Blog
Why future ESG regulatory and disclosure requirements will need good governance
Monday 14th August 2023
To meet future regulatory expectations, firms must adapt their IT systems to systematically collect, aggregate, and report on a broad range of ESG data. However, many companies still do not have a comprehensive approach to integrating ESG data reporting never mind being able to provide evidence and audit trials.
For them to move toward this goal, they will require significant changes to their IT infrastructure, from applications to data integration, architecture, with full alignment to governance. Whilst many new platforms include the management and capture of ESG data such as emissions, climate risk, and climate-adjusted ratings, they often are standalone applications. It is therefore preferable to use an automated ESG platform that can adjust their data architecture to be woven into your existing governance processes, approvals and decision making. Look for a platform that also provides optional data collection / import strategies so firms can reorganise their data governance to successfully manage and report ESG data in real-time.
How to best start your ESG journey
Given future disclosures will require increasing levels of proof and evidence, companies really need to consider how they plan to embrace governance, (the G of ESG), at the very start of their ESG journey. It is far better to start out being prepared for any level of future ESG governance challenge with the ability of instantly being able to provide audit trails of where your ESG data you effectively remove costly future investigations by automating your ESG process. By developing an ESG road map that balances tactical, short-term data solutions with a strategic, long-term vision around your governance process you will be better prepared choosing an ESG platform that delivers sustainability data performance with integrated, instantly available and accessible governance reports, is not only efficient, it will also avoid the potential high costs incurred by ESG teams to address the increasing burden of proof and evidence of forthcoming regulatory demands to avoid incorrect disclosures.
To de-risk your ESG Journey consider the following components:
- Build an automated robust ESG data governance model at the very start.
- Have a central data platform that can be integrated with existing governance and risk management tools to build a single source of ESG truth.
- Use ESG platforms that have a range of options to capture ESG data, by integrated surveys with stakeholders, integrations with third-party data applications (via APIs) and compliance with ESG data policies.
- Ensure users and leadership are able to gain real-time visibility into the ESG-related aspects of their projects, stakeholders programmes and portfolios.
- Do replace existing legacy ESG solutions with a cloud-based solutions to reduce technical debt and modernise the technology infrastructure for future solutions.
- Embed ESG requirements into your core operational processes.
- Integrate new workflows into existing processes, to incorporate ESG data into decision-making processes, reviews, and governance approval gateways.
- Use platforms that communicates ESG requirements across the organisation and bring all employees on board with an intentional change management approach.
- Review and revise existing data processes to comply with changing ESG requirements (for example, increasing the frequency of data updates).
- Develop clear plans to support the integration of material issues and new ESG approaches.
- Identify central ownership and responsibility within the organisation for ESG projects.
- Create a cross-functional steering committee for ESG data governance—including leaders from the business, technology, data, risk, and finance functions—with joint accountability and decision-making processes.
- Establish ESG data controls to ensure compliance with regulatory frameworks.
- Ensure that ESG data governance reflects shifts in market demand and location-specific regulatory requirements.