Game over for ESG reporting in Excel?

With the increasing number of sustainability-related directives and (mandatory) frameworks to comply with, the field of reporting is gradually changing as well.

• Traditional sustainability reporting has largely consisted of Excel spreadsheets managed by a small number of employees at individual companies.
• Emission factors were often hard to obtain, reporting took a lot of manual effort, and data was largely static with few means of checking it for consistency.
• Due to a lack of harmonization in reporting requirements on an international level, the comparability of reports across companies was limited.

Currently, with the emergence of highly complex reporting frameworks such as the CSRD, Excel seems to no longer be fit for ensuring compliance.

This is primarily due to a lack of digital data tagging (a key requirement of the CSRD is to use the European Single Electronic Format – ESEF for presentation of reports), which is important considering the sheer volume of data to report on.

Additionally, mandatory external auditing, dynamic data management, and global comparability of sustainability reports require systems that are more comprehensive and streamlined, and enable automation and sharing of data among many stakeholders.

The notable growth of ESG software-as-a-service (SaaS) companies reflects the market needs for such solutions. Valued at 700 million USD in 2022, this number is expected to climb to 1.7 billion USD within the next three years (MarketsandMarkets). A plethora of SaaS companies offer cloud-based software that provides a user-friendly interface with useful visualizations, and often combines sustainability strategy and future ESG targets with actual and past data. 👩‍💻

Of course, these developments are not without possible pitfalls.

• Whilst Excel has been a corporate staple for years, adoption of new software can come at a steep price – which could be a noteworthy budgeting consideration for SMEs and start-ups.
• Additionally, there is a learning curve to sustainability reporting and upskilling will be necessary, often with the help of external consulting.
• An overarching problem in the digital era is data security, and agglomerations of sensitive company information are an attractive target.
• Finally, despite the calls for increased transparency, reporting software could result in more opaque processes and calculations as automation and complexity of data increase. This way, only the developers of the software understand how results are generated, and without proper skills and trainings for end-users, the meaning behind the data could get lost in long checklists of information to upload.

Regardless, the need for more advanced reporting solution is undisputed.

The next years will undoubtedly be a challenging time of trial and error, ongoing attempts towards harmonization and comparability, and designing sustainability into every department of enterprises. ⏳

We at Xylo Sweden are excited to accompany you on this journey and you can reach out to us.