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ESG reporting and compliance: data’s role in sustainability

ESG reporting

ESG reporting and compliance is clouded by more than 630 different ESG measures that have to be identified, measured and managed. As organizations create and consume data at unprecedented rates, management and reporting solutions are essential for making sense of the vast quantities of data being produced. With increasing environmental governance requirements the need and importance of ESG data management has become a priority.

ESG reporting and data-driven sustainability means collecting and using data to make decisions that guide measurable and responsible business practices. Whether it’s lowering greenhouse-gas emissions, optimising supply chains or reducing waste, insights from sustainability data can power positive change while increasing profitability.

Data science can help create a more sustainable organization via production planning and forecasting. New sources of ESG reporting data such as satellite data, new technologies and new analytical approaches can enable more agile, efficient and evidence-based decision making and can better measure progress on Sustainable Development Goals.

“The main challenge and the question to ask is how do you get the data?” says Jamie Cameron, director of digital solutions at Johnson Controls. “Currently, a lot of data management is manual and requires human intervention. Businesses need technology and software that works effectively to pull the data from various systems and centralise it into one platform. From there, the insights can be used to make contextualized decisions. A lack of alignment and tooling is preventing companies from measuring results and monitoring progress. It’s here that the old adage ‘you can’t change what you can’t measure’ rings true.”

ESG reporting regulation and compliance

Companies’  need for data process, insights and analyses have increased due to regulation and now drive demand for business intelligence software, enterprise resource planning and supply chain management software. To meet the complex demands of business and industry data governance providers are strengthening their technical capabilities, expanding the use of AI, machine learning and graph databases to future-proof new ESG solutions.

“There’s a huge legal requirement on business to report on their carbon and energy data under the Streamlined Energy Carbon Reporting framework and if you get that wrong you get fined,” says Nancy Hobhouse, head of sustainability at Evri, the UK’s biggest parcel delivery company. “SECR is the absolute bare minimum in terns of ESG reporting. If you want to understand your strategy and what levers to pull to make the most difference you must have a decent data set directly linked to sustainability and the business as a whole.

“ESG data is critical to our business and is reported to our executives and wider supervisory board every month. We have a main operations dashboard as well as individual dashboards so each client has their own data and an understanding of our services and how that affects the environment and how they report their own ESG data.”

Environmental reporting laws now sit closely alongside data protection and privacy regulation in driving need for robust real-time data capture, processing and reporting. Compliance is a key driver for organizations to create and/or improve their data governance. Security, privacy and compliance features are a key requirement in ESG reporting with collaboration, commercialisation, and leverage for training AI algorithms now being demanded and developed by industry. Stricter regulations for data usage, in particular for personally identifiable information or bias-free training data for AI, are on the horizon.

“ESG reporting may be a legal requirement but the data is produces also supports and drives our business management decision-making,” says Nancy Hobhouse. “We use it for everything; environmental, operations and forward planning. We’re forecasting to 2035, our net zero target, and modelling tells us what we need to do and when in order to reach our targets. Without data we couldn’t make these key business decisions. Data modelling supports and drives our procurement strategy, our roadmap and timeline for carbon reduction trials, fleet replacement, electric vehicles and hydrogen-powered trucks.”

ESG reporting due diligence

Data reporting regulations are more than just a ‘tick in the box’ exercise and should be seen as the bare minimum for businesses, Jamie Cameron believes. “Organisations that build ESG due diligence into company culture make attractive business partners and position themselves well for long-term success.”

Regulation has expanded the scope of data governance from an initial technical focus to include environmental reporting, data privacy, protection, and sovereignty. There are cost burdens associated with compliance but robust environmental data allows organizations to leverage their data for business advantage through internal collaboration, data sharing across ecosystems or as the basis for AI-driven business decision-making.

“You require a host of platforms to connect so data integrations shouldn’t be too bespoke,” says Jamie Cameron. “However there should be a requirement to use multiple different types of systems to pull the data together as this results in organised data management which can be analysed for critical business decisions.”

Businesses are increasingly having to embrace ESG reporting from other companies they deal with as a carbon hotspot at one point in the chain can tip the balance in ESG reporting at another point. Likewise data reporting from one company can benefit others up and down the chain. “We’re consulting with our top10 suppliers to identify carbon hotspots, their use of vehicles and how we can help to reduce their carbon footprint,” says Nancy Hobhouse. “We’re a large company with knowledge and processes in place that help and benefit us, and it can benefit them too.”

ESG reporting costs and challenges

“A sustainability journey requires clear strategy and, inevitably, investment,” says Jamie Cameron. “Objectives can be achieved by investing in turnkey data solutions to improve energy efficiency, decarbonisation and wider ESG targets. Only then will organisations realise the long-term return on investment.”

Finance has not been a major barrier to implementing Evri’s net zero strategy, the company is comfortable investing in ESG and has been doing so rapidly Nancy Hobhouse says. “Technology issues have been relatively straightforward and the data reporting system we use meets our needs. Culturally we’ve had a positive buy-in with ESG across the business and it’s one of every senior leader’s objectives

“The biggest hurdle was at the start of the journey, identifying and sorting the data we needed. ESG reporting sits across the entire business; involving fleet, energy, buildings and suppliers and you must engage with every aspect and every team to gather and organise the data you need. ESG data reporting involves a dozen different teams across our business, it takes time and patience to bring people along on the journey but the effort is worth it.”

Evri’s ESG reporting strategy has delivered a 17.5 per cent reduction in the company’s overall operational carbon footprint. Nancy offers some key advice for those beginning a sustainability journey.

“Start with elements that are within your control, things that are easy to manage. If you don’t have necessary experience in-house, reach out to specialist consultancies or software companies that can help identify what needs to be done and how to do it. For small companies with less complex reporting there are many online tools available to help you meet Scope 1 and 2 requirements. Organisations like the Carbon Trust can help you begin the journey then once you’ve established and implemented your strategy you invite auditors to report on your activities. Most importantly, however much experience you may have never be afraid to ask for help; there’s plenty available to support your sustainability journey.”

Evri is a multinational delivery company headquartered in Leeds, UK, that handles over 700 million parcels each year.

Johnson Controls develops sustainable technologies such as A1 and metaverse solutions for low carbon buildings

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