“A phased approach to implementing ESG programs, starting with quick wins and gradually advancing to more complex initiatives, enables organizations to embark on their ESG journey more easily. It is crucial for organizations to develop a ‘repeatable’ process rather than a ‘one-off’ approach when it comes to implementing an ESG program and reporting framework. Integrating digital tools from the beginning ensures that this repeatable process is streamlined— from assessing materiality to setting goals, collecting data, publishing reports and disclosures, and conducting risk assessments and performance assurance. Beyond the evident benefits of digital tools, having a single source of truth for sustainability data empowers management teams to incorporate ESG data into strategic decision-making.”

Q1. ESG reporting has become a focal point for organisations across the globe. What are your thoughts on this issue? 

It is heartening to see that ESG reporting is now a business imperative for Indian and global companies alike. While the journey is challenging, organisations that embrace transparency and implement ESG reporting strategies are going to be best positioned to navigate the opportunities and risks in the emerging global landscape. 

Companies in India and other emerging markets now have global ambitions and multi-country operations. As a result, stakeholder expectations are rising; investors, supply chain partners and customers increasingly demand greater transparency, particularly regarding social and environmental impacts. These companies need to prepare for broader regulations such as the European Union’s Corporate Sustainability Reporting Directive or the United States Securities and Exchange Commission’s requirements, as well as mandatory disclosures for larger listed Indian companies under the Business Responsibility and Sustainability Reporting framework. 

By establishing robust ESG reporting processes, these companies can gain several advantages. It helps assess and prioritise material issues most relevant to their business, identify and proactively mitigate risks, and tap opportunities for growth, differentiation and innovation. Companies can improve their reputation and branding by demonstrating sustainability credentials. ESG reporting also enables access to responsible investors and ESG-linked financing. For multinational companies operating in India, it ensures alignment with global sustainability goals and parent company standards. 

Q2. How do you think organisations can best tackle it in an efficient manner?

ESG reporting is a data intensive and in most of the cases an enterprise-wide activity. Hence people, processes and technology are all important for organisations to ensure robustness and accuracy across the ESG reporting initiative. However, many organisations invest in technology much later thinking that they need to first set in place the team and processes. I think this is where the whole process can either get stuck or delayed. Since it is a data-driven process, technology can in fact boot strap and then scale up team’s efficiency and processes much faster. Technology can even help organisations in setting directions and goals for your ESG program. It can enable a thorough materiality assessment and industry benchmarking so as to set a framework that can guide teams in collecting the right data and also in measuring and reporting the success or progress of their ESG initiatives in a transparent and insightful manner. 

ESG touches many departments and communities, so data collection needs to be comprehensive and collaborative. This is where again use of a proper technology platform can work to organisations’ advantage. Software platforms can provide smart digital forms and templates aligned with global ESG reporting standards, helping organisations collect, structure and present their data in a standardised way. Automated data collection from multiple sources within the organisation can ensure data is up to date and minimise manual input errors. It can also help in doing proper audit trails and validations. And then analysing large volumes of ESG data to identify material issues, risks and opportunities requires advanced data processing and modelling capabilities. 

Hence for organisations especially in emerging markets, technology-enabled ESG reporting is even more crucial to overcome resource constraints and data management challenges. 

Q3. With the rise of new age technologies, do you think the ESG reporting platforms/solutions will become even more efficient and easier? 

Definitely, the new age technologies like cloud, AI, IoT, block chain all will have its own impact on the sophistication of ESG data management and reporting platform. Generative AI may be the technology that will have the biggest impact on how efficiently and quickly an ESG report can be generated once the data is in place. For example, we see clients and partners using our Gen AI Copilot to automatically draft reports found that they can save manual effort by at least 60-80%. 

However let us also understand that technology is only an enabler. For reporting solutions to truly become more efficient and effective, there needs to be alignment on ESG reporting frameworks and standards. The lack of consistency in metrics, definitions, and calculation methodologies today adds complexity for companies trying to measure and disclose their ESG performance. As frameworks converge over time, technologies will also become more of plug-and-play scenario. So naturally in such a scenario, technology can truly streamline and simplify the ESG reporting journey of organisations end to end. 

Q4. Also, which technologies are playing a crucial role in this journey?

As I told you there are many emerging technologies at play here. Some technologies like cloud and Open API frameworks have improved the accessibility and also reduced the overall cost of implementing ESG reporting platforms.

But among the other technologies, the role of Artificial intelligence and machine learning technology is going to be more profound in the near future. I touched upon the promise Gen AI holds in improving the efficiency of the whole reporting process with features like automated drafting of reports and also even giving relevant cues for ESG teams while filling up both qualitative and quantitative responses. AI also makes the ESG reporting platform intelligent with algorithms that can analyse large data volumes to identify patterns, trends, and anomalies. And then there is predictive analytics to help organisations forecast and mitigate ESG risks. Robotic process automation is another technology that can impact the efficiency by automating repetitive, time-consuming ESG reporting tasks like data entry and report generation. 

And among the technologies that are still in its nascent days, Block chain and IoT can potentially have an impact on ESG reporting especially in sectors like oil, gas, logistics and manufacturing, financial services and so on. Block chain can be put to use for ensuring transparency and traceability in ESG reporting. Internet of Things devices can monitor and collect real-time environmental data on aspects like energy use, emissions and waste management. This could support timely, informed decision making to improve ESG performance. 

Q5. How do you visualise the future course of actions across various countries on ESG reporting and what recommendations do you have for organisations to make their ESG reporting journey comfortable. 

The future of ESG reporting looks very promising across the globe with growing awareness and demand from different stakeholders like investors, customers, partners and employees. More and more companies are realising that their commitment to developing responsible business practices that align with their industry’s as well as broader ESG goals is crucial for long-term success, and regulators are putting in place frameworks to standardise ESG reporting. However I see some concerns among the organisations in terms of how they go about it. 

Commitment of the leadership and board is critical; it is not enough that they appoint a sustainability leader, but they must also encourage a culture across the organisation to support the leader in setting clear goals and implementing the ESG reporting initiative. Many a times, organisations tend to employ a third party consultant and then create a temporary team to help him in getting a report published somehow. But this approach often leads to many gaps in data collection, reporting and stake holder communication leading to green washing and other errors. 

Organisations need to create a ‘repeatable’ process than a ‘one off’ process when it comes to implementing an ESG reporting framework. Technology has to be integrated seamlessly in the beginning itself to make the ‘repeatable’ process streamlined right from conducting assessment to setting goals, collecting data, validating it, choosing the standards, reporting as per them and then doing risk assessment and performance assurance. It makes the life easier for internal and external entities involved in the whole process. 

As per a recent Deloitte Survey, though there is a significant increase in companies disclosing ESG information, very few of them are making use of this data for scenario planning especially in GHG reduction or for financial impact assessment. This limits the business value of ESG information. 

But what concerns me is the number of standards that are evolving. It will become extremely complex if different countries come up with their regulatory standards for ESG and sustainability reporting. Organisations will find it difficult to adapt to so many standards and then in the process will end up working with multiple consultants and creating multiple silos of data. I think global bodies like GRI and ISSB are trying to streamline this and have a unified way of ESG reporting; interoperability between standards is critical going forward. 

Disclaimer: This article was originally published on the NASSCOM page.