The evolving role of data in ESG management

As new Corporate Sustainability Reporting Directive (CSRD) began to materialize, the debate on data architecture and its role in ESG reporting became louder. Organizations had already been wrestling with the dilemma of having an ample selection of tools and technical solutions to gather the required data, but still struggling to find a comprehensive way to handle it. Especially aligning data from various source systems still seems downright impossible for many.

”Data and technology are significant elements in corporate ESG, yet understanding their true capabilities remains largely vague,” says Jussi Nokkala, ESG Advisory Leader at PwC Finland. “While the right ESG issues must be duly reported, the quality of data must also be lifted to the level where it can appropriately help guide the organization’s ESG strategy in a way that brings in results.

The need for more high-quality data is increasing substantially, and the best way to solve that challenge is to harness suitable, AI-enhanced technologies to process data efficiently for all the required purposes. For example, as various ESG reports tend to ask for the same information, but in a bit different way, an automated system that would adjust the formats according to specific needs would make the task a lot simpler.

Jussi Nokkala advises organizations to not look at ESG reporting as an end in itself.

“Understanding the role of data in its various forms and purposes is important throughout the organization. While increased duties help make operations transparent, reports can provide the best added value only when used as practical tools for better management and improved operations.

Jussi Nokkala, ESG Advisory Leader at PwC Finland.

Sufficient KPIs help take ESG data seriously

When organizations have the right kind of ESG data at their disposal they can use it for performance evaluation, competitor analysis, forecasting and budgeting – that is, for similar purposes as finance or any other kind of strategic data. With the help of a sufficient model, changes in KPIs such as carbon neutrality and energy transition can be continuously monitored to ensure that targets are eventually reached.

Typically, ESG reporting has not received that much attention from the business management, but as high-quality data effectively turns it into a cost item, the approach changes. When the situation evolves to the point where for example emission reductions can help generate sales, improve loan terms and such – and eventually contribute to annual bonuses – it suddenly becomes a significant issue worth the management’s full attention.

Relevant ESG data helps understand the proportions of ESG and how the changes in them affect operations. This is the key to successful management and KPIs that make sense. |

Read more at www.pwc.fi/sustainability