Software Solutions for ESG Data Management and Reporting
Joy Inouye
February 3, 2023
Consequently, more organizations are turning to digital solutions to help them collect, analyze, and manage ESG data to meet reporting and disclosure requirements that are constantly evolving. A recent Verdantix Smart Innovators report on ESG reporting and data management benchmarks the capabilities of 39 software vendors to help organizations inform their software purchasing decisions.
The report first acknowledges the shifts in the ESG reporting landscape during the last two years. Global events like the pandemic, inflation, and large number of layoffs in the tech sector have forced organizations to reduce operational and energy costs and prioritize issues like employee wellness. With these concerns in mind, organizations not only need to keep up with current ESG disclosure regulations and frameworks (from the SFDR, TCFD, etc.) but also anticipate the new and proposed disclosure rules coming in the next three years from the SEC, CSRD, and ISSB. Many of these new disclosure frameworks would require firms to include Scope 1, 2, and possibly 3 into their financial disclosures.
As ESG disclosures become mandatory, there is more pressure on organizations to collect, manage, and analyze large amounts of data from a variety of sources. The amount of data aside, organizations also need to ensure their ESG data are investor-grade, meaning their data are auditable, accurate, and timely. This means organizations are increasingly seeking better digital tools to aggregate their data, facilitate data audits, and demonstrate assurance. Implementing the right software solutions to manage ESG data and reporting helps organizations to not only mitigate risk, but also gain competitive advantage to see where they can effectively drive positive change.
The Verdantix Smart Innovators report identified 39 software vendors with capabilities across carbon management, EHS, ESG, GRC, and other enterprise applications that report across environmental, social, and governmental metrics. The Smart Innovators report also identified four core capabilities essential to software providers:
Management of diverse voluntary and mandated disclosure requirements. Leading software providers for ESG can facilitate disclosures with many voluntary frameworks like CDP, GRI, ISSB, and the TCFD framework, which is the basis for the EU’s SFDR and UK rules on climate-related disclosures
Creation of records for audit and disclosure assurance. Organizations looking to mitigate ESG risk and gain competitive advantage need to collect and manage investor-grade data, which means their data collection and reporting processes need to be more accurate and thorough than for traditional sustainability data. Leading ESG software vendors offer solutions with robust workflow management and the ability to produce auditable records of data to meet the assurance requirements of disclosure regulations
Aggregation of data from disparate systems. Oftentimes, organizations already collect the data needed for ESG reporting, but the data are collected cross-functionally and may be housed in information silos across EHS, HR, and financial systems. Leading ESG software vendors can aggregate data from all parts of an organization and integrate with platforms already in place. Additionally, some vendors can provide further capability by integrating quality control checks to help organizations report high-quality data
Guidance for improvement in sustainability performance. ESG software solutions help organizations go beyond reporting sustainability data to support organizations when setting and achieving their sustainability goals. Leading vendors incorporate data visualization and dashboards so organizations can easily view their progress toward their ESG targets and compare performance across different sites. And with more ESG data being disclosed, companies can also benchmark their performance against competitors or industry averages.
Most vendors identified in the Smart Innovators report have the above core capabilities as part of their offerings. Researchers at Verdantix have also noted additional functionalities organizations should consider when making their software decisions:
- Ability to automatically tag ESG data for inclusion into financial disclosures
- Functionality to automate ESG materiality assessments
- Ability to engage with key stakeholders by providing real-time data to the general public
- Functionality to work across industries
- Ability to externally benchmark ESG performance against industry averages and competitors
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About the Author
Joy Inouye
Enablon
Joy Inouye is a Content Marketing Writer for Enablon. Previously, she worked as a researcher for the Campbell Institute at the National Safety Council where she researched environmental, health, and safety (EHS) best practices in a variety of topic areas including leading indicators, serious injury and fatality (SIF) prevention, contractor safety management, and visual literacy for hazard recognition.
Joy serves as an adjunct faculty member in sociology at the College of DuPage, has worked as a pastry chef, and plays the French horn.
A graduate of Loyola Marymount University in Los Angeles with a Bachelor of Arts in sociology, Joy also holds a Master of Arts in sociology from the University of Arizona.