The increase in sustainability reporting requirements for corporations, including the CSRD, CSDDD, and new global standards by the IFRS ISSB, has brought about a significant data challenge. Companies will need to report according to ESRS developed by EFRAG, requiring detailed data to be digitally tagged and shared universally. The legislation mandates data availability via ESAP to facilitate access to financial services, capital markets, and sustainability-related information.
The surge in data due to reporting on carbon emissions, human rights risks in supply chains, climate change, pollution, water and marine resources, resource use, biodiversity, workforce safety, and human rights will create challenges for businesses. The amount of sustainability data in the marketplace is projected to be five times larger than financial data in three years. Managing this flood of information will require companies to collect, organize, tag, and interpret data in alignment with reporting standards, which may vary across jurisdictions.
Data governance has become a focal point for sustainability and regulatory compliance teams, requiring accurate real-time information across global operations and supply chains. Businesses must know the exact happenings in their supply chains, from sourcing to production, in near-real time. Aggregating, analyzing, and managing data collection across the organization is essential for businesses to survive and stay competitive in a landscape of heightened transparency and stringent reporting requirements.
As sustainability reporting requirements become more detailed, data quality and volume will be a top priority for C-suites. The evolution of these requirements coincides with advancements in data analytics and cloud-based tools, providing opportunities for innovation in capturing, storing, and deploying data. The challenge lies in utilizing these innovations to deliver the insights required for businesses to succeed in the era of increased transparency and sustainability disclosure.
Businesses of all sizes need to adapt to the growing demands of sustainability reporting and data governance. With the influx of data on environmental, social, and governance practices, companies must ensure they have the capabilities to manage, analyze, and report on this information effectively. Harnessing innovation in data analytics and cloud technology will be key in meeting the challenges posed by increased sustainability reporting requirements and ensuring compliance with evolving regulatory standards.
