Sustainability reporting has come a long way since the publication of the first environmental reports in 1989. But so has that amount of data that companies generate. 

In a company's data lies a spectrum of information, spanning from product development details to environmental measurements. However, this diversity in data is often spread across multiple departments, complicating the task of gaining a comprehensive understanding of the whole picture. Breaking down silos or accessing data in divergent systems is a challenge. All of this leads to companies not knowing exactly what data they have access to daily.

As a Harvard Business Review article notes: “Increasingly, companies must come to recognize and appreciate that data is a business asset that flows through an organization. Data cuts across traditional organizational boundaries, often without clear ownership.” With the increased amount of data and the lack of visibility across the business, for most companies, corporate sustainability reporting and monitoring is a tedious and time-consuming task. It often involves manual data collection, data processing, and interpretation. Data constitutes the foundation for various use cases in sustainability reporting (e.g., value chain mapping).

Sustainability reporting and monitoring is becoming more important to customers, politicians, employees, and investors. In fact, “Businesses are not gauged through their financial performance alone. Instead, stakeholders weigh in more on the sustainability aspect of the business than just the profitability.”

Several new reporting rules require data and transparency from companies no matter where they are in the world. For example, in Europe, organizations must comply with the Corporate Sustainability Reporting Directive, a part of the Green Deal reforms, requiring details on sustainability-related impacts, opportunities, and risks. Germany has its Supply Chain Act. And in the U.S. companies are responsible for reporting via the United States Security and Exchange Commission’s (SEC) new climate risk disclosure rule. The UN has additional reporting obligations that also rely on high-quality data sources.

Research by ESG Book found that “1,255 ESG regulations have been introduced worldwide since 2011, compared to 493 regulations published between 2001 and 2010. Since the turn of the millennium to the present day, there has been a 647% increase in ESG regulations.” Without access to the correct sustainability information organizations may struggle to complete requirements.

“Put simply, noncompliance is not an option and could have significant consequences.” Errors or avoiding any of the regulations can result in fines and damage the overall reputation of the company. According to Harvard University Law School’s Forum on Corporate Governance’s report, The State of U.S. Sustainability Reporting, “There has never been a more important time to ensure that company sustainability disclosure is robust, clear and credible—while also keeping pace with the rapidly evolving demands of stakeholders.” 
 

Sustainability reporting creates internal accountability as well as transparency and accountability with external stakeholders. Reporting on sustainability can be complex. It is often made more difficult because leaders do not know specifically what information to report. They are also unaware of the data they have within their grasps leading to one of the largest challenges to achieving sustainability reporting requirements – the way companies gather data for those reports. 

In these situations, the employees do the best they can to interpret the data manually which often leads to errors. A recent Qlick survey showed, “… just 24% of the global workforce claimed to be fully confident in their ability to read, work with, analyze, and argue with data.” In addition, “85% of organizations believe they are ahead of their peers concerning sustainability reporting, but almost half (47%) still use spreadsheets to aggregate their data.” 

There is hope for improving the process for obtaining required information for sustainability reports. In fact, leading organizations have turned to technology to automate the harvesting and interpretation of data. 
 

Achieving the technical automation necessary to assist in data gathering for sustainability reporting requires both a clear business strategy and an appropriate structure to unite IT/OT and other various data sources within the organization. 

Let’s look at the strategic component. There are four questions that the executive team needs to ask:

1. What data are we already collecting?
2. What data is required for reporting regulations?
3. What do we want to collect in the future?
4. Who is responsible for capturing and harmonizing the data?

Once there is a clear and documented approach capturing the data required for automated collection and report generation, then the company can move to building the appropriate IoT framework to make this solution a reality.

“An IoT framework is a set of protocols, tools, and standards that provide a specific structure for developing and deploying IoT applications and services.” It enables collection, standardization, and processing of data. It also connects with IT/ OT where data from various sources within the company (e.g., in ERP systems or on operational/shopfloor level) are assimilated, hosted centrally, and interacted with through a dashboard. The entire process is done in real-time, is cost efficient, reliable, and easy to use. Ultimately, the IoT Framework generates a holistic overview of the company and its progress on ESG initiatives.

A critical part of the IoT framework is the interplay of the semantic layer and processed data because it is the foundation for future processing to aid in certification, reporting and visualization. Since the data is from various places within the organization and may not follow the same format or criteria, “it is necessary to implement a method of sophisticated data integration … it is challenging to efficiently fuse a large amount of probably noisy data and then infer an accurate result.”

“Incorporating data fusion, the process of merging multi-source data to increase integrity, allows companies to effectively deal with noisy data of dynamic environment, and helps the decision-making process based on the available information.” This means the heterogeneous data of an organization is conveyed, stored, and accessed in the same way. “The data structure is expressed through the links within the data itself, it is not constrained to a structure imposed by the database and does not become obsolete with the evolution of the data. When changes in the data structure occur, they are reflected in the database through changes in the links within the data.”
 

Automatically generated sustainability reports provide several advantages compared with manual processing, including: a reduction in errors, allowing employees to focus on more value-added work, and faster, more accurate production. 

In addition to ensuring accurate data is available and referenced in automated sustainability reports, the IoT framework delivers even more benefits to the organization. For example:

• It allows for improved data quality and interpretation because it can be queried easily, and calculations are based on real data and not average or estimates. 
• The interactive dashboard used in many IoT framework solutions is automatically updated allowing the sustainability manager (and others) to manage process on goals.
• IoT frameworks offer advanced visualization and modeling. The information is shareable in several views and dimensions (technical, commercial, geographic).

Spreadsheets and manual data entry aren’t made for the era of Big Data and IoT. Changes are necessary across industries and around the globe to move to more automation such as IoT frameworks, especially for gathering data to demonstrate sustainability growth and achievements for companies. 

Leaders must accept technology’s role because sustainability reporting is a necessity. In fact, “Regulators and investors hold sustainability reporting to a higher standard: Companies making sustainability claims without defensible data [supporting information generated through a data-driven approach] put themselves at risk of greenwashing lawsuits and other liabilities.”

Therefore, “Companies … need robust reporting technology to help ensure organizational alignment while meeting complex reporting requirements. A focus on data consolidation and using an IoT framework are essential for businesses to “achieve their strategic goals, comply with regulations, and become a leader in sustainability.”

Embracing technology and implementing robust reporting systems are imperative for companies to navigate the evolving landscape of sustainability reporting, mitigate risks, and position themselves as leaders in sustainability, all while ensuring transparency, credibility, and organizational alignment.