The ESG Dodecahedron Challenge: Information Architectures Appear On The Horizon
All of us who have played board games will have had the pleasure of rolling 12-sided dodecahedron dice – so much more impressive than the regular 6-sided cubic dice. Executives with a seat at the table of the ESG disclosure and sustainability reporting game will soon get to play with an ESG data dodecahedron. Why? The complexity of ESG data management is relentlessly increasing: the volume of requests for data is booming; the level of accuracy required is ramping up; the number of data users is exploding; and the speed at which information needs to be provided is moving from years to days. As my colleague Sam Renshaw explains in his report on the future of ESG and sustainability disclosures, firms will need to comply with new ESG disclosure regulations whilst running their voluntary reporting in parallel for several years to maintain their ESG scores with the likes of Morningstar and S&P Global. So much for the global harmonization of sustainability reporting.
The next few months will see many software vendors announce their product strategies to deliver against the ESG data dodecahedron challenge. Earlier this year we benchmarked 44 providers of ESG and sustainability software across 16 functional capabilities. But that study didn’t assess the overarching ESG information architecture because they are still under development. With potentially thousands of firms shopping for an ESG digital solution in 2022, we recommend starting with an information architecture design rather than buying a point solution that solves a single need such as compliance with the EU’s corporate sustainability reporting directive.
The good news for tech buyers is that there is a wide range of ESG information architecture solution providers who can help solve the ESG dodecahedron challenge. What are some of the options? The partnership between EY and Wolters Kluwer opens the door to the creation of an information architecture built on the Enablon EHS and risk management applications along with the CCH Tagetik financial management software. Sphera, recently acquired by Blackstone, combines in-house sustainability experts with sustainability management software and product stewardship materials databases. These ESG software assets form the basis of an ESG information architecture for discrete manufacturers and chemicals producers. In March 2021, Accenture invested in ESG financial data and analytics provider Arabesque S-Ray to enhance the level of financial insight embedded in sustainability IT projects. To tackle the investment community’s ESG dodecahedron challenge, GoldenSource has launched ESG Impact which enables both buy- and sell-side firms to develop ESG materiality maps based on scores and ratings whilst also assessing data quality. SAP is leveraging its widely deployed transactional systems to support its Sustainability Control Tower offering.
The big question for sustainability leaders is whether they wait until 2022 to see the full details of ESG disclosure regulations from the US SEC and from the EU Commission or whether they kick-off the internal ESG dodecahedron challenge discussions now to secure budget for next year.