Businesses are aware of the importance of ESG and sustainability objectives. The market is inundated with announcements on ESG software, standards, frameworks and various initiatives to drive adoption. However, we see a concerning gap between technology and those initiatives. Without the right technology to provide comprehensive and accurate measurements, reaching sustainability goals will be hard. Findings from our Sphera Sustainability Survey Report show:
Recent analyst reports confirm that digital technology plays an essential role in ESG management and performance. “As companies become tasked with collecting and reporting on environmental, social, and governance (ESG) metrics, a market opportunity has emerged for software solutions that support the rapidly evolving requirements of ESG risk management.”¹
In recent years, we have witnessed an increasing interest in measurable and comparable sustainability data and performance. These have been largely influenced by large investment firms and by national and organizational legislation and directives.
Traditional CSR approaches have primarily focused on voluntary carbon accounting and disclosures of corporate carbon footprints. However, the increasing interest in reliable and comparable ESG metrics is shifting the focus to mandated reporting of a company’s sustainability performance.
During COP26, many countries like the UK, Japan and New Zealand have announced mandatory reporting and comparable disclosures relating to sustainability and climate risk issues.
The EU taxonomy with prior legislations like EU Sustainable Finance Disclosure Regulation (SFDR) and the EU Non-Financial Reporting Directive (NFRD)²³ will strengthen sustainability disclosure requirements and demand more transparency.
At the same time, three significant developments were announced by the IFRS Foundation Trustees (Trustees). These will provide the technical foundation for a global climate and sustainability disclosure standard-setter for the financial markets.
Science Based Targets initiative’s (SBTi’s) new Net-Zero Standard will provide the first global framework for corporate net-zero target setting aligned with climate science. The standard speaks about short-term and long-term science-based targets, impacting how companies measure carbon footprint and report carbon reduction targets.
All these developments, along with the financial community’s increased focus on ESG, will drive better reporting and disclosures.
With so much external pressure and high interest in a company’s sustainability performance, why is there little technology adoption? How can technology accelerate the sustainable transformation of businesses?
In practice, many companies still record their sustainability data in spreadsheets, use various systems, keep it in silos, tie up many resources, and make data collection very time-consuming. It is a real concern if the database for calculating the corporate carbon footprint and sustainability goals is not accurate and accessible to all stakeholders. We see a great need for the right tools to make reporting efficient and audit-proof:
Based on our long-term expertise and wide customer experience, we see mainly two use cases of how companies operate today and what they need to be prepared for future mandatory reporting requests.
The Case for Corporate Sustainability and ESG Reporting
- Establish transparent audit-proof sustainability management and efficient reporting processes to reduce the risk of non-compliance and related financial consequences.
- Automate data collection and connect all relevant sustainability data company-wide, including all GHG emissions (Scope 1, 2 and 3 emissions), water and waste emissions and other requested ESG-related data.
- Use the right emissions database to ensure granular and accurate GHG reporting.
- Report efficiently to all relevant standards (e.g., GRI, CDP, SASB, GRESB, etc.), ratings (MSCI, DJSI, etc.), and existing and emerging regulations.
- Use a best-in-class cloud-based software that provides a single source of truth for sustainability, finance, operations, and other stakeholders to have real-time, reliable and audit-proof data for better business decisions.
The Case for Sustainability Performance Improvement
- Having completed the Corporate Sustainability Reporting must-haves, you are well prepared for the next step: Enhance your sustainability and ESG performance.
- Make use of advanced performance analytics to understand the gap between targets and actual performance: by using BI technology slice and dice information in the ad-hoc analysis.
- Identify your options to improve sustainability performance with an advanced and professional sustainability application that allows adding and modifying sites, dashboards, reports, KPIs, etc.
- Build and implement a plan to manage execution against expected outcomes: Set targets for all organizational levels based on scenario analysis and take action through the use of marginal cost abatement curves.
According to BCG, the greatest impediment for companies to achieving their climate goals is an inability to accurately measure emissions, with only 9% of respondents reporting that they can quantify their full Scope 1, 2 and 3 emissions.
Going by the insights, even this 9% could be on the higher side. Some organizations are managing their Scope 1 and 2 and the easier parts of the Scope 3 measurements. But the data suggests that the vast majority of organizations do not even have the basic part of their net-zero strategies complete. They need a comprehensive and accurate GHG calculation for all scopes, including all categories of scope 3.
Sphera is uniquely positioned to help. Combining enterprisewide carbon accounting and emissions calculation with detailed and extensive Scope 3 databases will help support the more challenging Scope 3 categories, such as the use of sold products and purchased goods and services.
Get the Right Help in Navigating and Optimizing Your Sustainability Journey
SpheraCloud Corporate Sustainability software delivers an advanced solution at scale for all organizations across the globe, based on the expertise of our sustainability teams and a wide variety of customers situations all over the world. It provides the most relevant emission factor sources as standard content, including our own annually updated LCA database that is the most powerful on the market.
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