By Amelia Zimmerman
From managing ESG workflows to a lack of auditability, here are six reasons why you should say goodbye to managing ESG data on spreadsheets.
More than half of public companies (55 percent) still manage ESG data from a spreadsheet, according to a recent EY report. Despite the fact that spreadsheets lack the speed, accuracy, and security of more targeted ESG data solutions.
As companies of all sizes face mounting pressure to report on and make progress toward their ESG goals, managing huge volumes of environmental, social, and governance data is a crucial piece in both sustainability strategies and bigger picture business plans.
Read on to learn more about the six major drawbacks of managing ESG from a spreadsheet and what to look for in an alternative solution.
1. Version Control and Meaningful Collaboration Capabilities
Although file-sharing and cloud-based document management platforms have come a long way in recent years, these platforms can still pose problems for consistency and meaningful collaboration. It’s all too easy for multiple versions of the same file to be created, for users to download and work from outdated copies, and even for team members to download and share files with people who shouldn’t have access to that data. There’s also not much in the way of alerts and notifications on changes, downloads, and other user access.
Look for a robust ESG management solution — one that offers intuitive user management and version control, allowing you to add authorized team members and control user permissions and view settings, all while working from a single source.
2. Manual Data Entry Fire Drills
Managing ESG through a spreadsheet means your team must enter data manually and cross-check it (often multiple times) for accuracy. If your team is spending hours inputting and checking data for consistency across multiple sources, this puts a significant strain on resources. It also creates room for error, putting your organization at risk of possible greenwashing accusations, not being audit-ready, or not hitting your environmental, social, and governance targets.
Managing ESG data accurately and at scale requires efficient data collection from each relevant department and across the supply chain. An ideal ESG data management solution will integrate into existing systems, including financial systems and operational dashboards. This can give your team significant time savings, make their lives easier, simplify auditing when the time comes, and reduce risk across the board. Some solutions will even automate goal-setting and management, making it easier to stay on track with your targets.
3. Data Isn’t Insight
Even the most ardent spreadsheet fans can agree that spreadsheets lack visual intrigue. But the real problem with relying on spreadsheets for ESG management is that viewing data in dry or overly complex formats (i.e. tables and cells) can make extracting insights difficult to grasp, stalling much-needed action toward your ESG goals.
A more insightful solution will present data in digestible, visual ways that are easy to understand. This makes communicating your ESG progress and goals to different departments, stakeholders, and consumers much easier. Even within your own team, having data presented in the right way makes it more insightful and actionable, revealing the best course of action for future progress.
Spreadsheets also lack the ability to present data and updates in real-time. Without up-to-date insights into performance metrics, planning and taking action is limited to short windows after reporting periods. It also delays feedback on the actions you’ve already taken, as it’s harder to get the most current insights into whether a course of action is working. Real-time updates and insights are essential for your organization to make continuous progress toward its targets.
Most spreadsheets also present your ESG data out of context. They can’t offer industry or competitor comparisons and can’t always easily benchmark data against past scores. A more sophisticated solution, specifically for ESG, allows you to compare your firm’s performance over time, as well as against industry and framework-specific benchmarks. This kind of contextualization makes your data more meaningful to everyone involved.
4. Spreadsheets Make Disclosure Difficult
ESG data needs to be shared internally and externally and every audience has different requirements for the way the data needs to be presented. Within your organization, it’s common to have stakeholders and investors ask for updates on ESG performance between reporting periods. Responding to these demands can be time-consuming and stressful.
Externally, ESG reports and disclosures are a challenging process when managed manually through spreadsheets. Reporting against various ESG frameworks and standards can feel like going from one specialized project to another with little overlap on ESG data inventory.
“You can’t deliver action on a net-zero claim or an ESG report without a GHG inventory,” says Neal Dikeman, a partner at Energy Transition Ventures. “Doing that across a large organization consistently and repeatedly, and meeting modern standards for quality in the inventory, is challenging without good tracking and management software.”
ESG software simplifies the reporting process, not only through automated data collection, but also through framework-specific goals and templates. This enables you to produce reports relevant to your framework while offering actionable insights on your progress through real-time dashboards and easily presentable reports.
5. Spreadsheets Focus on the Past
Let’s be honest, spreadsheets are static databases that aren’t designed to track events in real-time. They require manual updates and primarily show past performance — and even current performance becomes out of date the minute the data is entered. The past-focused nature of spreadsheets limits their ability to forecast the future, which means firms can’t get insight into what’s coming and what they should do about it.
Steven Okun, a senior advisor at McLarty Associates, believes there’s more to ESG than measuring performance. “Companies need to be cognizant of emerging ESG trends and not focus just on what’s currently on their spreadsheet to track,” he explains. “The increasing business impact from the physical risks of climate change, such as more severe flooding and heat extremes, and diversity and inclusion — going beyond just calculating diversity and ensuring equal pay — are two such issues.”
A better solution built for ESG will help you manage ESG risks and make more informed decisions by staying ahead of new industry standards and regulatory changes, while allowing you to predict the results of strategic changes through simulation and change modeling.
The lack of data security inherent in spreadsheets (even those stored online) puts companies at risk ofdata breaches and leaks. A solid ESG data foundation makes digital security a top priority.
Additionally, the complexity and scale of ESG project management means data needs to be pulled frequently from various departments, suppliers, and systems. Extracting and sharing data manually across teams and organizations creates data vulnerabilities within your firm, as team members share data through a variety of less secure channels. A sophisticated approach to ESG data management requires secure third-party integrations — the kind spreadsheets can’t achieve.
How to Modernize Your ESG Strategy
There are two pressing reasons for companies to modernize their ESG strategies, Dikeman says. “The first is shareholders pushing for action on transparency in climate,” he explains, which includes setting net-zero and other diversity and governance targets. The second is regulators like the SEC updating requirements for climate and ESG disclosures, which will require that companies keep tight control over their data for compliance reasons.
Modernizing your ESG strategy is a long-term goal, but it doesn’t have to happen all at once. The ESG landscape is constantly evolving, so focus on long-term change rather than overnight success. Here are a few tips to get started.
Keep Up to Date
Stay up to date with the latest industry and ESG trends, standards, regulations and changes. Attend relevant conferences, read the latest reports, and subscribe to updates from leading ESG organizations.
Embrace Best Practices
Subscribe to regular updates from companies that perform well on ESG and consider how their goals, approaches, and communication styles could be adapted to work for your firm.
Invest in a Robust ESG Software
The right ESG solution can save your team time and frustration while avoiding the risks inherent in manual data management. It also helps you stay on top of shifting regulatory environments and model the results of strategic changes, transforming your ESG strategy into one that is far more proactive than reactive.
As your ESG goals and plans evolve, it’s vital to stay on top of risks and opportunities in your supply chain. Future-proof your organization’s ESG data mangement and reporting with Equilibrium, a next-gen, end-to-end ESG management solution that helps companies move past static spreadsheets and legacy solutions.
Take charge of your impact on people and the planet
Create, control, and communicate your ESG360 story through Equilibrium, a holistic, sustainability data management solution combining cutting-edge AI technology, insights, and strategic advisory to drive decisions.