ESG reporting is both complex and challenging, and many companies struggle to find the resources and support to get programs on a course to sustainability and maturity.
Audit, risk, compliance, and sustainability professionals have a pivotal role to play in helping organizations to navigate the challenges of ESG reporting:
- What processes, tools, and investments are needed to identify, gather, validate, and audit ESG data metrics?
- How do you determine which metrics will make an impact?
- How can organizations best collaborate with ESG stakeholders and share the insights that matter to them?
- How can leaders build the comprehensive and purposeful ESG strategies needed to support long-term value creation and sustainability — especially as ESG emerges as a key competitive differentiator?
As you embark on your ESG program or strive to improve it, it’s helpful to understand common hurdles. Read on for the top challenges we’ve heard from teams who have rolled out ESG programs, and download AuditBoard’s new Step-by-Step Guide to Building Your ESG Program: Resources, Best Practices, and Key Considerations.
1. Labor-Intensive Manual Effort to Aggregate Data From Disparate Locations
ESG disclosures and ratings questionnaire submissions require both quantitative and qualitative answers drawn from data that lives across the organization and beyond (e.g., compliance, HR, legal, suppliers). It’s a cumbersome effort to manually centralize, aggregate, and massage ESG data from disparate locations and stakeholders. Plus, it’s a resource-intensive and time-consuming process to engage with data owners, identify and capture the right data, and make sure data is complete, accurate, and up to date. The process often involves a mix of spreadsheets, emails, and data in many formats.
2. Time-Consuming to Map Topics and Metrics Against ESG Frameworks
ESG frameworks overlap, and many organizations report against more than one. It’s challenging to map your topics and data metrics to reporting and disclosure frameworks, and difficult to see where you may have gaps in data. Data must be extracted from a range of formats (e.g., Excel, Word, PDFs, emails) and submitted in a range of formats.
3. Difficult to Get a Unified View on Program Performance and Health
Data compiled into a spreadsheet or report only offers a point-in-time view on overall ESG program health and progress, risk management/mitigation, or audit readiness, and can’t be viewed in the context of historical performance or future modeling. As a result, much of the value of the data is effectively siphoned off, given the inability to see it in context, identify patterns, and get a unified view of progress over time.
4. Time and Cost of Materiality Assessments
Materiality assessments are crucial for determining what’s important to stakeholders and where ESG efforts can have an impact, but they require a high degree of stakeholder engagement (e.g., interviews or surveys with employees, customers, or investors). But if assessments are not completed regularly, they can quickly become stale or out of alignment with stakeholders whose priorities may shift quickly. In addition, because materiality assessments can be time-consuming and resource-intensive, companies often engage third-party consultants to complete them. This can be expensive, and budget may not be consistently available.
5. General Resource Constraints
Despite the considerable momentum around ESG, teams often struggle to secure budget, headcount, and executive sponsorship to support programs that quickly grow in complexity.
6. Lack of Authoritative ESG Education, Guidance, or Role Clarity
At this time, ESG frameworks and ratings are still largely voluntary, and there’s not yet global alignment on regulations, compliance, or standard operating procedures. In addition, in most companies, ESG roles are unclear and evolving. Different parts of the business are taking on responsibilities, with compliance, risk, audit, and sustainability teams often taking the lead.
Get Your ESG Program on the Right Track
By understanding the ESG program challenges other companies have faced, you’ll be better positioned to address or avoid them in your own program. Whether you’re a first-time reporter starting from scratch or in the first few years of ESG program development, AuditBoard’s seven-step guideoffers practical tips, best practices, and resources to help you navigate through key considerations and common challenges. Download the Step-by-Step Guide to Building Your ESG Program: Resources, Best Practices, and Key Considerations.