ESG Reporting: Companies’ Plans Clash With Spreadsheet Realities

Image by Jason Goh from Pixabay.

by Hannah Fischer-Lauder

February 15, 2024

In a dynamic landscape where Environmental, Social, and Governance (ESG) considerations increasingly dominate corporate agendas, a recent survey by KPMG US sheds light on the intricate challenges and ambitious plans of large companies in elevating their ESG data and reporting capabilities.

Survey Snapshot: A Mix of Confidence and Contradiction

The survey, encompassing 550 board members, executives, and managers from public and private companies, unveils a paradox: While 83% of organizations believe they are “ahead of peers regarding ESG reporting,” almost half of all respondents — 47% — admit to still relying on spreadsheets for ESG data management.

Around 38% reported using ERP systems with ESG modules, 37% said they use specialized ESG software solutions and 33% reported relying on ESG data management solutions.

In the report, KPMG explains why it is problematic to rely on spreadsheets for ESG data: “Regulatory reporting is driving the need for more transparency and accountability over ESG information. To meet accelerated reporting timelines, the sustainability reporting process must become more controlled and efficient, which is difficult to accomplish in spreadsheets.”

Importantly, an overwhelming majority of respondents, 90%, say they will boost ESG investments in the next three years. Here the top areas earmarked for increased investment include dedicated ESG personnel (43%), ESG-specific software (40%), employee training and education (38%), and data collection and management tools (37%).

The report also notes a promising trend where “innovative tech is growing in popularity.” According to the survey, 59% of organizations use “advanced data systems for ESG reporting” and 58% plan to use Artificial Intelligence (AI) to enhance data analysis and consolidation.

However, as KPMG US Climate Data & Technology Leader Tegan Keele explains:

“Artificial intelligence and machine learning technologies can help organizations gain valuable insights from disparate data and make more informed decisions, but AI and ML are not a silver bullet for sustainability reporting or for setting a strategy that adds value to the business. Judgment calls like which data to use, which sources to collect the data from and the type of controls that need to be in place require a cohesive strategy that should be driven by the organization and informed by the technology rather than driven by it.”

Most respondents, 83%, also believe “access to better information” will help to “increase […] ESG integration across roles.”

Beyond compliance, the survey underscores a growing recognition among organizations that building ESG capabilities serves as a pivotal tool for enhancing overall performance. According to 45% of respondents, “improving ESG data management and reporting capabilities” emerges as the top method to integrate sustainability goals with broader business objectives.

Barriers to Integration

While aspirations are high, the report outlines key barriers hindering seamless integration of sustainability strategies into broader business goals. “Insufficient resources or capacity to collaborate effectively” tops the list, reported by 44% of respondents.

“Internal silos and limited communication between departments” came in as the second top challenge, selected by 41% of organizations, while “divergent priorities or goals across functions” came in third, reported by 30% of respondents.

When it comes to the “challenges in allocating adequate financial resources for ESG activities,” 21% reported “difficulty measuring the return on investment (ROI) for ESG” while 19% said  “budget constraints or competing priorities” are the main challenge.

This article was originally published on IMPAKTER. Read the original article.

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