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4 Apr 2023

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IBM Provides Guidelines to ESG Reporting

Posted with permission from ESG Impact Zone.

What gets measured gets managed. This is especially true of environmental, social, and governance (ESG) metrics, where data capture and management present a challenge for many organizations. A robust data foundation can help you slice and dice insights for different reporting needs. But when data types like electricity, water, waste, gas, supplier data, performance KPIs, and more exist in a myriad of siloed systems, the question is: Where do you even start?

One of the first places to start is by reviewing your organization’s reporting requirements based on its sustainability commitments, to understand what data you need to support them. But that’s only a piece of the puzzle. Read on to learn how to help streamline the collection and consolidation of your ESG data into a foundation that supports your GHG accounting and sustainability disclosures.

Use consistent methods to capture ESG data

Timely data capture, supported by consistent and repeatable ways of capturing data, can help reduce time and increase the efficiency of reporting processes. Here are some ways to strengthen ESG data capture:

  • Get as close to the original source as you can. For example, sourcing energy consumption data from utility providers via utility meters is the gold standard.
  • Aim for automated data transfer wherever possible. Manual data entry and capture can lead to errors, precision loss, and metric confusion — particularly if your organization works across various regions
  • ESG data can come in many forms and will continue to grow in volume over time. Have a plan in place for storing and managing the data on an ongoing basis.
  • Sustainability performance management is measured over long timeframes, ensuring processes are enduring and can be consistently followed over time.

When ingesting ESG data, an automated software platform is superior to manual spreadsheet entry.

Ensure data is complete

Gaps in ESG data can result from poor quality data or a lack of quality controls in the data collection process. These gaps may result in missed opportunities to evaluate your performance and can lead to lower-than-expected results or scores. It may sound straightforward but effective data maintenance requires dedicated focus, regular attention, and clear lines of responsibility. Here are some tips to improve data completeness and quality:

  • Create an accountability matrix for data management and assign responsibilities to staff. This matrix should set out a regular schedule to review data completeness to catch errors in time to address them.
  • Use reporting tools to keep track of data gaps and regularly interrogate data records to assess data quality

Push for transparency in data so auditors can retrace calculations and processes

An increasing number of climate-related disclosures require robust, auditable ESG data. The latest case in point is the SEC’s climate disclosure rules that are poised to require organizations to report on their ESG metrics in 10-K filings. Your GHG accounting practices must support reliable, consistent reporting that eases the audit process and allows for year-on-year repeatability and comparison. Here are some things to consider:

  • Ensure that assumptions, methodologies and data sources can be easily reviewed by auditors. This can also put your organization on a strong footing in future years when additional documented evidence may be required.
  • Keep track of decisions and the reasons for them, store supporting paperwork. Maintain clear change-tracking history for the data used for certification. It’s better to record more information than is required as it may helps auditors retrace your process, calculations and decisions.
  • Work in close collaboration with your auditor, and ensure your team understands their requirements. This can help align your data retention and tagging policies with audit requirements.

Ensure data is accurate by putting in place processes to reduce uncertainties

Not all data is equal when reporting for ESG, so processes that yield more accurate data can help alleviate some of the stress associated with reporting time. Here are some ways to enhance the accuracy of ESG data for better quality reporting and insights:

  • Have clear logic in place for your assumptions and estimations, and document these over time
  • Errors are more likely when dealing with multi-metric, multi-currency data. A platform that has the flexibility to capture or report data in multiple units of measure, but also has strong data normalization and harmonization capabilities can help reduce uncertainties.
  • No matter which framework you’ve chosen to report to, you will need to be clear on your baseline to measure progress over time. Therefore, ensuring your baseline is accurate and appropriate is essential.
  • Self-verify your results by putting in place simple sense checks like year-on-year comparisons to spot any unusual percentage changes or variations in data sets.

ESG reporting season can be stressful. So after a reporting cycle, make sure you celebrate wins and have processes in place to learn from mistakes so you can improve reporting outcomes over time.

Image from IBM Sustainability Software.

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