Finance looks for tools to automate the ESG reporting process

SEC reporting managers, expert timeline planners who project manage quarterly and annual reports, will face a new challenge if the SEC moves forward with a proposal released earlier this year: ESG reporting. In the past few months, data tools and cloud platforms have released a plethora of reporting tools for companies, but verifying the data and signing off on it still remains to be done.

“The phenomenon that we’re looking at would be similar to an accounting team trying to do financial reporting without a general ledger,” Steve Soter, senior industry principal at Workiva, a SaaS company, told CFO Brew. He said that ESG data is spread across utility bills, HR files and so forth, creating a reporting nightmare.

It’s no surprise then that companies are eager for a solution to the reporting issue; according to a new Deloitte report on ESG disclosure and preparedness, 99% of 300 public company executives surveyed said they were somewhat likely or very likely to invest in more technologies and tools over the next 12 months.

And, companies with available tools are rushing to fill this need. Salesforce announced a new tool, Automate ESG Reporting, that polls data from a host of its other systems to manage and spit out investor reports “in real time.” The tool will be available in February 2023 and comply with Global Reporting Initiative, an international ESG framework. AuditBoard, a cloud platform, also launched an ESG reporting tool earlier this fall, featuring some automated capabilities. Reporting platform Workiva incorporated an ESG element that it says is “always audit ready.”

Automating the reporting could transform the function and ESG roles as they are today, John Willard, US transformation lead at ESG consulting company Quantis, told CFO Brew. He said that sustainability roles are now spending the majority of their time gathering data.

While companies are clamoring to get a tool that can effectively communicate their ESG metrics, the tricker part will be verifying the data, a critical concern for CFOs who, if reporting data to the SEC, have to vouch for the information. The biggest challenges to report Scope 3 emissions was a “lack of confidence in the quality of data from external vendors” (51%) and “lack of data availability” (41%), Deloitte’s survey found.

When the SEC released its ESG proposal, it was like pouring “gasoline on an already smoldering fire,” Soter told CFO Brew, adding that “financial reporting and audit were already kind of tough to deal with,” so tools that can handle ESG data on top of that will be the “winners” in terms of clientele attraction.

Willard added, “CSOs, CEOs, and CFOs need to really figure out what that balance is that they’re asking of their sustainability teams. Is it to be a reporting function? Or is it to be a larger transformative, integrated business function that is helping them meet the needs of their future business model?”—KT