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ESG has a major data problem: Here’s how to solve it

By James Fisher, Chief Strategy Officer, Qlik

There is a new data imperative for businesses today: effectively reporting environmental, social and governance (ESG) data to meet new regulations.

New regulations around ESG reporting are currently phased in within Europe and have also been released or will be released soon in other countries, including the United States. As we have seen before with GDPR, local regulations have global implications if you are doing business in a country or region where compliance is required. In fact, it has been previously estimated that more than 50,000 EU-based companies and approximately 10,400 non-EU enterprises will be subject to Europe’s Corporate Sustainability Reporting Directive (CSRD).

For organisations that fall into either of these categories, it’s crucial to consider the fact that ESG has a major data problem. To correctly report ESG data and avoid risks of “greenwashing”, all the right data must be collected, integrated and analysed properly, and the data must be right and trusted.  But with ESG data being predominantly unstructured and stored in many different formats and disparate locations, this is a huge undertaking. According to a recent study, the top challenges identified by organisations are lack of data quality and reliability (42%) and too many different data sources (36%). 

Unfortunately, a lot of organisations are struggling to solve these challenges and get ESG reporting right.

The challenges of siloed and ineffective ESG data

In a new global study, KMPG found that almost half of organisations are using spreadsheets to manage their ESG data. This is not necessarily surprising – and spreadsheets can be a convenient and easily accessible tool for basic data management tasks. 

But this isn’t always the best solution. This approach often works well at first but quickly goes through growing pains. And when it comes to ESG, considering the nature of that data and the multiple siloed systems where it resides, the spreadsheet approach is particularly ill-suited.

Spreadsheets have limitations in handling large volumes of data. They are susceptible to compromise data integrity due to errors and version control problems. They lack advanced analytical capabilities and often require manual manipulation to derive meaningful insights. They also lack robust collaboration features, hindering effective communication and teamwork. They are vulnerable to data breaches and unauthorised access, which is especially problematic for ESG data, which often contains sensitive information. They are also not designed to adequately manage auditing and compliance complexities, making it more difficult to demonstrate compliance with reporting standards. 

In sum, that path is paved with data silos, lack of governance and control, and inefficient and time-consuming processes. And, of course, if the data fed to these spreadsheets is not properly collected, integrated and governed, to begin with, the problem is only compounded.

The United Nations, a long-time partner of Qlik, once learned this the hard way while attempting to measure their air travel carbon footprint. Their sustainability department was downloading SAP extracts and leveraging their carbon emissions calculator (ICAO) to measure it all in Excel – a manual process that took 20 people and six months. At the same time, their travel department was also pulling data from SAP and was using it for a Qlik dashboard to help manage air travel expenses. The two departments operated in silo from each other… 

Getting ESG data on the right track

Fortunately, the UN righted that path and their SAP data is now connected to the carbon emissions calculator. All of that information is automatically pulled for analysis, so the sustainability team are able to measure carbon footprint fast and efficiently. And perhaps the best part: with access to carbon footprint information, the travel team can now also act on the data and book more sustainable travel to help reduce their environmental impact and meet their Sustainable Development Goals. It’s a great story of automation, insights, and action for good.

Ultimately, to successfully manage and report ESG data, you first need to build the right data foundation by effectively collecting, integrating, and delivering trusted data into your target environment, whether it’s on-premise or, in the cloud, or a combination of both. Once you have done that, you should leverage AI-powered analytics to take that trusted data and turn it into insights and action – generating visualisations and predictions and providing interactive and fast answers to benefit not just your reporting efforts but your business overall. 

And in addition to being able to fulfil ESG requirements effectively and efficiently, new market analysis, also confirms that good ESG data management ultimately benefits your business too.