Finance Monthly - March 2022

44 Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s More confidence in ESG credentials Historically, employees, customers, investors, and other stakeholders have been cynical about corporate reports on sustainability and corporate social responsibility issues. There is still a lack of trust regarding organisations’ ESG claims and a perception that companies are guilty of greenwashing or only reporting on positive progress. This is frustrating for organisations that not only understand the value of reporting accurate ESG metrics but also invest significant time to do so. For many organisations, it isn’t entirely clear what they need to do to build that trust. Until ESG is standardised and everyone is on a level playing field, organisations need to establish how they can provide greater consistency and transparency of ESG data. Key to this is working with investors to understand what it is they want to see. Companies recognise that strong relationships with their stakeholders will only be possible if they can demonstrate that they are reporting consistent, trustworthy data. With audit-ready reports based on a single source of truth, they can establish more confidencewith their stakeholders. Regulations that seek to mandate greater trust, transparency and accountability are on the horizon. This is one reason why stakeholders are beginning to feel that they can have more trust in the ESG data included within a company’s reports. For example, many organisations across Europe are currently issuing their first European Single Electronic Format (ESEF) filing, in line with a mandate that aims to make reports more easily discoverable and comparable with standardised tagging. Additional regulatory changes are coming into force such as the Corporate Sustainability Reporting Directive (CSRD) which will create more standardisation – and confidence – in the reporting of corporate ESG progress. Inevitably, more regulatory changes are yet to be revealed but organisations don’t need to wait for regulatory bodies and standards setters to set the pace of change within their businesses. Trust can be built now. Companies will need to go further when sharing data, both to meet these regulatory requirements and to cater to stakeholder demands. For example, outlining the company’s gender and diversity split no longer satisfies investors. They are also interested in how executive pay links to sustainability goals. Pay gaps need to be reported on and taken into account alongside, for instance, seniority and length of time at the company. Organisations will also need to ensure that processes are in place to gather this data efficiently from siloed departments across the business. One way to address this is to use one centralised platform that integrates teams, processes, and workflows to make this complicated data gathering exercise simpler. With this type of technology, all data within the platform can be linked. When data is updated in one place, it automatically updates everywhere. This means reporting teams can be confident in the consistency of the data, and stakeholders can be confident in the ESG credentials being reported. As organisations get into their stride with streamlining ESG reporting processes this year, banks and investors can expect more confidence in the ESG data that companies publish. A collaborative approach to ESG reporting As regulation is changing, the ESG data that companies need to track and report on is also shifting. Annual and interim reports can be a mammoth task, involving many stakeholders across multiple disconnected teams — from the sustainability and corporate communications teams to investor relations, auditors and more. So there is a growing need for businesses to ensure that everyone involved in developing ESG reports not only buys into a collaborative, centralised reporting model but understands their role in it. This requires education across teams. Once an organisation has identified who needs to be involved, those individuals will need access to the right reporting tools and, importantly, clear and consistent lines of communication. Efficient ESG reporting requires everyone to know the role they play and collaborate.

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