Preparing Investor-Grade Disclosures: Early Insights From The 2024 Verdantix ESG And Sustainability Global Corporate Survey

Preparing Investor-Grade Disclosures: Early Insights From The 2024 Verdantix ESG And Sustainability Global Corporate Survey

How prepared is your organization for mandatory ESG and sustainability disclosures? Well, according to our Verdantix 2024 ESG and sustainability global corporate survey, more than 70% of firms feel that they have the data management capabilities to provide investor-grade data for ESG reporting and disclosures. Investor-grade data – which we define as data that are accurate, auditable, automated and timely – are key to both meeting regulations such as the EU’s CSRD and the US SEC’s climate disclosure rule and satisfying the need for transparent decision-useful data.

However, this means that almost a third of organizations do not feel confident in their ability to produce investor-grade ESG and sustainability disclosures. If you fall into this category, there’s no need to panic – at least, not just yet. Reassuringly, in fact, we suspect you’re probably being more realistic. Getting started on investor-grade ESG and sustainability data now? Here are two key steps:

• Get IT onboard.
  We often refer to sustainability as a team sport, and roles such as finance and IT are increasingly involved in the process of delivering investor-grade disclosures. In fact, 76% of ESG and sustainability decision-makers agree that their CIO/CTO supports ESG and sustainability priorities and requirements.
  
  
• Identify your software starting point.
  What software does your organization currently use that can be the foundation to build out ESG and sustainability reporting functionality? 67% of organizations are using IT systems consolidation as a strategy to improve ESG and sustainability disclosures, and IT teams can help in this regard by customizing existing software to incorporate ESG reporting features. This may include developing new modules, dashboards and reporting templates.
  
  

To AI or not to AI?
As with all waves of technology innovation, AI has been the recipient of considerable excitement, especially in the past 2 years; ChatGPT 3.5 has proven to be the fastest-growing software application in history. ESG and sustainability use cases have not been exempt from such hype.

Each year, we aim to gauge market perceptions regarding the use of AI and once again, we asked respondents to indicate the extent to which they agree with the statement “We are using or plan to use AI to positively improve our ESG and sustainability disclosures and reporting AND performance within the next 2 years”. We found that only 40% agree with this statement, much lower than the 75% who told us they agreed in 2023.

We believe this reflects that AI hype is slowly being replaced by a healthy skepticism around the use of AI and an awareness of its potential limitations. At the beginning of 2024, we published a report detailing how GenAI functionality is being incorporated into sustainability reporting and data management decisions. While use cases are still emerging, several software vendors have already started incorporating AI and GenAI functionality into their software.

Decision-makers planning to invest in AI for their ESG and sustainability reporting processes must develop training for employees on responsible AI programmes to ensure strong governance policies around the use of the technology. Organizations should check that their ESG programmes reflect the risks associated with GenAI, and ensure that the core elements of responsible AI policies are included in – and are consistent with – their ESG risk management policies.