June 19, 2023

Complexity reduction through simplification, standardization and automationOpen ESG-Reporting

A new phase of sustainability reporting begins in 2024. Gradually, more and more companies will have to submit CSRD-compliant sustainability reporting, the individual rules of which the legislator will only lay down in the course of this year. This is a challenge that is easier to meet with publishing systems.

First published in The Reporting Times, No. 2/2023

For years, most companies have been making efforts to operate more sustainably, optimizing supply chains, production processes and energy consumption, recycling, saving raw materials and also working on measures in the «S» and «G» areas of the ESG requirements. The task now is to translate these results into measurable, comparable, and repeatable facts, embed them in a narrative, and thus reveal the sustainability performance.

In this article, we highlight the contribution publishing systems can make in addressing the ESG reporting challenge.

Wide-ranging issues

For ESG reporting managers, some broad questions arise first:

1. Complexity factor: EU regulations
   The EU's ambitions are high, as is the pace of the continuously specified requirements. Nevertheless, much is still unclear. The extension of reporting obligations to more companies, the mandatory disclosure of non-financial information, the introduction of uniform criteria and standards (European Sustainability Reporting Standard; ESRS), and the implementation of new reporting formats such as machine readability present numerous reporting managers with new, challenging tasks with unclear implications for the necessary competencies and resources. How can they prepare?
2. Complexity factor: ESG data acquisition, processing and playout
   ESG data are produced at different points in the company. How can the EU regulations be implemented in internal company processes and systems? How can they be collected at the source, integrated with data from other sources and from other systems, processed and evaluated? How and where is the data played out? In which formats? How can the required machine readability be implemented? Who is responsible for this? What role can supporting systems play?
3. Complexity factor: ESG software
   Using technology can make the ESG task easier to accomplish. But implementing ESG software is another major project. Is this worthwhile or is it still too early? Is the approach more purposeful to first wait and see how the regulatory requirements become more concrete and the numerous new specialized ESG software solutions develop?

A dilemma

Before thinking about systems, fundamental considerations are necessary. In order to proceed in a structured and analytical manner, we identify nine fields of action for successful ESG reporting. Each field of action comprises a catalog of questions that must be brought into the corporate context - an important preparation for the development of a uniform understanding, the alignment of expectations and their documentation in the company.

While the demand for an in-depth analysis of ESG requirements is undoubtedly correct (and costly), EU regulations are pushing for rapid implementation and creating enormous time pressure. Two opposing dynamics - a dilemma!

The solution approach

A tried and tested way of implementing the required sustainability report without stress can be to use established publishing systems which, via tried and tested interfaces, make it possible to adopt the new non-financial KPIs easily and integrate them into the existing business reporting.

There are several reasons for this:

• The sustainability report must be integrated into the annual report in accordance with EU requirements. Existing systems for the realization of the annual report can be used and reduce the stress of a new set-up.
• Non-financial KPIs are less "learned" for stakeholders and need to be made understandable through explanations and interpretation aids in the form of accompanying text or graphics.
• The integration of multilingual text, tables, key figures, graphics and images are typical features of publishing systems.
• Non-Financial KPIs sind für die Anspruchsgruppen weniger „gelernt“ und müssen durch Erklärungen und Interpretationshilfen in Form von begleitenden Texten oder Grafiken verständlich gemacht werden.

Open ESG reporting with field-proven publishing platforms such as ns.publish or ns.wow is a valid and flexible solution for ensuring sustainability and business reporting and brings decisive advantages:

• In accordance with the «single source of truth» principle, all data for the annual and sustainability reports are located in a single data source.
• The Excel interface is very flexible, proven in practice many times, even in the highest complexity.
• Thanks to the built-in solution, the implementation of machine readability is given.
• All output formats are possible from the same data source: PDF, HTML and XBRL

The goal: A stable solution

To reduce complexity, it can help to look at the ESG project from the output side. This simplifies the preparation of the final report, reduces stress and allows time to be used well in the already short project phase - important time to define the company-specific fields of action in ESG reporting in parallel and to continuously learn about the new EU requirements. New systems for recording and evaluating ESG-relevant data are constantly coming onto the market at a comparable pace, and existing systems are being further developed. With a stable reporting solution, companies can approach the topic of ESG reporting flexibly and calmly and thus dynamically dock new requirements or changes to their existing system.

Machine Readable XBRL for Non-Financial and Financial KPIs

What a Built-in solution can do:

• Coding directly at the source – making text blocks and passages easy to label
• No additional interfaces to external solutions and service providers, thus no platform break; thus time savings
• Autonomous work, editable and traceable without external service providers
• Processes can be repeated as required, with roll-forward functionalities in subsequent years
• Significant time savings through direct, parallel processing of content in the editor2024 marks the beginning of a new phase in sustainability reporting. Gradually, more and more companies will have to submit CSRD-compliant sustainability reporting, the individual rules of which will be laid down by the legislature in the course of this year. This is a challenge that is easier to meet with publishing systems.

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