By Jenn Clipsham and Josh Whitney.

As mentioned in Part 1 of this blog series, Part 2 shifts our focus to how GRI’s move to create the technical infrastructure necessary for digital reporting may impact the reporting landscape.  We will also provide guidance on how companies can best prepare (and benefit) from this inevitable shift.

GRI has set up a Digital Reporting Alliance which aims to create the technical infrastructure for digital reporting by promoting an eXtensible Business Reporting Language (XBRL) taxonomy for tagging sustainability data in reports and a platform for filing digital reports, similar to the system already in place for tagging data in financial reports. This would enable data to be more quickly and easily analyzed and integrated into aggregated industry level reports or those assembled by investor-led initiatives or other issues-driven organizations.

GRI has also announced new partnerships with a number of other sustainability and technology specialists to help organizations and stakeholders transition to the next era of corporate transparency and disclosure, one where they believe shareholders and regulators will demand more real-time access to corporate sustainability performance data.

Just think how much more valuable sustainability performance data would be if it were on par with financial data. Not only would investors (and their automated systems) be able to analyze it more quickly, but the business case for companies to truly integrate ESG metrics into their business strategy would be much stronger. It would no longer be an “add on” but just part of business as usual.

Simply put, our view is that this shift is coming, and it may be coming sooner than many think!

The Benefits

Greater integration of ESG metrics into strategy enabling positive social impact

There is little doubt that any platform that enables the digitization of sustainability data could help facilitate greater integration of ESG metrics into corporate business strategies, programs and reporting.  By demonstrating that their corporate strategies and sustainability goals are one and the same, companies can communicate and report progress in a streamlined and clear pathway, whilst also demonstrating how the push to real-time data could make the potential for positive impact really powerful. As companies increase their visibility to metrics they are using to manage their business, they will be able to make management decisions while they can have the biggest impact.

Elevating importance and accessibility of data

Digitizing and elevating ESG data to the same level of financial data will makes it easier for the CFO and other C-Suite executives to talk about ESG issues with their Boards and shareholders. The data will all be accessible and go through a similar process of assurance and communication cycles as with financial data.

Reducing the reporting burden

The digitization of reporting may reduce the overall reporting burden of companies to produce hundreds if not thousands of custom reports and submissions for customer qualification, inquiries, requests, corporate rankings, surveys and awards and other industry, investor or stakeholder disclosures and submissions. While it is unlikely that there will be complete alignment and consolidation towards the use of GRI’s XBRL tagging system by the rankings, survey and disclosure universe, as well as comprehensive adoption by companies themselves, we have seen such systems dramatically, and positively, impact reporting processes, resulting in a lower cost effort and better ‘product’. In fact, we have contributed to the standardization of reporting, using in this case XML formats, in the electronics hardware manufacturing value chain for product compliance data management, and are helping clients and their supply chains and customers realize these benefits of improved data collection, supplier engagement and streamlined reporting for a total reduced cost.

The Challenges

Changes in reporting and data collection

Organizations would need to rethink their reporting and data collection processes and the cycle of reporting if they currently report on ESG information on an annual or bi-annual basis.  Materiality may also become more dynamic with regular involvement of key stakeholders instead of once a year or once every 2 or 3 years. As a result, sustainability teams will likely require more collaboration and support across and within their business to make the case for increased frequency of data collection.

Investment into increasingly sophisticated software and systems

The information requirements that would enable robust real time sustainability performance data analysis will undoubtedly force companies to make serious decisions about the architecture and design of their integrated data management systems. More sophisticated software solution will likely be required, as well as data quality management and assurance processes.

Another challenge of course is getting the data on more than an annual basis and then having the business process to assess and act with it. This is no small task. But we are working with many clients who have put the systems, structural agreements with vendors and internal culture in place to align data with key decision making milestones (e.g. better integration with Enterprise Risk Management, strategic planning etc.) and ensure you are using real-time data, or at least ‘near-time’ to inform critical decision-making points.

Short term reporting – losing sight of the bigger picture

Companies such as Unilever, Patagonia and Tesla have set bold, long-term corporate-wide goals based on new, disruptive technologies, or new business models, and with all of their strategic activities driving towards the impacts they are hoping to generate in the long-term, with some critical towards quarterly financial reporting as it leads to short-term thinking and data generation to meet arbitrary deadlines. Quarterly ESG reporting doesn’t necessarily mean companies will get bogged down in data collection and management. But just as equally challenging, nor is it the case that reporting only once a year means that companies operate more strategically.

John Elkington, the Chair of GRI’s Technology Consortium, summed up the challenge at hand quite well in that, “data is going to be endemic to all that we do; it will saturate everything. We are going through another industrial revolution: information technology is disrupting one sector after another…”[1]. Companies who aren’t ready to embrace the digital revolution from a performance management and reporting perspective will be less likely to reap the benefits.

[1] https://www.globalreporting.org/information/news-and-press-center/Pages/Using-sustainability-data-to-enable-transformational-change.aspx