As the prevalence of ESG reporting continues to grow, collecting and communicating high-quality ESG data has never been more important. Despite the growing pressure from regulators, investors and the public, companies still struggle to generate quality, comparable and transparent ESG data.
Sphera participated in a Reuters-hosted panel discussion focused exclusively on this topic, which included a panel of ESG experts. The experts who participated in the panel were:
- Richard Howitt, strategic advisor (moderator)
- Ben Goodare, head of sustainability at Renishaw
- Sandra Schoonhoven, lead climate risk initiative at ING
- Preyasi Patel, senior consulting manager at Sphera
Read on for five takeaways from the session.
1. Good ESG data drives better decision-making.
The first questions offered to the panel were: What is your relationship with data and what is the crucial importance of data for ESG? A variety of answers were offered for the first part of this question—but the key agreement for participants was how better data can provide guidance for immediate business decision-making and for long-term decisions as well. Several examples were offered of data being discovered in the process of preparing for ESG reporting, and some coming from reporting on Scope 1, 2 and 3 greenhouse gas (GHG) emissions.
2. “Decision-critical data” can drive ESG reporting priorities.
One of the ideas touched on by all the participants was that the volume and variety of data generated or required for reporting can be overwhelming. These difficulties are magnified as one reaches out to partners in the value chain for Scope 3 reporting. The concept of decision-critical data can help determine what data to gather and report.
3. Establishing data materiality requires expertise with data and its use.
This idea came up in a discussion about assuring data accuracy. Throughout the discussion, examples were cited where knowing the practical use of specific data was crucial for assessing its accuracy. Schoonhoven provided an excellent synopsis of how this dynamic can work:
“We can teach ESG specialists to become data experts, or we teach data experts to become ESG specialists. But in the end, it’s a combination that really should work. You can start from one side or the other, but in the end, you really want everyone to understand what is climate [for example]. How can you use it in your day-to-day work? Because if you really push that knowledge and bring that knowledge, everyone will help you to get to a more accurate level of reporting.”
4. Good ESG data solutions provide consistent and auditable data.
As the discussions about decision-making, priorities and communication would indicate, technology can’t do everything. However, it can play an exceedingly important supporting role. The panelists offered real-world experiences and reflections on the (still) common use of Excel as a primary data gathering and calculation tool, and the dangers that come with this approach.
The primary benefits of modern enterprise solutions for ESG data recording included uniformity, immediacy, continuity of access and the means to trace back dates, sources and other key metadata needed for robust reporting and auditing. And as regulations continue to play a bigger role in ESG reporting, auditable data is becoming more important, as Patel explained:
“There needs to be rigor around it in terms of verification and audibility. It’s great getting the data, but you need to think about the trail of where that data’s come from. Having that trail is something that’s really key to consider as those regulations are becoming a little bit tighter around non-financial reporting.”
5. ESG data collection and communication is a journey.
The final theme to emphasize is the value of having initiative. All panelists agreed that collecting and reporting ESG data—particularly Scope 3 data—can be very daunting. The most common problem encountered is an overabundance of data, rather than scarcity.
The panelists agreed that there’s irreplaceable value in starting well. This includes committing to the data collection process and understanding what data has the most meaning for companies’ decision-making processes. Communicating internally and with key partners and consultants is essential for gathering and sharing ESG data. And the only way to discover the qualities data may have (or lack) is to pick a target and begin.
“Just make a start. Be patient. You’re not going to get quality data or data at all the first request that you may get out. I think the better relationship that you can get with your suppliers in educating them on what you need is going to ultimately benefit you,” Patel said.