Preparing for ESG (Sustainability) Reporting: The Role of Business Analytics and IT Solutions

Everyone is feeling the impact of significant environmental problems like global warming, waste, and water shortages. Because of this, the European Union is trying to make things better. One of the ways they plan to do this is by  asking companies to share information about some key metrics concerning various areas of sustainability. This is called ESG reporting.

The idea is simple: if companies tell everyone how they're doing, they might try harder to be reduce their negative and increase positive impacts.

Hopefully, this helps the European Union to reach their target: to cut down harmful air pollution by 55% by 2030.

Sustainability reporting matters a lot. Here's why:

But what if a company doesn't provide a report? There could be problems:

Banks, including ones like Swedbank, are joining the movement too. They're looking for these reports when deciding whether to lend money. Banks want to see that a company isn't just talking about being green – they're actually doing it.

This includes following best practices, managing changes, checking the company and who they work with, getting others involved, and setting real, science-backed goals. If companies don't do this, banks might not offer loans or might charge more.

The sustainability reporting directive will apply from 2024 onwards, expanding gradually:

Sustainability reporting might seem like extra work, but it can also be an opportunity. Here's how:

In places like Estonia, many businesses use "being green" as a selling point when hiring new people. We've also found that young workers like to join companies that care about the planet and are trying to reduce their harm to it.

Companies will need to add a sustainability report to their usual annual report every year. This will be done in the same electronic format all over Europe.

This report has to give an overview about various topics concerning sustainability:

Now, it's true that this is a bit of extra work. Larger companies might find this costly. And it might not make your company better straight away.

But here's the good news: tech can make this job easier. To simplify the task, let’s look at the report from two perspectives. First of all, there are more or less qualitative topics, like the existence of whistleblower protection programs.

The second part can be thought of as quantitative metrics based on structured data that is produced during everyday processes. This is something, that can be relatively easily automated; this is basically what business intelligence solutions are designed to do.

For example, if you collect data about fuel purchases, then it’s quite easy to calculate how much CO2 is generated through burning gas. In the end, this means less manual work and better, real-time overview of your processes.

Starting something new can sometimes be a bit frightening. In our experience, it's usually a good idea to break things down into smaller bits. Let's take an easy example from ESG reports. We already touched CO2 emissions a bit, so let’s go forward with that.

The topic in general is quite easily understood – when we use energy, when we drive with our cars and fly with planes, it creates CO2. Excess CO2 is considered harmful for the environment.

So, let’s map the main activites that generate CO2 and try to calculate how much CO2 emissions are generated. Electricity usage, natural gas usage, fuel consumption, office heating during the cold months and so on. There are ways to simplify the process, for example, calculating the CO2 equivalent (convert used natural gas into CO2 equivalent).

In essence, this is just data collection which can often be quite easily automated and, what is also important, that the topic is quite easy to understand and it’s easy to check if the solution is actually able to work independently.

In our experience, it’s often best to start smart. Pick the first issue to solve, validate your solution based on that small proof of concept and if it works as advertised, then you can confidently move forward with more complex issues.

And, of course, it is also always helpful to plan enough time to achieve desired outcomes, as rushing at the last hour can reduce the quality and make the solution more expensive.