ESG reporting: tools, standards and challenges
New BARC study “The State of ESG & Sustainability Reporting: Challenges, Instruments and Outlook” published.
- Many companies refer to more than one ESG framework for their reporting.
- The majority of companies have published their first ESG report.
- ESG reporting is essential for maintaining a positive image and gaining stakeholder trust.
BARC has published a new study titled The State of ESG & Sustainability Reporting: Challenges, Tools and Outlook, offering insights into the challenges companies face in their ESG (Environmental, Social and Governance) reporting processes and the tools available to overcome these challenges. This study found that ESG reporting is essential for companies to maintain a positive image with stakeholders and gain their trust.
ESG reporting has become increasingly important as it is seen as a vital instrument to maintain a positive image with customers, employees and business partners. The study found that many businesses refer to more than one ESG framework in their reporting and often exceed the required minimum scope, making it a data and workflow-intensive challenge, especially for manufacturing companies and those with complex supply chains.
ESG reporting “a disruptive process”
According to co-author FH-Prof. Dr. Susanne Leitner-Hanetseder, “ESG reporting is a disruptive process, but necessary to gain the trust of stakeholders. Companies need to ensure their reporting is in line with the most relevant frameworks and standards and invest in the necessary resources and IT tools to make the process efficient.”
Stefan Sexl, co-author of the study, added: “The technical implementation of ESG reporting is a significant challenge and there is no market standard yet. Companies need to invest in the right tools and solutions to integrate their data and add ESG data to their reporting. The data sources required for ESG go far beyond those used in reporting to date.”
The study identified the following key findings:
- The European Sustainability Reporting Standards, Global Reporting Initiative (GRI) Standards and the IFRS Sustainability Disclosure Standards are the three frameworks and standards that are predominantly used to disclose ESG-related information.
- Many of the companies surveyed have already published their first ESG report, with those in North America or with more than 5,000 employees being the pioneers in this area.
- Sustainable customer branding is the main driver for ESG reporting. Compliance with legal standards and employer branding also play major roles.
- ESG reporting is usually anchored in the office of the CFO or a specialized ESG department, but it is also present in various departments, depending on the industry and size of the company.
- ESG reporting is a data-intensive task. The challenge of collecting data, especially for environmental KPIs, is often underestimated. Many companies recognize the need for improvement across all the process steps of ESG reporting.
- ERP and CPM systems, Word, Excel, and BI tools are used in combination with specialized solutions, often developed by start-ups, for the technical implementation of ESG reporting. There are significant differences in the priority of the tools used between Europe and North America.
The study concludes that ESG reporting is a complex and challenging process, but it is essential for companies to demonstrate their commitment to sustainability and social responsibility. The right tools and resources can make the process more efficient and effective, enabling businesses to gain a competitive advantage in the long run.
It is available as a free download thanks to generous sponsorship from Board, Jedox, Solitwork and Wolters Kluwer.
