European Union’s 2023 Corporate Sustainability Reporting Directive (CSRD) requires companies to report according to the new European Sustainability Reporting Standards (ESRS) already in 2025. The Directive was designed to provide tools to combat the root causes of climate change, including industrial emissions or the disappearance of the world’s rainforests. However, businesses gearing up to meet its requirements might discover a different kind of jungle right within their own recording systems – the jungle of Environmental, Social and Governance (ESG) data.
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While many businesses have already been producing ESG reports, the mandatory nature and specific structure of ESRS reporting present unique challenges. To tackle these, most companies opt to invest in an analytics and reporting tool that will help them put the jungle in their backyard into order and emerge ESRS compliant. There is a diverse offering of sustainability reporting tools on the market, each with its own set of ‘superpowers’ and weaknesses.
However, speaking from my experience from several sustainability reporting projects, organizations should not lull themselves to sleep thinking that simply investing in a digital tool will magically solve their data management issues from day one. What does it take to find your way out of the jungle? An honest look into how data is sourced and managed within your organization and a willingness to transform.
To help you in this process, we highlight three common challenges companies face in the process of transforming their ESG reporting to fit ESRS:
1. If your organization consists of multiple units and is geographically spread, be prepared for diverse data sources and data formats
One of the foremost challenges in meeting ESRS requirements is the need to integrate diverse data sources and formats. Sustainability data is regularly spread across multiple systems within an organization, including ERP systems, environmental management systems, HR databases, and supply chain management tools. Additionally, this data is ‘owned’ by different stakeholders and can be housed in different formats, from structured databases to unstructured documents and spreadsheets.
Integrating this disparate data into a single reporting tool is a complex task. It requires not only technical capabilities to handle various formats but also a strategic approach to ensure consistency and accuracy across departments and geographical locations. I have seen organizations tackle this in multiple ways, including APIs, cloud-based data hubs or even tailored middleware developed in-house to help consolidate data from different sources, standardize it, and make it available for reporting tools.
Each choice has its pros and cons and the best choice depends on your organization’s specifics and priorities.
2. You will most likely need to customize your chosen tools
No single tool is likely to meet all the specific requirements out of the box. Customization, such as configuring dashboards, setting up specific metrics, or creating custom data connectors, is often necessary and most tools on the market count with this. Customization requires expertise, making it essential to have a clear plan and sufficient resources dedicated to this task.
3. Do not leave your sustainability reporting tool isolated
Implementing a new analytics and reporting tool involves more than just technical integration; it requires embedding the tool into the company’s broader IT ecosystem. This integration must ensure seamless data flow between various systems, from data entry points to final reporting outputs. It also involves addressing data security, compliance, and governance issues to ensure that the sustainability data is reliable and protected.
This again requires dedicated personal resources with the necessary expertise and willingness to ‘own’ the reporting process (including any new tools) and the transformation towards ESRS compliance. For the stakeholders managing the various data sources, proper training and change management are critical to ensure buy-in and ease of use of the new tool in daily work.
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As the clock is ticking towards the 2025 ESRS reporting deadline, organizations are realizing they need to tidy up their ESG data flows. Sustainability reporting tools help, but only to the extent that an organization does not try to use them as a band aid for their messy data. An honest transformation will not only make you ESRS compliant but will provide you with clean and reliable data to track your progress towards your organization’s strategic goals.