Harnessing ESG Reporting Software to Simplify Compliance

Introduction and agenda

Welcome everyone, and thank you for joining us today on this webinar where we'll talk about how you can harness ESG reporting software to simplify compliance. A quick look at the agenda: we'll start with some introductions and then look at the current state of ESG reporting. Then we'll do a quick overview of ESG reporting software and talk about the essentials of what you should look for in an ESG reporting platform. We'll dive into how you can integrate that ESG reporting platform into your current digital ecosystem. Finally, we'll wrap up with some dedicated time for Q&A. We'd love to make this session interactive, so please feel free to post questions and we will certainly try answering them in the Q&A session. If not, we can continue the conversation offline as well.

My name's Daryush Mistry and I head product here at Pulsora, thrilled to be collaborating on this webinar with Cain Benham, who is the ESG lead at Kainos.

About Pulsora

Pulsora is a purpose-built platform from the ground up for companies to manage and improve their sustainability performance. We have over 500 companies on the platform with users across many countries and regions across the globe. We're fortunate enough to have some of the largest companies on the planet across multiple industry verticals like manufacturing, energy, retail, finance, and private equity on the platform. We're a globally dispersed team of 170-plus Pulsorans. We also have strategic investors in the form of Accenture and Workday, who have invested in Pulsora through their ventures arms.

About Kainos

Kainos started back in 1986 with a team of software engineers from Belfast, and has grown since then to become one of the FTSE 250 technology companies with shared revenues of over £300 million. A lot of our successes and some of the most challenging digital projects have helped us establish a solid reputation for innovation, and we've experienced impressive growth over the years, particularly in the last decade. We have 20 offices globally employing over 3,000 people across 23 countries. We are truly global. We handpick our teams of experts so that we make every one of our customers feel that we're integrated into their business and one of their team.

The state of ESG reporting today

Until recently, what we've seen is ESG reporting was primarily being driven by a company's desire to express its commitment towards sustainability for its various stakeholders, whether customers, partners, or as a vendor. This was being done through voluntary frameworks like GRI, CDP, SASB, and others. But with the increasing focus on climate change, as we've all seen, and on business accountability, there is increasing focus from regulators and government bodies to make ESG reporting a mandatory disclosure for companies to do business.

This became very apparent with the CSRD coming into effect in the EU, but also in many other parts of the world across various countries and regions. There is now a mandate for regulatory reporting around sustainability and ESG. In fact, the latest one to join this is the Australian government, which earlier this week passed their mandatory regulatory reporting for ESG and sustainability for companies based in Australia.

Beyond regulators: intrinsic drivers

It's not just about regulators. There are intrinsic drivers for sustainability and ESG, and those continue to remain. As you can see from this survey from PwC, over 75% of the respondents across the board said they make sustainability a criterion, or a key criterion, for decision-making when they're interacting with a company. Whether as a consumer purchasing products from that company, or as an employee considering employment options, or as investors looking at making an investment, they consider sustainability as a key criterion in that decision-making process.

Key challenges in ESG reporting

ESG reporting has some challenges and hurdles when it comes to working with it within a company. Here are three key challenges we'd like to focus on today, primarily driven by what we've seen in working with various companies and various data that has emerged around ESG reporting. The first is data fragmentation. Something really key is data accuracy. Both of these are internal drivers but reflect externally as well. Then there's the evolving regulatory landscape, which is primarily an outside-in initiative or challenge driving companies towards ESG reporting.

Data fragmentation: I think everyone in the sustainability space at a company is aware that sustainability and ESG data is highly fragmented, not just across your own organization but throughout the value chain, both upstream and downstream. It's often siloed in various kinds of applications within that dispersed environment. It requires working a lot with various entities throughout the value chain, across various applications, various users and teams, and presents a significant challenge in collecting data across this fragmented data landscape.

Related to that is data accuracy. Fragmented data often leads to data difficulties around collecting that lead to accuracy-related issues. Data accuracy is also a challenge because a lot of companies today are leveraging emails and spreadsheets for collecting their ESG and sustainability data. What that leads to is a lot of human data entry and copying of data across spreadsheets and various other documents, which can be error-prone often, and validating data across those mechanisms has its own challenges. When you have inaccurate data, there are also downstream issues of audit and assurance, and overall it ends up lowering the trust or the brand equity for the company.

The regulatory landscape is continuously changing and companies have to adapt to that changing regulatory landscape across the globe. What this means is it's no longer about adding more people or doing more. It's about how do you do more with what you have today, or doing more with less? That's really complex, especially given that some of these disclosures like CSRD have 1,400-plus metrics and very specific criteria for responding to each of those data points that might be relevant for a company.

The top two challenges that came back from the poll were data collection and aggregation, with 50% of respondents naming it, followed by data accuracy, and then stakeholder engagement. That tracks with what we see as well, and it's interesting that it's almost as critical as evolving regulations.

The ESG reporting platform: end-to-end view

What is an ESG reporting platform? Here you see a representation of the platform. Going from left to right, it starts with collecting data, consolidating it, calculating it, analyzing it for insights, and reporting on it, with the goal of comply and communicate.

When you look at collecting data, you want to make sure the platform allows you to collect data across your value chain, and can have integrations with existing data that you have within your enterprise or even outside, and be able to do that as human data entry, updating the data, or also being able to upload it through files. Once you have the ability to collect this data through the platform, you can then start consolidating it and centralizing it.

I do want to call out that centralizing data does not mean that you put it at one node at the top of the pyramid at your corporate or HQ level. The platform should be able to centralize data at whatever level it's applicable for, because for large, globally dispersed companies, they have representation in various countries and regions and should be able to centralize and use that data for insights and report within those countries and regions as well.

Data should also be validated when it's consolidated, because it's best to validate data and get high-quality data right from the source. This makes sure that data is ready for audit and assurance from the get-go and throughout its lifecycle.

Calculation is a key component of any ESG reporting or sustainability platform. Calculation largely focuses on greenhouse gases: Scope 1, Scope 2, Scope 3, and renewables and offsets. But it can also be calculation for specific methodologies like PCAF, or being able to work with the ESG Data Convergence Initiative (EDCI) if you're a financial institution. Calculation is also involved around other topics or domains like waste, water, biodiversity, and traceability. Calculating that data that's been collected and consolidated is a key component of the platform.

Once you have this data calculated, or as data is coming in and getting calculated, you can gather insights on that data through the analytics platform and be able to visualize this. See how you're tracking to your goals, and be able to benchmark it both with your internal data to see how your company's doing or units doing within the company, or even externally with peer groups or best-in-class.

Then you can take that data and convert it quickly into reports, whether in human-readable format or machine-readable format like XBRL. Be able to use templated disclosure reports and version-control them, because it's really key what you report on, and that needs to be audited so that you know at what point what report was generated and leveraged for sharing with specific stakeholders.

Which leads us to comply and communicate. At the end of the day, a lot of ESG and sustainability teams need to leverage everything that they do throughout the process with the platform and be able to provide this data to regulators for disclosures, to provide it to frameworks, to work with various stakeholders, and provide it to ratings agencies if they're interested.

Essential: cascading data collection

Cascading data collection is the ability to collect data through the platform across your entire organization and through your extended value chain. Whether this is your suppliers or you're working with various vendors, or as a vendor in an ecosystem, be able to collect all of that data throughout your value chain. This is really key, because a lot of the reporting in sustainability is dependent on the data in the value chain, and being able to do that in a structured way is really key.

With the Pulsora platform, our customers can create their own business hierarchy and define their own organization structure, including the extended value chain. They can then create requests and send them out to various entities within the value chain and be able to cascade that data back. Not only centralize it at the top corporate or HQ node, but also be able to use that at whatever level of the hierarchy that data would be useful at. So if you have a business unit, if you're headquartered in a specific country but you have a business unit in another country or region of the world, that business unit can centralize data as well while the data is cascading up and down the value chain.

Essential: integration with data sources

Integration coupled with cascading data and the ability to integrate with data sources helps solve the data fragmentation and data accuracy challenge in many ways. Integration is not just about being able to integrate from the corporate or HQ level with the corporate data you have, because as we know, as large globally dispersed companies, oftentimes you have subsidiaries, you have acquisitions over a period of time. You might have different systems in each of these different entities, like different ERP systems or ERP systems with different versions, different HRIS systems, procurement systems. In some places you might not have procurement systems.

Being able to integrate into these data sources throughout your business hierarchy and value chain, and being able to have that flexible architecture, you can address the data fragmentation and data accuracy challenges. The Pulsora platform enables you to do that. With the Pulsora platform, you can integrate at each level of your cascading data hierarchy with specific data sources relevant to that level of the hierarchy, and then aggregate it and use that data up and down the value chain.

Essential: controls and validations

Controls and validations are a key aspect of ESG reporting platforms. Similar to financial controls and validation of data, for sustainability and ESG data you do want to establish controls. This allows you to make sure the data you're collecting is accurate and high-confidence. Validations allow you to make sure that when you're collecting that data as close to the data source as possible, you have the ability to inspect and validate that data based on business rules that you might have set up.

With the Pulsora platform, our customers are able to create these control points through workflows, through approvals, through having the ability to review them and have multiple levels of approval, including getting their auditors into that approval chain if needed. They can configure their own validations as business rules so that, if the data is beyond a certain threshold or does not compare to a specific value, the platform can automate that and enable the user to do this more efficiently.

Essential: carbon accounting (modular)

Carbon accounting is a key component of ESG reporting and sustainability platforms. It is the ability to gather your greenhouse gas emissions data and be able to calculate that, analyze that, and make sure you're working towards your decarbonization goals.

That data has to be integrated into your ESG and sustainability reporting platform. However, it can also be modular. We've seen that companies that are more mature on the carbon accounting front might have already embarked on their journey with specific platforms addressing just this business challenge, and often are looking for ESG reporting platforms that are complementary to that. With the Pulsora platform, you have the ability to leverage carbon accounting available as part of the platform, but if you're already on that journey, you can still integrate with that as well.

Essential: audit and assurance

Audit and assurance is one of the most critical or essential parts of an ESG and sustainability platform. However, it's also one of the most overlooked ones. What companies are now realizing, and what we're seeing, is that it is really critical, especially with the mandatory regulatory disclosures that are kicking in.

The platform should have the ability, right from the get-go, to be able to audit all the data points and the data collection processes, so that throughout the lifecycle and the lineage of the data, you should be able to know how that data was arrived at at any given point in its lifecycle, and have the ability to attach supporting documents.

On the Pulsora platform, our customers have the ability to define their own metrics. Right from definition, it is bound to an audit trail that is maintained throughout the lifecycle of that data point. Customers also have the ability to create business rules around requesting the addition of supporting documents as those values are updated, either by humans or through file upload or through APIs. We call them evidence documents that can be attached to the data point.

The platform ensures that whatever data you're collecting for your ESG and sustainability reporting is audit- and assurance-ready, both for internal and external auditors. We have customers who have their auditors as part of the platform and in the approval process sometimes, so they can review this data in real time as it's coming in through the workflow and the control, and be able to review, approve, or revise it.

Essential: turnkey reporting

One of the outcomes of a lot of work that sustainability teams and ESG teams do is to be able to quickly create reports out of all the information that has been gathered by a company. The platform should enable turnkey reporting.

With the Pulsora platform, we have a full reporting and analytics platform as part of the ESG sustainability software. What this allows you to do is cleanly separate the visualizations and the layout from the data, and bring those two together dynamically through configuration, so that at any given point in time, if you need to generate your reports, you can do that with a single click and have the latest data represented in those reports. If you need to change the layout, you just need to create the new version of the layout and upload it into the platform. The next time the user runs the report, they would have the refreshed layout and the latest data represented in there.

This ensures that you have a highly efficient and smooth reporting capability within the platform. Prior to adopting platforms, companies had to wait for extended periods of time to bring all the data together and create reports, which an ESG reporting platform can completely eliminate.

Implementation planning

Implementation planning when you're going through this: it is key that you know where your data is, finding your data and gathering the data. Define your objectives, do any materiality and scoping testing. As a robust solid platform of risk, ensure that you're gathering the data.

It's very important that you talk to all of the stakeholders inside the business, because everybody has to be responsible. You've got to come from the top down with this. You've got to be on board. It is key that everybody, all of the stakeholders internally and externally, are on board, and their insights, thoughts, and processes are involved in the questionnaires and what you're going to do and the outputs of what you're going to do.

You must ensure that when you're implementing, you know what you're going to report on. Establish it strongly, involve all your stakeholders, find your data, and put all your data together. The reporting framework you need to use will generally be determined by your business type, but there may be crossovers as well to do multiple reporting. Always monitor your progress, audit your progress, double-check everything. These are just some of the points of implementation planning.

Building an integration strategy

In order to get seamless integration, you've got to train your staff, keep everybody alive and alert, and on top of all of the training and methodologies that are available. Allocate the resources accordingly. Don't overburden and don't underburden the staff and the people involved in the team. Keep everybody on target and ensure that they have clear timelines, milestones, and objectives to achieve.

Risk management is probably one of the most important parts that you're going to do, because this is part of materiality and risk of everything. Here's where you need to be true and honest to your business, to scope in and scope out of what you're going to report against, weighted risk, and really dig deeper into some of the more finite detail of your business and what it is. Don't be tempted through materiality to risk out something because you may not understand where the data is or have the data. Don't do that. Stay honest and true inside the business. You have consultancies. Pulsora's skill and Kainos' assistance can help you understand where the data is, find the data, bring all of that together, and give you a great result for your risk management.

Collaboration: we always use the big C word, communication. Across any part of your business, communication is key. You really need to foster the teams, bring them together, collaborate with the teams, keep everybody strong and united through this process, so that you actually make it part of your business culture and part of the business change, so that your sustainability journey is taken seriously throughout the business. Make sure that you communicate regularly with them all and keep them moving.

Common pitfalls

There will be things that you're going to stumble on and fall foul upon. Inadequate planning speaks for itself. You have to put quite a bit of time into the plan. Let us help you do that. Let us build that with you, and ensure that your integration and implementation are absolutely smooth-running.

Poor communication: this is not just for ESG. This is throughout your entire business. If you don't communicate with a team, then it generally has a less effect or a poorer result. You do need to keep your communication high throughout this, right from the top down. It has to be part of the culture of the business.

Don't underestimate the resources you need. Everybody said that the data is hard to find, hard to understand, or you don't know where it is. Don't underestimate the resources required for that. It may not necessarily be an internal resource that you need. It could well be that you need better understanding of how you can use the data from the disparate systems that you have.

Address issues early. If you do get hold of any issues early, that supports successful outcomes in any of your technology implementations. It's a fact of addressing it and getting upfront with it. Don't be shy of it. Don't shy away from it. Come back and get help, go back to collaboration and communication, and you shouldn't have too many issues.

Q&A: What are the potential consequences for businesses that fail to comply with ESG regulations?

Ultimately, it's going to land in fines. As ESG becomes mandatory and more countries around the world start to unite with it, the mandatory process will be... basically, carbon will equal tax. Like if you don't pay your current tax or comply, and you file your accounts late, etc., it comes with fines. Ultimately, that's where this will land.

But I would say look at it and spin it for the positive. Don't even consider failing. Set yourself a baseline because, with some true great practices out there and a few small changes, you'll soon realize the benefits. Sustainability and making some changes can increase the bottom-line margins and profits very quickly and very easily. Pulsora's tools can show you that and identify that very quickly.

Q&A: What regulations are priority to comply with, and what business size needs to comply?

At the moment, over 500 employees is probably the greatest rule of thumb. The larger companies are falling into mandatory CSRD, EU Taxonomy. In the UK, ISSB is very swiftly moving on its way.

Start gathering your data, start getting ready. Science-based targets are great for showing your keenness and interest to your customers and supplier base that you're prepared to make change and you're setting science-based targets. CSRD and ISSB will probably be the mandatory ones that come out first, and they're part of GRI and TCFD, which is financial and non-financial.

I'll be expecting to see those come to the UK first, but I wouldn't be waiting too long. 2026 will be your input year, so '25 you'll need to be collecting your data and gathering your data to report '26. The journey should really start for you ASAP. Don't wait for the rush. I really would start collecting data and start the journey now.

Q&A: Existing carbon accounting systems and custom emission factors

ESG reporting and sustainability requires you to be able to calculate and collect information for greenhouse gas emissions, which includes carbon accounting, and the Pulsora platform can enable you to do that. However, like I mentioned, we're also a modular platform, so for customers who might have already embarked on that journey and have applications in place that do that, the platform is modular and can integrate with their existing carbon accounting systems as well. The platform supports both standard and custom emission factors.

Q&A: Will Scope 3 emissions be included in the new regulations?

Scope 3 is already part of CSRD, in terms of it now moving towards spend-based data collection. You're basing that on your spend per supplier and moving down to individual supplier and breaking down harder over the next couple of years. Scope 3, you don't have to really start to scare upon straight away. It is there, but it's on a spend-based capacity currently, so it's not as detailed and as in-depth as going down to per SKU level or per supplier. That is coming, but tools to gather data, etc., will be available to make Scope 3 a lot simpler as it comes along.

Q&A: Turnkey reports and industry-specific metrics

Yes, the Pulsora platform provides turnkey templates for many of the voluntary and mandatory regulations and frameworks like CSRD, SFDR, BRSR, GRI, CDP, SASB, DJSI, and others. The platform also allows you to create your own custom reports that you can use for any other stakeholders for which you might not have turnkey reports on the platform. You have the flexibility to leverage what's available and configure it and make it your own, or create your own as well.

Q&A: Social and people metrics for CSRD

The comment is valid that carbon often becomes the center of gravity and pulls a lot of conversations in that direction for ESG and sustainability. From a platform perspective, Pulsora supports all qualitative and quantitative metrics across all disclosures. You can define your own industry-specific metrics as well.

The social element often gets overlooked in the governance because we focus on carbon so heavily. But it is just as important to understand your diversity levels, your staff levels, and even down to your health and safety and quality. All of those are reflected inside the social factors and how you're impacting your local areas.

Part of materiality will draw that out for you and bring that to its forefront. You can get some great results from just APIing into your current data and your work, such as Workday or your other HR platforms and systems. You can bring all of those metrics in. Pulsora will deal with those exactly the same way as it does with carbon, and generate the social factor that you need to report against. You can also start to look at your diversity levels and communicate that. It really is key to better staffing.

One thing I would like to do to wrap up: remember that social factors will be your company's CV. Going forward, our next generations will want to work for companies that are sustainable. Your social values and your social factors will be your company's CV to attract and retain staff, and keep the good ones and the stronger ones within your organization.

Closing

Thank you everyone for joining us on this webinar.

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