Incorporating Information Governance (IG) best practices into Environmental, Social, and Governance (ESG) reporting is not merely a strategic choice—it is critical for ensuring transparency, accountability, and trust with stakeholders. As ESG metrics become increasingly expected by both investors and regulators, having a robust IG strategy is essential for organizations aiming to produce reliable and defensible ESG reports.
From a compliance perspective, as far back as 2020, the European Union introduced the Corporate Sustainability Reporting Directive (CSRD), mandating stricter ESG reporting requirements for large companies. Also, in the United States, the Securities and Exchange Commission (SEC) has also proposed rules to enhance and standardize ESG disclosures, especially concerning climate-related risks. These trends reflect a global shift toward holding companies financially accountable for their environmental and social impact.
Beyond the regulatory risk, however, organizations that fail to “have their ESG ducks in a row” have become increasingly prone to shareholder lawsuits and legal actions related to ESG issues have surged, often focusing on "greenwashing"—misleading or exaggerated environmental claims—or failure to disclose material ESG risks.
And, beyond the legal and regulatory risks, a 2021 PwC report found that 85% of investors consider ESG factors critical for investment decisions, emphasizing the need for reliable disclosures to assess long-term risks and to the potential reputational harm of providing inaccurate ESG data.
Here is where IG comes in. Organizations that have strong IG practices are far more likely to submit accurate, timely, and defensible ESG reports and successfully consolidate ESG results into coherent reports.
This post discusses 6 best practices that demonstrate how IG structures can significantly enhance the quality and reliability of ESG reporting.
Metadata Classification. Industry studies have shown that effective metadata management can lead to a 25% improvement in audit readiness for ESG reporting. Proper classification of data also enhances responsiveness to rating agencies like Morgan Stanley Capital International (MSCI) and Institutional Shareholder Services (ISS), enabling organizations to respond with relevant, up-to-date information.
Retention Management. Effective data retention management and the timely disposal of redundant, obsolete, and trivial (ROT) data helps companies to ensure that their relevant ESG reporting data is retained for the appropriate duration. This reduction not only mitigates risks related to data retention but also contributes to operational sustainability by reducing paper records and unnecessary electronic storage, thereby lowering the organization's carbon footprint.
Version Control. Ensuring the accuracy of ESG data through strict version control practices is essential to maintain the integrity of ESG reports. By consistently updating and verifying the latest information, organizations can avoid submitting outdated or incorrect data. According to one study by IBM, for example, companies lacking robust version control were 40% more likely to submit inconsistent ESG reports. Maintaining a single source of truth for all ESG-related data not only improves accuracy but also ensures regulatory compliance and enhances trust with stakeholders.
Data Security. A 2020 report by Gartner indicated that companies with strong data security frameworks were 25% less likely to experience data breaches involving ESG information. Proper data security protocols and regular training not only protect against unauthorized access but also reinforce stakeholder confidence in the organization’s ability to manage ESG data responsibly.
Audit Trails. Comprehensive audit trails allow organizations to maintain transparency and accountability in ESG reporting. Audit trails track the modification, access, and movement of ESG-related data, creating a clear record of actions for future audits or inquiries. This transparency is crucial for providing regulators, stakeholders, and investors with evidence of progress toward sustainability goals and other ESG commitments.
Compliance Monitoring. An ARMA survey in 2021 found that 60% of organizations implementing continuous compliance monitoring reported significant improvements in the accuracy and defensibility of their ESG reports. This proactive approach not only mitigates legal risks but also improves stakeholder trust by demonstrating a commitment to transparency and accountability.
Simply put, IG is indispensable to ESG accuracy.
A well-implemented Information Governance framework not only enhances the accuracy and reliability of ESG reporting but also brings broader organizational benefits.
Structured IG practices such as the regular reduction of redundant, obsolete, and trivial (ROT) data and the consistent use of an updated and defensible retention schedule, have been shown to demonstrably improve productivity and reduce environmental impact by cutting down on physical and electronic storage needs.
Also, consolidating ESG data from disparate systems—such as carbon emission calculators, HR platforms, and finance systems—makes reporting more streamlined and responsive to both regulatory bodies and rating agencies.
IG best practices provide the foundation for a comprehensive ESG reporting process, reinforcing organizational sustainability and building stronger relationships with regulators, investors, and stakeholders.
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