In the past year, the responsibility of sustainability data has shifted. Sustainability teams within organizations used to be responsible for identifying the key data series and then scrambled to produce them each year. Now, as sustainability data has become part of public disclosures, the finance team has taken over. These finance teams are experiencing shock and dismay at the state of sustainability data.
Public companies use well-defined, Sarbanes-Oxley-compliant (SOX) processes to produce financial data that has been carefully tracked and validated and has limited risk of being incorrect. In contrast, sustainability data has been handcrafted. It is often scattered across spreadsheets, difficult to understand and full of unknown risks.
With hundreds of sustainability software vendors, it is tempting to buy a fix to this problem, a software package that promises to organize data, display instant visualizations and deliver a set of useful analytics. But, according to a survey from my company earlier this year, all but 12 of over 300 sustainability software vendors prepared actual data; the rest used industry averages or unverified user inputs.
As finance teams confront the challenge of preparing sustainability data, the common elements of modern data strategy apply: a centrally stored, well-governed data repository to eliminate duplicate data sets, and well-documented processes that reliably and easily provision the data for various use cases. But there are specific pitfalls of sustainability data that should be top of mind as well.
Here are five key components of a data strategy for sustainability data.
1. Actuals Not Estimates
This might seem a bit obvious, but the state of sustainability data is such that many vendors pipe in industry and sector averages for emissions data to enable quick summary results.
The problem is two-fold: The estimates are quite coarse and may not be even mildly accurate. A recent study by FTSE Russell shows that the noise is huge. Second, investor expectations are not just that data will be reported, but that the data will show emissions and water reductions over the next few years. Industry averages don’t work for these goals.