The barriers preventing CFOs from achieving effective ESG reporting

Apr 25, 2024

ESG reporting is the practice in which businesses disclose their environmental, social, and governance performance, often to external governing bodies, internal stakeholders, and end consumers...

ESG reporting is therefore not only key to ensuring compliance, but can help attract investors who value sustainability, reduce risks related to climate change or social issues, improve financial performance by optimising resource use and operational efficiency, enhance company reputation, and ensure customer loyalty.

However, despite these benefits, many CFOs face significant challenges when it comes to producing an effective ESG report.

In this blog, we explore three of the main barriers hindering effective ESG reporting.

 ‌1. Fragmented data sources

As organisations continue to ramp up their reliance on technology by integrating various systems designed to solve different challenges, they often end up with a collection of siloed solutions that are completely disconnected. This results in several sources of data that are inconsistent, and often captured in different formats.

‌The lack of integration between different systems and solutions hinders effective ESG reporting as it makes it difficult to track and monitor the impact of sustainability initiatives across the organisation. Without a clear and comprehensive view of the data, organisations cannot measure their progress against their ESG goals, identify areas for improvement, or communicate their achievements to stakeholders.

2. Poor data quality 

Collecting reliable, consistent, and relevant data across diverse business units and operations can be complex, particularly when relying on disparate systems and sources.

To help alleviate the challenge mentioned above, many companies rely on manual intervention to transfer data from one system to another, hoping to collate all relevant information into a single entity to foster a better reporting environment. And although having one single data point is ideal for effective ESG reporting, manual data transfer can lead to further inconsistencies caused by human error.

These inconsistencies result in poor data quality, which leads to unreliable ESG data.

‌3. Weak data governance practices

A lack of standardised ESG reporting frameworks and metrics can hinder a CFO’s ability to effectively measure and communicate their organisation's ESG performance. Different reporting standards and requirements imposed by various stakeholders and regulators may lead to confusion and inefficiencies.

What’s more, changing regulations also makes it difficult to ensure efficient reporting, as without real-time data, it can be difficult and time-consuming to have to go back and report on new metrics.

‌Addressing these barriers requires a proactive and comprehensive approach that includes collating relevant data into a single source of truth, improving data quality, and advocating for standardised reporting frameworks.

In our eBook, The path to data-driven sustainability, we dive into these barriers in further detail and explore how to build the foundations for data excellence with a green data lake. 

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