Addressing ESG Reporting challenges: how SAP solutions can help
Where do you stand on ESG reporting?
The need for companies to integrate environmental, social, and governance (ESG) factors into their operations has never been more pressing. It’s not only stakeholders who increasingly prioritise sustainability and ethical business practices. Regulatory authorities are starting to oblige companies to publish detailed disclosures on their ESG performance. Examples of this are the CSRD/ESRS reporting obligation in the EU and the Climate Ordinance applicable in Switzerland which requires TCFD-aligned disclosures as of this fiscal year.
ESG considerations are therefore no longer a checkbox exercise but fundamental to long-term business competitiveness. Investors, consumers, regulators, and employees are demanding greater transparency and accountability, pushing companies to rethink their approach to sustainability.
These new requirements are driving companies to embark on an ESG digital transformation, which we believe is based on three pillars: a solid ESG data foundation, proper governance, and suitable technologies (more information about these three pillars here).
Yet, despite the growing recognition of ESG's importance, many companies are struggling with these three pillars, especially with the task of having accurate data available and calculating and reporting on the most relevant ESG key performance indicators (KPIs). Uncertainty about the right reporting frameworks, difficulties identifying the sources of data and calculating the KPIs and a lack of the appropriate technology to support the process creates challenging obstacles. Companies find it hard to accurately assess their ESG performance and communicate their sustainability efforts.
Why is it a challenge for organisations to produce their ESG reports?
The most common technical challenges with ESG reporting are set out below:
Data Sourcing
In many cases, available ESG data is unreliable, outdated, or missing and firms tend to replace it with proxy data.
Calculation and modelling
Another challenge is how to aggregate and harmonise diverse data sets from multiple sources. This requires integration and processing, defining and implementing formulas and calculation engines, and correctly calculating ESG KPIs.
Analytics and reporting
A further step that companies must often tackle is how to transform ESG data into visually comprehensible and appealing insights suitable for diverse stakeholders. This involves accurately assessing and evaluating diverse sustainability metrics and benchmarks and translating them into actions.
How SAP Sustainability Control Tower can help
SAP Sustainability Control Tower (SAP SCT) is a modelling and reporting solution, released at the end of 2022, based on SAP’s Business Technology Platform (BTP) and developed by SAP in response to new ESG reporting needs.
With its numerous data integration capabilities, the solution can easily pull in data from a variety of sources, including internal SAP systems and external data providers. SAP SCT can be reinforced using SAP Datasphere at the base and as an add-on, to facilitate data sourcing.
The solution also offers standardised metrics and pre-built data models and reports, making it easy to track and report ESG KPIs using the main standard ESG Reporting frameworks. In our experience a standard metric can be populated in a few clicks, and custom metrics can be created in the tool relatively quickly, depending on their complexity and on the use case.
Additionally, the Control Tower provides ESG performance management capabilities, allowing companies to set goals and track progress over time.
Finally, the solution offers harmonised insights, providing a comprehensive view of ESG performance across the organisation.
With these capabilities, SAP SCT is a good solution for companies looking to improve their ESG reporting and overall sustainability strategy.
The future of the Sustainability landscape with SAP
In our view, SAP SCT already has the necessary features to create your first ESG reports based on your SAP or non-SAP data. In addition, SAP is investing in the solution, providing monthly updates and quarterly releases with plenty of new features and capabilities in a very promising roadmap.
In the near future SAP SCT will be a key component for monitoring both financial and non-financial ESG data, as part of a newborn SAP sustainability ecosystem, enabled by native integration capabilities.
From a broader perspective, SAP offers more than just modelling, reporting and steering capabilities. It is about tackling the full Record to Report (R2R) process. In this context, SAP ERP enterprise resource planning will, for example, play a crucial role in transactional carbon accounting through SAP’s Green Ledger. This solution, currently under development, will integrate into the overall SAP sustainability ecosystem to record and monitor greenhouse gas emissions resulting from daily business activities and will help the businesses to take appropriate actions to reduce their greenhouse gas emissions.
We will provide more information on SAP Green Ledger in a dedicated article that we are planning to publish in coming months.
Why Deloitte
Credentials – With 4,000+ clients served on sustainability issues and 7,600+ sustainability projects delivered across 100 geographies, we can help you plan ahead with confidence and clear actions.
Capability – With our team of CSRD and DMA experts, Climate scientists, GHG emission modellers, decarbonisation specialists, ESG tax, credits and incentives specialists, former regulators, data and technology architects, we have the right expertise and are actively contributing to the regulatory landscape.
Experience – Deloitte holds capabilities in various SAP ESG solutions, has been working together with SAP on multiple proof of concepts successfully delivered to clients across industries and has also developed its own solutions in SAP ESG space (D-Carb).
Let’s talk
Getting ahead of tomorrow’s challenges requires more than technology and a vision. It requires an ability to deploy comprehensive solutions that can evolve as your challenges and need for value grow.
Whether you want to consult us on how to address challenges related to ESG reporting or simply want to explore insights in this area, we’re ready to talk. Contact us to get the conversation started.
