As 2023 approached there was no doubt that each business owner should focus on sustainability. With great changes in our environment and other problems that our ecosystem is facing, we should ensure that each step we take takes nature into account.
Starting on 5 January 2023, the Corporate Sustainability Reporting Directive (CSRD) has updated the directive to change the regulations about information that companies must report. As a result, SMEs (totalling around 50,000 companies) will be required to report on their sustainability practices. For now, there are currently no requirements for ESG disclosure in the United States, but it is reporter to soon be changed.
The best solution, in this case, is to implement sustainability software, to ensure the business’ proper growth as it is explained more in depth in our last blog post on ESG. However, finding the right software for your company can be quite challenging as the requirements change frequently and there is a plethora of sustainability software programs on the market.
To assist in the decision-making process, SolveQ provided you with some tips and solutions for your company and the following text is a guide to a better understanding of this topic.
ESG Reporting and Sustainability
Since this topic is essential and will soon be an absolute must-have, it is best to understand it in depth!
A Sustainability Report or ESG Report is a publication by a company or organization that details its impact on the environment, society, and governance (ESG). Such a report facilitates transparency regarding the risks and opportunities that the company encounters. This report serves as a means of communication and is a critical tool in convincing doubting parties of the company’s genuine commitment to action.
On the other hand, sustainably does not have one explanation. Over time, the term sustainability has lost its original meaning and has become less specific. While some individuals view sustainability as solely concerning the conservation of the environment, others consider it as encompassing both environmental and social responsibility. Therefore, a more precise and concise definition is required, and ESG has fulfilled that requirement.
Understanding ESG Reporting: What You Need to Know
Now that you can define ESG and its differences from sustainability, it will be best to know the most important information on this topic.
What do ESG reports include?
ESG reports contain qualitative and quantitative information related to three key topics:
- Environmental: What actions is the organization taking to be an environmental steward? This includes efforts to combat climate change, reduce carbon emissions, preserve biodiversity, improve air and water quality, manage waste responsibly, and use resources sustainably.
- Social: What is the organization doing to improve the lives of stakeholders? This covers initiatives related to workplace culture, diversity and inclusion, employee engagement, data privacy and protection, community involvement, human rights, and labor standards.
- Governance: How is the organization ensuring long-term sustainability and preventing corruption? This encompasses internal controls, policies, and procedures related to leadership, board composition, executive compensation, audit committees, shareholder rights, bribery, lobbying, political contributions, and whistleblower programs.
What is an ESG score or rating?
ESG scores are third-party ratings that evaluate an organization’s efforts in environmental, social, and governance (ESG) areas. Like a credit score, these ratings assess a company’s ability to meet its ESG commitments, performance, and risk exposure. Different providers use varying criteria to calculate ESG scores based on a set of ESG metrics.
Who assigns ESG scores?
Several third-party providers offer ESG scores, including:
- Bloomberg ESG Data Services
- Sustainalytics ESG Risk Ratings
- Dow Jones Sustainability Index Family
These organizations evaluate companies based on ESG metrics and provide scores that reflect their ESG efforts, performance, and risk exposure.
What are ESG regulations?
As mentioned, the government regulates ESG in each country or region differently.
The European Union (EU) has established a comprehensive set of ESG regulations to promote sustainable investing and advance the EU Green deal. The EU Green deal aims to combat climate change and environmental degradation by achieving zero net greenhouse gas emissions, decoupling economic growth from resource consumption, and ensuring that no one is left behind. The EU’s ESG regulatory framework centers on two pillars:
- Reimagining incentives for financial markets and corporate governance, which the Sustainable Finance Agenda and the Sustainable Corporate Governance Initiative primarily cover.
- Providing transparency into the ESG impacts of an organization’s activities through ESG reporting. The EU Taxonomy, the Sustainable Finance Disclosure Regulation (SFDR), and the Corporate Sustainability Reporting Directive (CSRD) are the key regulatory measures used for ESG reporting.
The EU Taxonomy is a system that classifies environmentally sustainable economic activities to provide standard definitions of what’s considered environmentally sustainable. This ensures that companies do not misrepresent their products or activities as environmentally sustainable, encourages sustainable activities, and channels investments to the most sustainable organizations.
The SFDR, which became effective in March 2021, outlines the disclosure obligations that organizations must follow to demonstrate how they consider sustainability risks in their decision-making and report strategy, goals, and ESG impacts to investors. Financial Market Participants (FMPs) must disclose 18 mandatory indicators and select at least two more from 46 optional indicators based on the Principal Adverse Sustainability Impacts Statement (PAIS), requiring extensive data analysis.
The CSRD, the revised version of the Non-Financial Reporting Directive (NFRD), sets out disclosure rules for non-financial and diverse information by large companies. The CSRD is more stringent than the NFRD and is expected to take effect in 2022/2023. The NFRD requires large and listed companies to disclose their business model, policy outcomes, principal risks, non-financial key performance indicators, and other minimum information. The Slovak Act on Accounting No. 431/2002 Coll. has also implemented an amended version of the NFR Directive.
Sustainability Reporting: benefits for your company
- Enhanced Understanding
Technology can provide a greater understanding of sustainability management, a complex topic. With the help of a sustainability management tool, the process can be streamlined and made more proactive throughout the value chain, leading to a deeper and broader understanding of the organization than would be possible without it. By spending more time on analysis and insight-driven work, the focus can be on developing the organization in the right direction to achieve its goals.
- Cost Reduction
Utilizing sustainability software can streamline your processes to eliminate errors, save time on manual tasks, and reduce your dependence on specific individuals. Though there may be an initial investment in time and money, this investment can save you time and money in the long term. Additionally, sustainability software can help you identify waste areas in your value chain and increase resource efficiency. For instance, you can optimize your energy and water consumption, or improve the efficiency of your supply chain, ultimately resulting in cost savings.
- Revenue Increase
Taking a systematic approach to sustainability management can reveal new patterns in your behavior and that of your suppliers and other stakeholders. By using a sustainability platform, you can better understand the impact you’re currently making and identify new potential within your operations. This, in turn, presents an opportunity to attract more conscious and environmentally aware customers, particularly Millennials and Gen Zers, who are among the fastest-growing consumer groups and prioritize sustainability. Ultimately, this can lead to increased revenue for your business.
- Quantified Impact of Risk
Unpredictable risks can strike at any time and place, resulting in high costs. Such risks may arise from natural disasters, political events, pandemics, or media. According to a study by McKinsey, the frequency and magnitude of risk are increasing, with global losses reaching $150 billion in 2019 alone due to earthquakes, floods, fires, and similar events.
By utilizing specialized technology to manage sustainability data, you can better quantify costs and identify and mitigate risks, enabling you to be more resilient. Business risks can threaten your brand reputation and operations, but by proactively managing risks and focusing on transparency, you can stay ahead of the game and maintain a competitive edge.
- Maximized Transparency
Utilizing a cutting-edge sustainability platform lets you operate transparently and track climate frameworks, international reporting standards, and other relevant metrics. With the platform’s capabilities, you can calculate your carbon emissions and benchmark yourself against SDGs, empowering you to set targets, track progress, and achieve sustainability goals through a streamlined process. This, in turn, enables you to produce valuable sustainability reports and operate transparently for your stakeholders.
Sustainability Reporting Made Simple: How to Select the Right Tool or Platform for Your Organization
Conducting an internal assessment is important to select an ESG reporting tool that suits your organization’s needs. Here are the key factors to consider:
- Organization size and ESG reporting scope
- Your objectives for using the tool
- Sustainability boundary, scope, and internal definition, including consideration of whether social sustainability should be included in reporting
- Internal team and technical capabilities
- Which personnel in your organization will be using the tool
- The industry-specific metrics that will be used
- Value chain type
- The reporting requirements of your stakeholders, including frameworks, investors, and other parties.
- Primary problem or use case
- Other supporting resources
- Org structure
- Compliance, audit, and IT security needs
The Best Sustainability Reporting Software Platforms in 2023
To find the best sustainability management software platform for yourself, staying up-to-date with new trends and solutions is best. We prepared a list of the best platforms to make your choice easier.
Here are the main ones on the market:
Tergo’s Sustainability Reporting Software Platform is designed to help companies improve their ESG performance and meet the increasing demand for transparency and accountability from investors, customers, and other stakeholders. Platform provides a centralized place to collect, analyze, and report on sustainability data across an organization. The platform is designed to help companies manage ESG risks and opportunities, streamline data collection and reporting, and provide insights that can be used to inform strategic decision-making.
By using Denxpert, companies can improve their sustainability reporting and communication, demonstrate their commitment to sustainability, and enhance their reputation with stakeholders. The platform is designed to be user-friendly and customizable, so companies can tailor their sustainability reporting to their specific needs and goals.
CSRware is a sustainability management and reporting platform that allows companies to measure, manage, and report on their sustainability performance. It offers a range of tools for data collection, analysis, and reporting and features for internal and external stakeholder engagement and sustainability strategy development.
Quentic is a user-friendly and customizable solution for sustainability that offers tools for managing sustainability across EHS, compliance, supply chain, and learning management. It supports supplier risk assessment, performance monitoring, and sustainability reporting and enables employee training through e-learning, course management, and certification tracking. Suitable for companies of all sizes and industries.
This software ESG enables companies to identify and manage ESG risks and opportunities and engage with stakeholders on sustainability issues. It is user-friendly, customizable, and suitable for companies of all sizes and industries. Convene ESG offers unique features, such as integrated data management, advanced data analysis, stakeholder engagement tools, materiality assessment, and action planning. These features allow companies to track and analyze sustainability data, prioritize sustainability issues, engage with stakeholders, and develop action plans.
This comprehensive ESG management platform includes data collection, analysis, and reporting tools. It helps companies to improve their sustainability performance and manage their ESG risks and opportunities. Some of its unique features include advanced data analytics, stakeholder engagement tools, supply chain management tools, and compliance management tools. Enablon’s platform is designed to meet the needs of companies of all sizes and industries. It enables them to track and report on their sustainability performance, prioritize sustainability issues, engage with stakeholders, and develop action plans. By using Enablon, companies can improve their sustainability performance, reduce risks, and create value for their stakeholders.
Is a business intelligence and data analytics software that tracks and analyzes ESG performance. Its unique features include data visualization, advanced analytics, and the ability to integrate data from multiple sources. Qlik allows companies to analyze their ESG data and identify patterns, trends, and correlations that can help them to make informed decisions about their sustainability performance.
Sphera’s Life Cycle Assessment (GaBi) is a leading carbon footprint software that helps companies measure and reduce their environmental impact. With this software, companies can track and analyze their carbon emissions across their entire supply chain, allowing them to make data-driven decisions to reduce their carbon footprint.
One of the unique features of Sphera/GaBi Software is its extensive database, which includes over 4,500 life cycle inventory datasets and 11,000 environmental profiles. This database enables companies to accurately measure the environmental impact of their products, processes, and services and identify areas where they can reduce emissions and improve sustainability.
BuildingMinds is a comprehensive sustainability reporting software tool for buildings that offers a range of features for building management, energy usage, and sustainability reporting. It also has tools for building certification tracking and compliance with sustainability regulations. With integration to existing building systems and sensors, BuildingMinds offers real-time monitoring and control of building systems, making it a powerful tool for building management and sustainability reporting.
When to choose custom Sustainability Reporting Software?
A custom environmental software solution can be ideal for companies with unique requirements that off-the-shelf products can’t meet. It can seamlessly integrate with existing systems, streamline processes, and be scaled to accommodate future growth, providing a competitive edge. You should consider building a bespoke solution when:
- Unique requirements: Companies with unique environmental, social, and governance (ESG) requirements may be unable to find a suitable off-the-shelf solution that meets their needs. A custom solution can be tailored to address specific business needs and challenges, which can improve efficiency and provide better outcomes.
- Improved data management: A custom ESG software solution can help companies to better manage their ESG data by centralizing and automating data collection, analysis, and reporting. This can help to reduce errors, improve data quality, and provide better insights into ESG performance.
- Competitive advantage: A custom ESG software solution can provide a competitive advantage by offering unique features and functionality unavailable in off-the-shelf solutions. This can help companies differentiate themselves from competitors and improve their ESG performance.
- Scalability: A custom ESG software solution can be designed to scale with the company’s growth, ensuring that it continues to meet the evolving needs of the business over time.
- Integration with existing systems: A custom ESG software solution can be designed to integrate seamlessly with existing systems, such as enterprise resource planning (ERP) systems and customer relationship management (CRM) systems. This helps streamline processes and improve overall efficiency.
Why choose SolveQ as your technology partner?
As a custom software development company, we specialize in helping organizations like yours achieve their sustainability goals through innovative technology.
Whether you’re a budding startup or a seasoned enterprise, we’ve covered you with our full-service solutions. From designing and building custom sustainability software tools to ongoing maintenance, our team is dedicated to creating tailored solutions that fit your unique ESG strategy goals. At SolveQ, we believe in the power of technology to create a greener future for all. If you’re ready to join us on this journey, contact our ESG development team today and let’s bring your sustainability vision to life.