At the latest when the Corporate Sustainability Reporting Directive came into force, it became clear to all European companies that they could no longer avoid the issue of sustainability. This is because sustainability reports are gradually becoming mandatory. Reporting also has an impact on a company's IT system landscape because data from different sources has to be merged and made usable. This requires a suitable system architecture with corresponding data flows and key figures. Once these have been established, companies not only meet their reporting obligations, but also benefit from a wide range of advantages.

For certain companies, ESG (environmental, social and governance) reporting has already been part of their obligations for several years: Around 11,600 large capital market-oriented groups, insurance companies and financial institutions across the EU have had to measure their sustainable performance and submit corresponding sustainability reports since 2017. This reporting obligation was massively expanded at the beginning of 2024 and will gradually affect all capital market-oriented companies in the coming years - only micro-enterprises remain exempt. By the 2026 financial year at the latest, virtually all European companies will be required to submit ESG reports. The time to prepare the IT system landscape and the internal and external data flows accordingly is therefore pressing.

This is because ESG reporting requires the aggregation and review of a wide range of data from different sources. The difficulty lies in the fact that the required data is not available centrally and not in a uniform format, but in heterogeneous structures and forms. It is also often unclear which data and data sources are actually required for sustainability reports, especially as there is no uniform standard. Instead, the European Sustainability Reporting Standards (ESRS) specify twelve standards, two overarching and ten topic-specific. These standards can be used to determine 1,178 qualitative and quantitative key performance indicators (KPIs). Companies must disclose these. For each data point, they also need documentation on how the data is collected, from which source it originates, how it is verified, compiled and finally prepared for the report. Before companies can embark on the actual ESG reporting, key points need to be clarified and the IT systems adapted.

Identify data sources, harmonize data

The first step is to identify the required data sources from all silos and involve all internal and external stakeholders. The existing data records from the various sources must then be consolidated and harmonized. Guidelines regarding processes, roles and responsibilities should also be developed in this process step.

The next step is to select the technologies and tools required for ESG reporting, taking into account the existing system architecture and the possibility of easy scalability. The internal and external data flows must be evaluated and, if necessary, adapted or even newly developed. A comprehensive security check is advisable at this point in order to minimize security risks when exchanging data.

The decisive factor for complete ESG reporting, which means as little effort as possible for the company, is that the required data is ultimately collected digitally at a central location - a single point of truth (SPOT). This requires large amounts of granular data to be digitized first, which can be very challenging. A full-service digital company can provide important assistance and support companies at this point. If the ESG data comes together in a SPOT, it can be made available to the processing systems in real time. ESG reporting can then be carried out based on the defined KPIs.

A comprehensive data and system check is therefore essential before embarking on sustainability reporting in order to obtain an overview of the systemic availability of ESG-relevant data. The existing system architecture and the existing processes and tools must be recorded and analyzed in relation to the ESG requirements. This reveals where data gaps exist and where interfaces are missing. In addition to the dual materiality analysis, this data and system check forms the basis for successful ESG reporting enablement. Gaps between the actual and required target data points can be identified and closed, dependencies and responsibilities can be recorded, new data flows can be developed, new tools can be implemented and the system landscape can be adapted.

Utilizing external capacities and expertise

However, companies often lack the necessary capacity and knowledge for the required analyses and system adjustments. Only the financial years 2024 and 2025 remain for preparations in order to be able to report as prescribed from 2026. It is therefore advisable to bring in an external partner with the relevant expertise for the data and system check, the subsequent strategy and gap analysis, the implementation of new tools and the adaptation of the system landscape. It is always worth looking for a partner that offers comprehensive advice and solutions.

If companies take a timely and holistic approach to sustainability reporting, they can also turn the obligation into valuable opportunities for their business. After all, sustainability is also an image issue and has a positive effect on attracting and retaining customers and partners. Qualified specialists can also make their decision on which company to provide their workforce and expertise dependent on the issue of sustainability. Last but not least, ESG reporting reveals potential for improvement: Companies can optimize their energy efficiency, limit the waste of resources and thus save costs. In this respect, ESG reporting also contributes to the future viability of a company.

Robin Dawn Merkelbach, Junior Business Consultant E-Commerce & Engagement, SQLI

SQLI Germany, http://www.sqli.com