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What is ESG?

ESG means using Environmental, Social and Governance factors to evaluate companies and countries on how advanced they are in terms of sustainability. ESG ratings are used by investors to help to decide what equities or bonds to buy.

What is ESG Reporting?

The term ‘Environmental, Social and Governance (ESG) reporting’ is trending. Businesses are

under increasing pressure to provide clear, correct and comparable sustainability data as they answer to investors, regulators but not to forget also to their customers or employees. 

Why does ESG seem so complex?

While ESG reporting sounds simple, in reality it seems to be quite challenging as regulations are still maturing and as we see a lack of trust by investors in the integrity of the reporting. At the same time, the importance of the reporting can’t be ignored as missed targets across the board on ESG criteria have a financial impact, whether it be from investors that refuse to provide capital or unhappy employees that go on strike. 

What is the impact of ESG for Financial Planning and Analysis Teams?

  1. As ESG is still relatively new, more developments and reporting requirements will arise. In time, we expect more industry specific sustainability reporting standards to meet the demands from investors but for now, FPA teams are expected to react agile in adapting to evolving reporting expectations. 

  2. It’s not just about Finance. Although the ESG Reporting is on the CFO’s desk, many stakeholders are involved across multiple teams: from HR recruiting for more diverse teams, Plant Controllers knowing what to do to reduce carbon emissions to corporate communications managing investor relations. A closer collaboration between finance and other departments is a must-have for a successful ESG strategy. 

  3. The data challenge will have to be faced. Companies know that ESG will likely end up forming part of their annual report—but they’re not clear on what data needs to be collected, how to ensure data integrity and the best way to prepare to incorporate both structured and unstructured data sources. Research shows that most ESG data is stored in spreadsheets, which makes reporting and analyzing a largely manual process. 

  4. FP&A teams will need to automate their processes for budgeting, planning and reporting as this will eliminate the risk associated with managing manual spreadsheets. Automation will also help to easily create fresh reports or to manage multiple reports for different scenarios more easily. Another major benefit of automation is that all data is stored in one central location, offering greater control while establishing a single source of truth for all the ESG data gathered from the many teams involved in the annual reporting process. By using technology that unites teams, processes and workflows, gathering data from across the business becomes simpler, plus reporting will be done with more confidence because of the consistency of the data. 

How can Aexis help with ESG Reporting?

Aexis has over 20 years of experience in Financial Planning and Analysis (FP&A) and Corporate Performance Management (CPM). We help our customers in all verticals with state-of-the-art FP&A technology so they have all the right tools in place for faster, more efficient and more accurate budgeting, forecasting and reporting. ESG reporting is another chapter in the continuous development of performance management. We supply our clients with the right tools to incorporate ESG related activities and measure their financial impact in their multi-year financial plans, annual budgets and forecasts. 

Within the leading FP&A solution IBM Planning Analytics, an ESG-Model with prebuilt dashboards is available, including the example shown here below where CO2 emissions are monitored.
Do you want to know more about this ESG-model? Please reach out to us! Or register for our upcoming FP&A webinar covering ESG on 13/10/22.  

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