Simplify ESG compliance: Embrace technology
Thomson Reuters and SAP leaders discussed strategies for CSRD reporting during Sustainability Europe 2024
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In an era where corporate sustainability is not just a buzzword but a business imperative, new reporting directives from the European Union (EU) pose significant challenges for companies aiming to maintain robust Environmental, Social, and Governance (ESG) compliance.
The EU’s Corporate Sustainability Reporting Directive (CSRD) promotes transparency and accountability in the corporate world, but its implementation poses significant hurdles for companies of all sizes.
Simplifying ESG compliance was the focus of a panel discussion at Sustainability Europe 2024, held recently in London and featuring speakers from Thomson Reuters and SAP, a leading provider of enterprise software for business operations. Panelists stressed that integrations are key to easing CSRD reporting and ensuring ESG compliance. The discussion centered around the challenges of CSRD reporting, the evolving role of CFOs, and the transformative power of technology in simplifying ESG compliance.
Leaders say by automating data collection, analysis, and presentation, companies can reduce manual effort, minimize errors, and enhance transparency. Advanced data management systems, data visualization tools, and artificial intelligence (AI) can streamline the reporting process, providing a unified platform for stakeholders to access accurate and reliable ESG data to comply with the European Sustainability Reporting Standards (ESRS).
“Collaboration is absolutely critical. “We found that both U.S. companies and global companies are having to prepare for this now.” “We found that both U.S. companies and global companies are having to prepare for this now.”
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What are the challenges of CSRD reporting and ESG compliance?
The complexity of CSRD reporting should not be underestimated, as it demands significant resources and specialized expertise. The directive’s compliance is only the beginning; companies also need to focus on maintaining data accuracy, which requires meticulous attention. The time-consuming nature of this process can strain even the most well-resourced organizations, making it a significant hurdle in the path to transparent and effective ESG compliance.
Adding to the complexity is the current lack of clear and consistent guidance on CSRD reporting, which will eventually include non-EU companies with significant EU operations. Companies are often left to interpret vague guidelines, which can lead to confusion and inconsistency. This ambiguity may lead to different approaches to reporting and make it difficult to achieve uniformity across organizations. The absence of standardized practices not only complicates the reporting process, but also undermines the overall credibility of sustainability reporting.
The growing role of CFOs in sustainability reporting
The landscape of corporate sustainability reporting is undergoing a rapid transformation, redefining the role of the Chief Financial Officer (CFO) in substantial ways. With the increasing focus on ESG, CFOs have a greater responsibility to ensure the accuracy and transparency in ESG data. This shift goes beyond simple regulatory compliance; it involves fostering trust and accountability among stakeholders who demand clear visibility into a company’s ESG practices.
CFOs now stand at the helm of sustainability initiatives, playing a pivotal role in aligning ESG strategies with overall business objectives. They are responsible for integrating ESG into financial reporting. This requires a deep knowledge of both financial metrics and non-financial ones. This dual expertise allows CFOs to have a holistic view of the company’s performance and facilitates more informed decision-making. Moreover, CFOs must collaborate closely with key stakeholders, including the board of directors, to ensure that sustainability goals are set, met, and effectively communicated.
Streamlining ESG reporting processes and disclosure
The CSRD complexity underscores the critical need for corporations to leverage advanced technology to streamline ESG reporting processes, ensuring accuracy and efficiency while alleviating the compliance burden.
The intricate process of ESG compliance can be significantly optimized through the strategic use of technology. By using advanced tools, companies are able to automate the collection of ESG data and its calculation and presentation, reducing manual work and errors. Advanced data management systems play a pivotal role in ensuring ESG-related information is easily accessible and analyzable, allowing for more efficient and accurate reporting.
Standardized reporting frameworks and templates are essential for maintaining consistency and comparability across different reports. These frameworks offer a unified structure to ensure that all relevant data is captured, presented in a coherent way and reduces the risk of omissions. Data visualization tools can also transform complex ESG data to clear, user-friendly formats, which are easily understood by all stakeholders. These tools not only enhance transparency, but also facilitate better decision-making and stakeholder engagement.
An ERP-centric, cloud-based, and AI-enabled strategy, as outlined by Adriana Andreea Ursu, Global Sustainability Principal at SAP, offers numerous advantages for CSRD reporting. This approach centralizes data management, ensuring that all relevant information is consolidated in one place.
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When it comes to ERP centricity, most of the data that you need in the sustainability reporting is already sitting in the ERP, or it could potentially sit there. |
Adriana Andreea Ursu
Global Sustainability Principal at SAP
The panel highlighted the emerging role of AI and cloud-based solutions in sustainability reporting.
Knight, of Thomson Reuters, emphasized the importance of AI in data analysis and anomaly detection. The panel highlighted the emerging role of AI and cloud-based solutions in sustainability reporting. In some of our research we found that risk professionals expected AI to save them 7 1/2 hours per week,” he said. Knight also emphasized the need for ethical and transparent considerations when it comes to AI applications. “The critical piece with AI is that it has to be transparent and also needs to be ethical,” Knight said.
Overall, the integration of technology into CSRD reporting processes can simplify and optimize the various stages involved. This not only meets regulatory requirements but also demonstrates a commitment to sustainability and transparency. This not only meets regulatory requirements but also demonstrates a commitment to sustainability and transparency.
The future of ESG compliance includes processes and efficiency
To simplify the complexities of CSRD reporting, companies must harness the power of technology, panelists said.
The path ahead for ESG compliance is paved with advancements in efficiency and process optimization, propelled by innovative technology and the evolution of integrations between ERP providers and reporting solutions.
The future of ESG compliance transcends mere regulatory adherence; it involves harnessing technology to drive efficiency, precision, and strategic value. As ESG reporting becomes more intertwined with financial reporting and gains significance in investment decisions, companies that adopt advanced tools and processes will be better positioned to flourish in a sustainable and ethical business environment.
As organizations navigate the evolving landscape of sustainability reporting, they must consider compliance, data accuracy, and the adoption of AI and cloud-based solutions. CFOs, other stakeholders and the business must work together to make sustainability reports effective.
