Essential ESG Data Collection Tools Every Organization Needs for Effective Reporting
TL;DR
Effective ESG data collection is vital for credible reporting but often complex due to data's spread across multiple systems.
Relying solely on APIs or AI for data integration falls short; a more comprehensive approach is needed.
Key ESG software features should include:
Bulk uploads for large datasets
Real-time API integration
Copy/paste tools for quick transfers from external sources
Manual entry for unique data points
Third-party data entry options for supplier and partner data
AI-powered document hubs for managing and analyzing complex data
Investing in a versatile ESG platform enhances data accuracy, transparency, and ease of reporting, supporting organizations in building trust and avoiding greenwashing risks.
As organizations increasingly integrate Environmental, Social, and Governance (ESG) factors into their business strategies, efficient ESG data collection becomes crucial. Reliable data enables organizations to measure, report, and optimize their environmental and social impact. However, collecting ESG data can be a complex process, involving multiple sources, departments, and data formats.
As highlighted in a recent EY article, concerns over ESG data reliability and greenwashing are paramount, making robust data collection functionalities essential for credible ESG reporting. Unfortunately, most decision makers and software developers underestimate the core issue: much of the data is dispersed throughout the organization on multiple systems, many of which do not communicate with one another. Thus, a simple API approach, with or without the sophistication of AI, is simply not a winning strategy.
Investing in a robust ESG reporting software with versatile data collection tools that enables a more grounded, easy for implementation strategy can streamline this process and succeed in a relatively short time, enhancing accuracy, and improving transparency over a tight learning curve. But not all software solutions are created equal! Before you take the plunge, ensure that the SW platform you choose meets your organization’s needs with multiple data upload tools and a variety of data types for both quantitative and qualitative data, allowing you to enjoy immediate insights and create long term projections effectively.
In this blog post, we’ll explore the essential data collection tools that every ESG software should offer to support efficient and comprehensive reporting on an ongoing basis:
1. Bulk Upload
The first and most important capability that you need from your ESG accounting and intelligence software is bulk upload functionality. For organizations with extensive data from various departments and geographic locations, this feature is indispensable, and often a key reason for transitioning from a basic spreadsheet solution to a specialized ESG platform. The bulk upload tool allows users to import entire spreadsheets at once, enabling efficient data entry for large volumes of information. This feature not only saves time but also reduces errors by avoiding repetitive manual entry, especially for metrics that need regular updates.
**Key Considerations: Ensure that bulk upload capabilities support multiple file types (such as .xls, .csv, or .xlsx) and provide templates that ensure data is formatted correctly before uploading. This helps maintain data integrity and prevents issues arising from format incompatibility.
2. API Integration
Application Programming Interface (API) integrations have become the gold standard for real-time data transfer across platforms. API connectivity enables companies to sync data from various sources, such as energy meters, financial systems, and supply chain management software directly into the ESG software. This not only automates the data collection process but also ensures that data is consistently updated, accurate, and comprehensive.
This automation not only streamlines data collection but also ensures consistency and accuracy in reporting. For ESG purposes, API integrations facilitate real-time monitoring of ongoing metrics like energy usage, waste management and water consumption, enhancing transparency and accountability.
By choosing an ESG software with API capabilities, you are ensuring that you are investing in a cutting-edge technology that will adapt to your needs as they change moving forward.
**Key Considerations: If your business is not fully (or mostly) digitized and automated at the moment, the API data collection feature may seem less relevant at first. But as you become more reliant on your ESG accounting software and start reaping the business benefits it provides, you may find digitization to be the natural next step in your ESG data management. Once that happens, your ESG platform will happily be able to jump on board with its API capabilities.
3. Copy/Paste from External Document
Many organizations still rely on spreadsheets for data management, and a robust copy/paste tool can significantly simplify data transfer to ESG platforms. In fact, a recent KPMG survey found that nearly half of companies are still using spreadsheets to manage their ESG data, highlighting the need for more efficient solutions. This functionality allows team members to quickly and accurately transfer data without extensive reformatting, keeping reporting processes on schedule and minimizing errors.
This feature is also key for data you may want to update from your Enterprise Resource Planning (ERP) system. Simply download your source file, and copy the relevant data to paste directly into the relevant data point on the ESG platform.
A robust copy/paste functionality that accommodates large datasets without altering formatting or introducing errors is ideal. It simplifies the process for users and ensures that data remains consistent across various platforms.
**Key Considerations: Your ESG platform must be able to store the reference file from which data was copied, ensuring full traceability and transparency—an essential factor for third-party assurance. With these tools, you’ll be able to swiftly answer questions about your data sources, and present supporting documentation when needed.
4. Manual Entry
Yes, manual entry remains extremely relevant! Despite the increasing automation in ESG data collection, manual entry remains an essential feature. Certain types of data, such as qualitative insights, irregular metrics, or customized metrics that are specific to a company’s unique ESG goals, often require manual input. This is particularly valuable for smaller companies or organizations with limited resources, as they may lack the capability to fully automate their data collection.
When thoughtfully designed, manual entry allows for flexibility, enabling users to enter unique, customized data points that might not fit into standardized templates. It’s especially useful for last-minute adjustments, data corrections, or for providing context to certain metrics. For ESG reporting software, a clean, user-friendly interface that facilitates quick, intuitive manual entry is a must!
**Key Considerations: Entering your data manually should not be a tedious process! From start to finish, you should have a clearly designed path for entering the relevant facility, year, and data category to get in and out of the platform as quickly as possible.
5. Third-Party Entry from External Sources
In ESG reporting, data often extends beyond the walls of a single organizational entity. For instance, Scope 3 emission calculations require data from upstream suppliers and downstream partners; meanwhile, a facility manager within the company might only need to enter monthly electricity usage without being fully onboarded to the platform. According to Deloitte, Scope 3 emissions may make up 88% of a total business emissions, but collecting this data is a major challenge due to the complexities of supply chains and the need for collaboration among various stakeholders.
To maintain data accuracy and build trust, your ESG software should allow for third-party data entry, either through secure portals or dedicated modules that authorized external users can access. This capability enhances collaboration, ensuring comprehensive ESG reporting that meets stakeholder demands for transparency and accountability.
**Key Considerations: To encourage external stakeholders to participate, look for features that provide them with user-friendly tools, such as visual analytics and reference document uploads.
6. Emerging must-have: Document hub powered by AI
With the shift from voluntary to mandatory ESG reporting frameworks, businesses must now collect metrics they have never tracked before. For instance, upcoming Corporate Sustainability Reporting Directive (CSRD) regulations require companies to submit an extensive array of data points—up to 1,200 in some cases.
While advanced data collection tools are essential, technology has limitations in answering complex questions that require human insight. This is where large language models (LLMs) come into play. Investing in software that combines industry expertise and insights with a well-trained LLM can enhance your data management capabilities, enabling the system to analyze documents and datasets, extract relevant information, and generate insightful reports.
**Key Considerations: A robust AI-powered document hub can save time and reduce errors, empowering your team to focus on strategic decision-making rather than data crunching.
How ECO-OS Provides All These Data Collection Tools (and more!)
ECO-OS provides an ESG accounting and intelligence platform designed with comprehensive data collection in mind. It offers a multitude of tools that align with the demands of ESG reporting, including features for third-party data entry and API integration. By streamlining data collection and enhancing transparency, ECO-OS helps organizations efficiently navigate the complexities of sustainability reporting and opens doors to new business opportunities.
Moreover, ECO-OS, with its extensive industry expertise and customer experience, supports companies through every step of their ESG journey, ensuring they remain compliant with evolving regulations like the CSRD while driving their sustainability objectives forward. With its user-friendly interface and robust data management capabilities, ECO-OS is an ideal solution for organizations committed to impactful ESG reporting.
Conclusion
The complexity of ESG reporting necessitates data collection tools that balance flexibility with efficiency, “hiding the complexity under the hood”. From manual data entry to automated API integrations, each tool plays a vital role in providing companies with the most accurate, up-to-date information. With these capabilities, companies can streamline their ESG data collection, ensuring that their reporting aligns and evolves with changing industry standards, resonates with stakeholders, and supports sustainability goals for years to come.
Investing in an ESG software that features a variety of user-friendly data collection tools shows that you are committing to transparent and impactful reporting. With ECO-OS’s robust capabilities, companies can better manage their ESG efforts, demonstrating accountability and driving forward their sustainability objectives.
Glossary
ESG (Environmental, Social, and Governance): A comprehensive framework used to evaluate a company's commitment to sustainable and ethical practices. ESG encompasses three key areas: Environmental factors, such as a company's carbon footprint, resource usage, and environmental stewardship; Social factors, including employee relations, community involvement, and human rights; and Governance factors, which assess corporate leadership, transparency, ethical behavior, and stakeholder engagement. ESG criteria help stakeholders understand a company's long-term sustainability and ethical impact on the world, guiding investment and operational decisions.
Greenwashing: A phenomenon where a company makes misleading or false claims to convince consumers that its products are more environmentally friendly or have a greater positive environmental impact than they truly do. This is often viewed as a critique of Environmental, Social, and Governance (ESG) practices because it undermines the credibility and effectiveness of ESG efforts.
Corporate Sustainability Reporting Directive (CSRD): An obligatory reporting framework enacted by the European Parliament that applies to certain companies with operations taking place in the European Union. The mandate requires companies to report on specific ESG metrics, conduct a double materiality assessment (considering both the impact of the company on the environment and the impact of environmental issues on the company), and undergo third party assurance to verify the accuracy and reliability of their ESG disclosures.
Double Materiality Assessment: Evaluates not just how the company’s operations affect the broader environment and society, but how external environmental and social issues may impact the company's financial performance and reputation. The CSRD mandate requires companies to report only on ESG issues deemed material, supported by their double materiality assessments. This approach provides a comprehensive understanding of risks and opportunities essential for navigating today's business landscape.
Scope 3 emissions: Indirect emissions involved in producing a product, including upstream and downstream emissions. Upstream emissions relate to those activities that support the production of your product before manufacturing (i.e. production and transportation of raw materials, business travel, capital goods, etc.) and Downstream emissions support the distribution and end-of-life of your product (processing of sold products, waste disposal, use of product, etc.) Scope 3 emissions are often the hardest to collect and typically account for the majority of emissions stemming from a product's production (for non-vertically integrated companies.
Third Party Assurance: The verification and validation of your sustainability report by an independent and qualified external auditor. The review process can be conducted to examine your data, methodologies, and disclosures against established standards, frameworks, or principles (e.g. ISO, GHG Protocol, PRI). There are two different levels of assurance that can be received: limited (lower cost but less rigorous) and reasonable (more thorough and provides a higher level of confidence in the ESG data).