SUSTAINABILITY data is the new currency of business up and down the value chain and with providers of capital. The good news is that we can now all use the same currency.
Data quality
When we think about what companies are struggling with, one of the key aspects is collecting, collating, measuring and also verifying environmental, social and governance (ESG) related information.
This often leads to inconsistencies, inaccuracies, and even what we call greenwashing. Of course, what this does is it undermines trust and credibility in ESG reporting, particularly reporting for investors.
With this background in mind, and based on our experience exploring various data types and sources that impact the quality of information available to responsible investors, we recognise the need to enhance ESG data for more effective reporting and disclosures.
Our work has shown that improving data quality is essential to meeting the evolving needs of investors.
Earlier, I mentioned the term “decision-useful”. At its core, sustainability reporting must provide investors with the insights needed to inform their investment decisions.
Whether it is identifying sustainability risks and opportunities, supporting scenario analysis, engaging in proxy voting with corporate boards, or meeting their own disclosure obligations, investors rely on high-quality ESG data.
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For reporting to be truly decision-useful, the data must be available and accessible, which may seem obvious but requires ensuring that investors can actually use it in a practical format.
More importantly, the data must be of sufficient quality, meaning it should be comparable across companies, verifiable so that its methodology can be corroborated, and transparent enough to be assured.
For ESG reporting to be truly valuable, it must be a fair and unbiased representation of sustainability efforts. However, the challenge goes beyond objectivity, reporting also needs to be relevant to individual investors.
This is where complexities arise. Investor data needs vary significantly based on factors such as mandates, strategies and investment objectives.
Companies often struggle to determine what data to provide since different investors demand different information, tailored to their unique needs.
When assessing the quality of sustainability data, we see that investors continue to face challenges, not just in terms of quality, but also in meeting all the criteria for decision-useful data.
For example, if we examine availability, a 2022 FTSE Russell study found that out of the world’s 4 000 largest listed companies, over 40% did not disclose their Scope 1 and 2 carbon emissions.
This highlights a major gap in data accessibility. While investors can request missing information from their portfolio companies, engaging with every company is resource-intensive, both for investors and the companies themselves.
Beyond availability, data quality varies across companies. Smaller companies, for instance, often lack the capacity to report on complex metrics such as Scope 3 emissions.
This creates challenges for investors managing portfolios with companies of different sizes, each with varying reporting capabilities.
To address accessibility, initiatives such as the Net-Zero Data Public Utility and Europe’s public access points for sustainability data are emerging. These public tools aim to collate and centralise ESG data, improving its availability, comparability and transparency for investors.
Holistic integration of ESG
One challenge that many companies face today is that we have become a little bit more tilted towards mandatory disclosures.
What we have advocated for with some of our corporate clients is to really say that the voluntary adoption of sustainability practices that integrate very well with the business process or the company’s process will last in the long term.
I will continue to underscore the point, even with all these mandatory disclosures, that when an organisation commits and executes on the larger principle of sustainability with the notion that it is profitable, transformation really happens and it sustains and scales up. So that is one of the broader themes.
Integrating technology
To advance ESG initiatives, businesses require a robust data collection mechanism supported by a technology-driven platform.
A well-structured digital framework helps companies contextualise sustainability data and understand its impact on return on investment (ROI).
Many organisations still lack clarity on key questions:
- What is the financial impact of implementing net-zero solutions?
- Do sustainability efforts only benefit the environment, or do they also drive business profitability?
- Could ESG initiatives create a competitive advantage or, conversely, lead to missed opportunities due to lack of stakeholder buy-in?
These insights are often missing within organisations. Advanced technology platforms, powered by artificial intelligence (AI), blockchain and automation, can drive better data collection, traceability, and reporting, while also combating greenwashing through transparency and standardisation.
So we can leverage these technologies and tools to focus on harmonisation of standards, ensure rigorous implementation and robust data collection and, obviously, recognising and scaling up that progress to get us all to net-zero by 2050.
Getting faster ahead
To get ahead faster on the ESG journey, there are things that we can learn and do differently. As an impact-driven organisation, we are focused more on the impact generated.
I will take a dive into one example of what has worked for one of our corporate clients using this sort of impact-driven lens to ensure transparency and accountability.
One of the shifts that one of our corporate clients made, which I think has been a game-changer for the company, was an organisational shift of resource where they created the role of ESG controller within the company.
Having an ESG controller, who reports to the corporate controller, and ultimately to the chief financial officer (CFO), has been a game-changer. This role has brought deep expertise in establishing robust controls and enhancing reporting processes at a more advanced level.
By applying best practices from financial reporting to ESG disclosures, the company has significantly improved reporting efficiency, accuracy, and compliance. This structured approach has enabled them to rapidly adapt to evolving ESG requirements.
I believe this is a critical factor in accelerating accountability, transparency and overall ESG.
Top emerging trends
As we move along in 2025, the ESG and sustainability landscape is set to evolve in transformative ways. From compliance and regulatory pressure, AI integration to elevated focus on environmental factors, these trends will shape the path forward for organisations committed to sustainable growth.
Evolution of ESG regulation
The regulatory landscape continues to transform around the globe. The year 2024 saw dramatic regulatory changes.
In the United States, the uncertain political climate is influencing individual states to act as federal progress stalls, paving an unknown path for climate change regulations. Regional laws continue to be guided by emerging obligations under mandatory directives.
The demand for more transparency in sustainability reports and the ongoing discussions on climate change are shaping legislation around the world.
These new and emerging regulations continue to focus on mitigating climate change impacts, particularly decarbonisation and increased reporting to identify problem areas to hold applicable businesses accountable.
AI in ESG, sustainability practices
AI is set to transform so many aspects of our lives. Regulatory compliance and sustainability management is no exception. Sustainability professionals are increasingly looking to AI to improve the accuracy of sustainability reporting and meet the growing regulatory and corporate transparency demands.
Sustainability practitioners across the globe are shifting towards more sophisticated sustainability reporting tools, with AI for materiality assessments and ESG data-management platforms being key future investment areas.
Digital taxonomy
I think one thing to look at is for technical solutions to actually address issues with sustainability data if they are executed right. I have already mentioned AI, but I think even something technical, such as a digital taxonomy, is actually very useful for investors. This is because it actually allows you to digitally tag information, which is going to make the life of investors a lot easier when they process that information.
Scope 3 emissions
I believe the opportunity and threat is Scope 3 emissions, value chain emission calculation, reporting, capturing boundaries, all these are very complicated topics.
Tackling that is our greatest opportunity. Not tackling it would actually create a threat for the world. That trend is going to emerge.
Tools are going to develop and we will see a lot more progress there.
Tapera is a certified expert in ESG impact investing. — [email protected]
