Organisations are adopting strategic decisions to safeguard the environment and publicly report their environmental, social, and governance (ESG) activities. As concerns about climate change, diversity and inclusion in the workforce, and the demand for sustainable business operations grow, finance professionals have the critical purpose to collect ESG data.
Before we collect ESG data:
- Establish the organisation’s goals: eg. by 2050, the business might seek to aim for net-zero carbon emissions.
- Set precise, measurable goals from the start, and the data you collect should be useful, practical, and auditable.
What does this mean?
It is evident that various definitions point to the same thing: the data must ultimately be appropriate for the degree of decision being made. To consider data high quality, it must be robust enough that the user can confidently base their decisions upon it.
According to Dr Klaus Hufschlag, the senior leader in business intelligence and analytics at the Deutsche Post DHL Group:
Meaningful data is clearly defined, internally and externally relevant, and measurable.
Practical data means information is gathered frequently, following existing resources and processes, with the appropriate detail that reflects the company’s needs and goals.
Auditable data must include the mandate for data collection, the internal control framework, and clear ownership and responsibilities for data sources.
“Gather ESG data in a meaningful, practical and auditable way, so it can then be reported transparently. You’ll want granular-level data frequently – monthly or quarterly, at least, but real-time data is best,” suggests Hufschlag.
So, what can businesses do to ensure that their ESG data gathering processes are up to par?
All data gathered must be material to your business category and give information which can help steer strategic decisions, as well as assist in ensuring compliance with corporate governance. Data should be gathered with transparency in mind, in a timely manner and any data gathered must be relevant and meaningful to investors, customers, and employees alike.
The data collected must be constantly reviewed to ensure it aligns with a company’s goals and objectives. Therefore, it is often the case that ESG reports are an integral part of a company’s financial report. A solid ESG foundation is often seen as a key component to a company’s sustainability and an indicator of future success, and especially useful when looking to attract investment.