Investors rely on data that is consistent, comparable, decision-useful and accurate to inform their investment decisions. With sustainability issues increasingly intertwined with business strategy, ESG data analysis is increasingly commonplace. According to a recently released study by the global professional services firm, EY, 43% of investors now employ full-time sustainability analysts and 25% anticipate significant additional hiring for that role over the next two years. But what is the quality of the data these sustainability analysts rely on to conduct their analysis?
While ESG data is increasingly relied on by businesses when making strategic decisions, the 2,000 finance leaders surveyed reported various issues with ESG data quality. Primary issues named in the survey include varying data formats, data inconsistencies, incomplete data and unclear data information. And then there is the issue of the data being correct in the first place. Only 4% of those who participated in the survey reported zero ESG data quality issues. Inaccurate data creates the risk of being perceived as greenwashing, which over half of the finance leaders reported feeling concerned about.
According to Sustainability Magazine, ESG data management should be integrated into a larger enterprise-wide data management strategy where systems and processes that prioritize data integrity are utilized . Keeping ESG data and financial data siloed results in the underfunding of ESG data integrity initiatives and makes financial analysis of sustainability initiatives difficult, if not impossible, to accomplish.
Some additional key elements needed to improve ESG data quality are:
- Standardization of data collection processes across departments so data is consistent with clear definitions, formats and methods.
- Automation of ESG data collection and management to decrease the risk of manual error, omissions and inconsistencies.
- ESG data verification and auditing by both internal risk management teams and independent third-party verifiers to ensure data accuracy.
- Training and capacity building to ensure that employees are adequately trained in sustainability reporting
- Utilization of clear and consistent sustainability metrics that align with global reporting standards, such as the Greenhouse Gas Protocol for GHG emissions accounting.
- Establishment of ESG data governance with clearly defined roles and responsibilities with a dedicated team or individual overseeing data quality.
- Real-time ESG data monitoring and reporting so that collected data isn’t stale or even irrelevant before it can be utilized or publicly reported.
- Establishment of ESG data review and feedback mechanisms to ensure that ESG data quality remains high over time.
- Assignation of ESG data management to ESG Controllers with both financial and sustainability acumen.
With new sustainability reporting regulations being implemented globally, investors and finance leaders are hopeful that ESG data quality issues will be remedied.
Another result of the proliferation of sustainability reporting requirements is the increased assignation of ESG data management to ESG controllers. 36% of finance leaders reported that their organizations already have this role in place with an additional 58% reporting that they are planning to create ESG Controller positions sometime in the future.
How Full Scope Insights can help you increase your ESG data quality
At Full Scope Insights, we are dedicated to elevating the quality and integrity of ESG data, empowering organizations to unlock accurate, reliable and actionable insights. Our tailored solutions ensure that your ESG data not only meets stringent regulatory requirements but also serve as a catalyst for driving strategic value and sustainable growth.
We offer a comprehensive suite of services that addresses the improvement of ESG data quality across every stage of the data management lifecycle. Our team:
- implements standardized data collection protocols.
- creates a roadmap for integrating your ESG and financial data.
- conducts rigorous data reviews.
- facilitates third-party verification processes.
About Full Scope Insights
Full Scope Insights provides fit-for-purpose fractional sustainability program management services. We specialize in developing and executing value-add sustainability strategies for public and private organizations in a cost-efficient manner, including scope 1, scope 2 and scope 3 GHG emissions accounting as well as ESG Controller services which help companies improve their data collection processes and integrity. Our fractional resources provide our clients with flexibility in the way they structure their human capital needs and ESG program sensibly.
By partnering with Full Scope Insights, you can confidently navigate the complexities of ESG reporting, strengthen stakeholder confidence and make well-informed, data-driven decisions that align with your organization’s sustainability goals and values. Our goal is to foster a culture of sustainability that resonates with your stakeholders.
For more information on Full Scope Insights, contact us today.
Marisa Flower, Sustainability Director
Full Scope Insights