant brand and reputational benefits.

However, this is just the beginning. The value of ESG data extends beyond reporting—when handled properly, it can unlock value for an organization in a variety of ways.

What is ESG and ESG Reporting?

It’s important to note that there is a distinction between ESG and sustainability. The terms are often used interchangeably, but there are important differences. Essentially, sustainability deals with how an organization’s operations impact the environment and society, whereas ESG has more to do with how an organization’s environmental, social, and governance initiatives affect its financial performance.

According to the Center for Audit Quality (CAQ), "ESG reporting encompasses both qualitative discussions of topics as well as quantitative metrics used to measure a company’s performance against ESG risks, opportunities, and related strategies."

How companies can use ESG data to their advantage

When organizations treat ESG reporting as more than a box-ticking exercise to meet regulatory obligations, they stand to reap a number of benefits, as follows:

Profitability and sustainability: Including ESG data in an extended planning and analysis (xP&A) strategy allows an enterprise to see how that data affects financial and operational data, which is key to making ESG initiatives sustainable and profitable.

Risk management: Neglecting ESG issues can result in financial or reputational damage. Thus, all organizations should ensure that they incorporate ESG data into their risk management strategies. By voluntarily disclosing this information, they will demonstrate that they are taking sufficient steps to protect themselves and their stakeholders from ESG-related risks.

Competitive advantage: Focusing on ESG can help an organization gain a better understanding of what matters to its stakeholders while also identifying opportunities. Furthermore, reporting ESG data will help stakeholders compare the organization with its competitors. This works in the organization’s favour if it is outperforming peers on the ESG front.

Uncovering critical operational drivers for decision-making: ESG data can help an organization see where sustainable changes could improve efficiency and make its business more ethical and equitable. This can greatly enhance the decision-making process.

What are the main challenges to effective ESG Reporting?

ESG reporting is continuously evolving as governments announce new standards that companies need to comply with, as well as a new mandatory International Sustainability Standards Board (ISSB) standard that is expected to be announced by the end of the year (2022). It also touches every financial process. For these reasons, companies can find the whole ESG journey intimidating.

The following are some of the main obstacles that need to be overcome:

Several ESG optional frameworks: The Global Reporting Initiative (GRI), Task Force on Climate-Related Financial Disclosures (TCFD), and the Sustainability Accounting Standards Board (SASB) are some of the more notable ESG frameworks, but there are plenty of others, many of which are specific to certain regions or industries. It can be challenging for companies, especially those operating in multiple countries, to know which ESG standards and frameworks to adhere to. This will all change when the mandatory ISSB standards are announced at the end of 2022.

Complexity of data management: Whether meeting regulatory requirements or carrying out voluntary disclosures, companies need to be able to collect, translate, and process ESG data. This is a task that is complicated by the fact that the data is often siloed across different IT systems and is often stored in different formats. In addition, sustainability can be hard to quantify.

Lack of ESG insight to inform decisions: Many organizations have difficulty seeing the connection between ESG data and financial results, especially when captured in spreadsheets, which means they are unable to use the data to improve their bottom line and sustainability initiatives.

How can CCH® Tagetik make a difference?

The CCH® Tagetik ESG & Sustainability performance management solution is designed to help you navigate the complexities of ESG reporting, ensuring that your organization meets regulatory requirements and achieves sustainable growth by capturing the data in a single place.

It is a pre-built, configurable solution that enables you to keep on top of evolving standards and regulations by streamlining data collection, calculation, and KPI disclosure. It goes beyond reporting by providing a single location to access the data built on a workflow that is auditable and updated centrally for any changes in standards, which allows you to see how the ESG initiatives and financial performance converge.

CCH Tagetik ESG & Sustainability offers the following key capabilities, among others:

Easily address EU taxonomy, GRI, and SASB requirements with intelligent, predefined but configurable data models and tools, which will be updated for any new requirements or changes to existing ones.

Integrate financial and non-financial data into a single ESG platform to see the cause and effect of changing plans and performance in real-time.

Play out what-if ESG strategies and see the impact on company plans, financials, and your ESG score.

There's no denying that the ability to measure and track ESG performance data can unlock value for businesses. To capitalize on the data’s true potential, you will need a reliable technology partner that can help you converge the financial and non-financial aspects of your ESG data so that you can track progress and implement changes that positively impact sustainability while boosting your margins down the line and improving your recognition by your stakeholders.

Discover more about the CCH Tagetik ESG & Sustainability performance management solution.

Ralph Stein
Solution Architect Financial Reporting Applications, CCH®Tagetik at Wolters Kluwer

Ralph is an associate member of Institute of Chartered Accountants of ANZ, and has over 25 years of experience in finance & accounting, financial applications, reporting, transformation, performance management and analytical software space.
He is currently the Solution Architect Financial Reporting Applications at CCH Tagetik, specializing in the ESG reporting and Supply Chain process across Asia Pacific. He is also the ESG CCH Tagetik AP Lead.

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