# ESG innovation: Allowing everyone to meet the standard
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-08-02
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: ESG Reporting Technology: Streamline Data Collection for
Meta Description: Discover how technology can help all companies, regardless of size, showcase their ESG efforts, attracting investors and meeting industry standards.
URL: https://financedigest.com/esg-innovation-allowing-everyone-to-meet-the-standardhtml

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_By_ **_Jessica Camus_** **_,_** _Co-founder and Chief Corporate Affairs Officer at_ [_Diginex_](https://www.diginex-solutions.com/)

Environmental Social and Corporate Governance (ESG) is a key factor for financial services. Morningstar even found that [ESG funds captured $51.1 billion of new money in 2020](https://www.morningstar.com/lp/sustainable-funds-landscape-report). ESG reporting is no longer seen as a fad, but an industry standard that all companies should be providing. Despite this, many [businesses – especially those at the earlier stage of their growth – still struggle](https://www.financedigest.com/pakistan-floods-add-to-pain-for-struggling-small-businesses.html "Pakistan floods add to pain for struggling small businesses") to produce the necessary data, often due to a lack of resources. It is here that there is a role for technology to address these challenges, allowing all organisations to share the same level of insight that investors are looking for.

**As ESG matures, so should data production**

In spite of the financial and ethical incentives of [ESG reporting](https://www.financedigest.com/whats-next-for-esg-reporting.html "What’s Next For ESG Reporting?"), it must be acknowledged that it is an undertaking for organisations. The first step is to get board buy-in, which requires making a business case. Next, organisations have to undertake a materiality assessment, which means defining what ESG [issues the company needs to report against based on internal and external stakeholder analysis and what factors are relevant to their industry](https://www.financedigest.com/how-the-financial-services-industry-can-solve-the-issue-of-vulnerable-code.html "How the financial services industry can solve the issue of vulnerable code").

Only once those factors – such as emissions, water consumption, good governance, diversity, and human rights – have been identified can the gathering of data begin and sourcing ESG data the traditional way is time, money and resource-intensive. Even once information is collected, it still needs to be analysed and presented in a [way that investors](https://www.financedigest.com/5-ways-that-start-ups-can-attract-investors.html "5 Ways That Start-Ups Can Attract Investors") can easily digest.

This entire process can take months to finalise. As a result, most companies will turn to external consultants to review the company and produce the ESG report. To bring on these consultants costs tens of thousands, meaning that only the largest of companies can take this approach. This is an issue, as regardless of company size, consumers, investors and stakeholders are all [holding businesses](https://www.financedigest.com/could-ai-hold-the-key-to-business-recovery.html "Could AI hold the key to business recovery?") to account.  Smaller players, unable to afford this investment, will ultimately struggle to [secure funding](https://www.financedigest.com/hungary-pledges-legal-changes-to-secure-eu-recovery-funding-govt.html "Hungary pledges legal changes to secure EU recovery funding – govt") and retain customers. For investors, this means a much smaller pool of options to choose from.

With ESG showing signs of maturity in the market, investors will come to expect all companies – regardless of size and available resources – to provide this data. It’s now time for businesses to harness [technology and lower barriers of entry to ensure every](https://www.financedigest.com/legislate-raises-3-6m-to-give-startups-smes-the-technology-to-query-and-compare-every-contract.html "Legislate raises .6M to give startups & SMEs the technology to query and compare every contract") company can showcase their ESG efforts.

**The right foundation**

Any software to improve [ESG reporting needs](https://www.financedigest.com/what-banks-need-to-prepare-for-eba-pillar3-disclosure-of-esg-risks.html "What Banks Need to Prepare for EBA Pillar3 Disclosure of ESG Risks") to streamline the process without demanding too much in terms of resources. Beyond this, [businesses unfamiliar with ESG](https://www.financedigest.com/esg-prepared-why-ignoring-esg-is-a-costly-business.html "ESG Prepared: Why Ignoring ESG is a Costly Business") reporting – most likely SMEs – will first need to decide on the specific factors they will want to report on.

Instead of capturing everything in their first report, SMEs will make a more meaningful impact by focusing on a smaller number of issues. This will allow the [business to action these insights and improve upon these metrics](https://www.financedigest.com/5-fx-metrics-your-business-should-be-tracking.html "5 FX METRICS YOUR BUSINESS SHOULD BE TRACKING"), showing a genuine change. From there, companies can expand their number of material issues, building out the ESG data over subsequent reports.

To identify what these factors are, companies [need to review what their stakeholders are prioritising as well as what other businesses](https://www.financedigest.com/what-is-premises-liability-coverage-and-why-does-your-business-need-it.html "What is Premises Liability Coverage … and Why Does Your Business Need It?") are also doing. Having this benchmark in place will make sure the [business analyses the data points that are important](https://www.financedigest.com/the-importance-of-intuition-in-business.html "The Importance of Intuition in Business ") to their industry.

In addition to the stakeholder and industry benchmarks, companies also need to choose a specific framework to follow. There are a number of ESG reporting frameworks including the The Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), or Task Force on Climate-related Financial Disclosures (TCFD). Deciding on which one to use can be a daunting process. Several factors can influence which framework suits the business – from the location of the company to the type of audience they wish to address.

**Data gathering and validating**

With the chosen framework as well as an understanding of stakeholder and industry priorities, the data gathering process then takes place. An alternative to consultants, blockchain has shown itself to [overcome the issue of resources for smaller businesses](https://www.financedigest.com/overcoming-challenges-faced-by-women-in-business.html "Overcoming challenges faced by women in business").

Each supplier or third party exists on the blockchain, their data feeding directly [back into the business](https://www.financedigest.com/improve-your-business-while-saving-the-planet-and-your-back-with-easycat.html "Improve your business while saving the planet and your back with EasyCat"). This allows the company to accurately audit their data and verify that it is correct. As all relevant information exists on an interconnected web, [businesses save](https://www.financedigest.com/5-simple-ways-in-which-your-business-can-save-water.html "5 simple ways in which your business can save water") time and money on sourcing this data rather than rely on manual inputting.

The immutable [nature of the blockchain also makes it easier to validate the data sourced](https://www.financedigest.com/algeria-regains-spot-as-spains-top-natural-gas-source-enagas.html "Algeria regains spot as Spain’s top natural gas source -Enagas") and identify if there are gaps in the information. Through using this technology, smaller businesses effectively cut out the middleman, reduce the [investment in time and money and source high-quality data on par with a large](https://www.financedigest.com/large-investment-success-for-basingstoke-cybersecurity-start-up.html "Large investment success for Basingstoke cybersecurity start-up") corporation.

**Presenting the data well**

However, [data is only useful if people understand](https://www.financedigest.com/how-data-visualisation-is-helping-the-insurance-sector-understand-environmental-risks.html "How data visualisation is helping the insurance sector understand environmental risks") it. Companies finishing the data collection process can [share](https://www.financedigest.com/chipmakers-weigh-on-european-shares-focus-on-u-s-jobs-data.html "Chipmakers weigh on European shares; focus on U.S. jobs data") raw data with investors, presented in a way that is well-structured comparable way and supported by evidentiary documentation.  In addition, it is recommended to visualize data as well as adding qualitative information, to facilitate the [analysis of data trends](https://www.financedigest.com/polypropylene-woven-bags-and-sacks-market-quantitative-market-analysis-current-and-future-trends.html "Polypropylene Woven Bags and Sacks Market: Quantitative Market Analysis, Current and Future Trends") and contextualization

Any platform that sources ESG data also needs a function that can design and [display the information in an efficient and impactful](https://www.financedigest.com/eye-tracking-study-confirms-that-high-impact-formats-outperform-standard-display.html "Eye-tracking study confirms that high impact formats outperform standard display") way. Having this integrated into the same platform will make it much easier to produce these reports and won’t require the added [step of sharing the data](https://www.financedigest.com/10-steps-to-stop-lateral-movement-in-data-breaches.html "10 Steps to Stop Lateral Movement in Data Breaches") with a designer.

**Enabling everyone with technology**

By the end of the process, a company will have a comprehensive document that [shares insightful data](https://www.financedigest.com/shares-drop-yields-shoot-up-after-u-s-inflation-data.html "Shares drop, yields shoot up after U.S. inflation data") on the business and gives a greater understanding to investors. While [technology like blockchain makes ESG reporting](https://www.financedigest.com/lumen-releases-report-from-pwc-on-the-roi-of-attention-technology.html "Lumen Releases Report from PwC on the ROI of Attention Technology") easier, its impact does more for the industry than streamline processes.

Technology democratises ESG reporting. All [types of businesses](https://www.financedigest.com/types-of-business-partnership.html "Types of business partnership") can produce this data, regardless of size or industry. On a moral level, it ensures that ESG is part of every company and a factor that investors can review and compare. For [financial services](https://www.financedigest.com/how-financial-services-leaders-can-prioritise-cybersecurity-investment.html "How financial services leaders can prioritise cybersecurity investment"), it creates more opportunity in the market – with a broader range of businesses able to compete with established organisations. ESG is maturing and becoming a standard for companies, but it [needs to be accessible to every](https://www.financedigest.com/10-secrets-every-entrepreneur-needs-to-thrive-in-2023.html "10 Secrets Every Entrepreneur Needs to Thrive in 2023") company, not just those with the deepest pockets.


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