Best Practices for Controlled, Governable ESG Disclosure Processes

By Matthew Linakis, ESG Solutions Lead, Unqork 

It’s hard to believe that just a few years ago, very few people were familiar with the concept of ESG (Environment, Social, and Governance)—the practice of measuring and reporting on a company’s environmental and social impacts. Today, it is one of the most recognizable mantras in corporate America. 

In the meantime, ESG investing has skyrocketed. According to International Data Corporation (IDC) estimates,  ESG business services spending will grow by more than 30% a year, reaching $158 billion in 2025. Meanwhile, governments are raising standards and requirements through a growing body of ESG regulations.  

However, ESG has also become a PR buzzword used by some companies as a marketing tactic rather than to drive real change. This has sowed skepticism about companies’ commitment to acting on their strategic and investment obligations. 

Moreover, few companies have the robust, effective processes to auditably track, measure, and report their ESG efforts. When the SEC proposed rules in March 2022 requiring companies to disclose greenhouse gas (GHG) emissions, barely one-third of publicly traded companies had relevant processes in place. 

With increasing  market and regulatory pressures in the US and beyond, ESG reporting is quickly moving from a voluntary nicety to capital imperative. 

Beyond a patchwork approach

When it comes to ESG, the proof is in the measurement and reporting. ESG leadership will be defined by the ability to measure from end to end and report and act on those efforts accurately. Companies no longer get reputational “credit” for simply talking about ESG. 

To go the next step, organizations need to overcome systemic challenges that are hindering transparency in how these goals are measured from end-to-end, including: 

• Unactionable goals: While a public statement that a company will be “carbon neutral” by 2040 is a respectable (albeit vague) goal, it is a poorly kept secret that companies rarely have actionable plans to set major milestones, let alone smaller milestones laddering to larger end results. It is paramount that companies track progress at granular levels across their business lines towards environmentally sustainable practices, greater workplace safety, corporate governance, etc. 
• Not enough emphasis is placed on empowering groups within companies that affect change: Corporate governance can provide internal structures that promote ESG-based change within a company. But these governance structures must be fully empowered by management in order for them to be successful. Until recently, organizations commonly created new departments focused solely on ESG-related pursuits (e.g., corporate social responsibility). However, to create robust processes and controls, the existing company’s finance, technology, and regulatory reporting teams must be able to easily leverage their current infrastructure to develop sustainable and compliant ESG operations across functions.  
• Keeping the ESG ecosystem manual: Organizations make the fundamental error of keeping their ESG ecosystem as a manual process, whether it be tracking asset inventory, collating carbon reporting data, or aggregating workplace safety information. This is due in large part to the fact that a full overhaul from manual to digital can be lengthy, difficult to integrate, and rigid once in place. Digitizing earlier in an iterative fashion makes downstream processes and auditability much easier. 

Best practices for an effective ESG program 

As ESG regulations become more targeted and companies are challenged to monitor and adapt to new expectations, businesses need to be able to arm themselves with the data and tools to stay in good standing. 

With the right solutions in place, companies can satisfy ESG goals better in the long run by digitizing their operations, and enabling those operations to evolve along with regulatory changes over time by relying on highly flexible technology. 

Based on our experience working with large, complex businesses with rigorous ESG reporting demands, here are a set of best practices we recommend: 

1. Provide external portals to allow suppliers, invested companies, and clients to collect and/or access data along every point of the business: An effective portal allows suppliers and vendors to more easily upload invoices, making GHG calculations and workplace safety figures both easier to gather and more accurate than by using manual hand-offs and conservative estimates. Similarly, investors can allow portfolio companies to access portals to key in and digitize their information or connect via API, saving time and reducing operational risk.
2. Integrate digital trackers with books and records: By choosing the right technology partner, you can more easily connect your asset inventory management with GHG and other ESG metric monitors. Doing so will expedite reporting cycles and reduce operational risk. Moreover, choosing the right technology will allow your organization to quickly upgrade or make changes in this quickly evolving space, and to deliver a speedy time-to-market. In this way, your business analysts and leaders can play a more substantive role in the software development process than ever before. 
3. Digitize traceable measurements at all levels of your organization: Imagine having end-to-end auditability in the collection, validation, and reporting of ESG metrics across all activities. Leading organizations are already building out reporting using omnichannel integrations—back-end integrations between production, distribution, reporting channels and more—with reporting platforms, which allows management teams to trace and control the entire process.   

ESG is here to stay. As global regulations challenge organizations to disclose integrated datasets and specific measurements consistently, accurately and in a timely fashion, the time to implement process changes is now. 

Future ESG leaders will be those that approach ESG proactively, rather than trying to catch up to the latest regulations. Finding good partners, from legal counsel and investors to manufacturers and technologies, will be of the utmost importance for long-term success. 

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About the author

Matthew Linakis leads ESG solutions at Unqork. Prior to joining Unqork, Matthew was a management consultant, working with many of the largest energy and financial institutions globally. Since joining Unqork, he has led the development of many of the company’s offerings, including ESG services, risk management, and KYC/AML.