The Controller's Guide to Selecting ESG Data Management and Disclosure Technology
We have reached a critical milestone in ESG data management and reporting where expectations for verification and assurance of ESG data are nearing those of financial reporting. Therefore, many organizations are taking steps to align existing processes and responsibilities for ESG reporting with those of their financial reporting functions.
We’ve synthesized input from across financial roles responsible for ESG - Controllers, Internal Auditors, SEC Reporting, and CFOs to name a few - throughout the Nasdaq network to help you navigate a busy marketplace in order to identify your best long-term partner for ESG disclosures:
1. Place the burden of tracking and staying up to speed on reporting changes on a vendor that is purpose-built for ESG
Unlike financial reporting in the 10-K which has been standardized for years, the ESG and sustainability reporting landscape continues to evolve, and quickly.
- Ensure your partner is committed to the long-term support, maintenance and update of changing reporting frameworks and standards such as TCFD (Task Force on Climate-related Financial Disclosures), SASB (Sustainable Accounting Standards Board), ISSB (International Sustainability Standards Board) and European Union reporting requirements. With dozens in frequent use today, staying ahead of the changes is no small feat and not practical for an internal ESG team.
- Verify that your partner will translate and provide guidance for impactful rating and ranking questionnaires including (but not limited to) MSCI, Sustainalytics and the Corporate Sustainability Assessment for potential inclusion in the Dow Jones Sustainability Indices.
- Seek a partner that meets the needs of stakeholders across your organization. Effective ESG technology streamlines both financial reporting and sustainability, not one or the other. Selecting a platform that meets the needs of stakeholders across your organization – one with end-to-end ESG data gathering, management, audit and disclosure functionalities – will encourage effective adoption and deployment across the many teams that contribute to ESG disclosures. Marketing, public affairs, Corporate Secretary and many other roles will additionally benefit from a centralized resource.
2. Audit-ready your disclosures
Prepare for potential changes in regulatory requirements with technology capabilities today
- Establish role and workflow functions that enable internal edit, review, and approval, as well as the facilitation of both internal and external audit for access and review of data.
- Require activity logs showing date/time stamps and uploaded references to allow auditors to seamlessly track your audit trail.
- Verify that you’ll benefit from easy year over year rollover of your data, making it easy to compare what’s changed, and reflective of the changes in reporting requirements.
3. Automate as much ESG and sustainability data capture and flow as possible
Bring as many data gathering and certification processes into a centralized system as possible to reduce the risk of manual error and ensure complete, accurate data is collected in a timely manner.
- Evaluate whether your partner can support the many venues in which you report ESG information. ESG reporting in regulatory filings such as the 10-K are top of mind, but your organization is leveraging ESG data across RFP responses, marketing materials, communications, recruitment, and questionnaires. Mitigate the risk of divergent data sets by securing a partner that focuses on the full ESG landscape.
- Because site-level data collection remains a key source for environmental ESG data, make sure your partner can pull source data such as energy usage from utility bills via API or bulk upload and translate it into reporting-ready emissions data.
- Prioritize a solution that can both support a data warehouse (subject to quality controls) in order to streamline the efforts of your team and also link data requests so your team can quickly identify commonalities across reports and ensure the consistency of your organization’s data and messaging. Be the hero for your subject matter experts by minimizing administrative and duplicative work.
4. Secure a dedicated customer support team of ESG experts for set up and ongoing account support
- Confirm that you can call your provider directly for assistance on ESG-related topics such as recent changes to reporting requirements and visibility into pending reporting deadlines, and that industry knowledge is built into the platform. Request specifics on how often the team receives training and development on ESG trends and reporting frameworks.
- Ask that the team of ESG experts that leads your setup stay with you throughout your partnership. This will ensure that knowledge shared during the introductory phase of your implementation is carried through to your ongoing use of the platform, and that your vendor truly understands and supports your unique business needs.
In summary, it is critical for companies to begin implementing the same data integrity, audit and assurance capabilities for ESG reporting that they leverage for external financial reporting. However, equally important to the similarities between the future of ESG and financial reporting are the key differences. ESG continues to evolve and requires a long-term commitment from solution providers to invest in the expertise and tools that will enable companies to stay ahead of the curve. Don’t fall victim to the current “land grab” amongst technology providers seeking a piece of the ESG pie, but instead identify your best partner to help you achieve your strategic ESG goals.