Is sustainability reporting your company’s source of grief – or a tool to build a competitive advantage?
Almost all companies will soon be required to report on their sustainability performance. However, many companies are shy about making strategic use of the information collected, argue Sofigate’s Katariina Kekkonen and Mikko Saari.
For many companies, ESG or sustainability work is a bit like the eccentric cousin that you bump into at all the big family gatherings. Everyone knows about the cousin. But the easiest thing to do is to pretend not to notice your cousin, even when you sit at the same table, because then you can avoid having awkward conversations with them.
This year, most businesses have been forced to pay attention to the odd cousin. The reason is not that companies have collectively received a sustainability awakening, but the EU’s new Sustainability Reporting Directive. The directive will see the reporting obligation extended in stages from 2024, and by 2026 almost all companies will have to report on their ESG performance.
Until now, the reporting obligation has only applied to the largest listed companies. For other companies, reporting has often been fragmented. HR data and emissions calculations have had to be extracted from a number of separate systems. A huge amount of time and manpower has been spent in different parts of the company manually transferring data from old taxi receipts and miscellaneous PDF documents to Excel spreadsheets.
What has happened to all the data that has been painstakingly collected since then? In many companies, almost nothing. Even in many large companies, the data has simply been compiled into an ESG report, which has then been left to gather dust in the sustainability section of the company’s website. At most, the company has published a press release bragging about its low emission reductions.
Don’t hide your competitive advantage
Funnily enough, in many Finnish companies ESG issues are actually already quite well managed. However, reporting difficulties have meant that companies are often still at a loss as to how to build a competitive advantage from sustainability. In addition, convincing stakeholders of a company’s sustainability credentials has often been hampered by a lack of reporting. Real progress has gone unreported due to a lack of reliable data to support the stories.
Many companies have simply misunderstood the significance of reporting. Reporting is necessary, but on its own it is not useful. The benefit comes from what the company does with the data generated by reporting.
The good news is that every company can still prepare for reporting in a way that saves time and effort and turns ESG into a tangible competitive business advantage. By taking action now, a company can make effective use of the work already done and at the same time further improve its operations.
- Quality data by 2025
Preparations for reporting ESG results in 2025 should start now. Management needs to address the requirements of the obligation at a strategic level and business units need to assess the operational changes required to meet the targets set by management.
The time to plan for practical reporting is also now. If the data required by the report is to continue to be collected manually, the company will need to assess, for example, the human resources this will require.
However, a much more efficient approach is to centralise reporting in a central system that is integrated with the business platforms in place. A centralised system will not only save human effort, but it will also provide the basis for continuous monitoring and business use of ESG data – right now, rather than later in 2026. By ensuring data and its quality in 2024, reporting the 2025 figures will be much easier. At the same time, companies can start to manage their operations based on the data collected. - Sustainable business is data driven
Sustainable business offers many benefits to a company by improving operational efficiency and the use of raw materials, as well as increasing the engagement of both consumer and B2B customers. Investors and financiers are also paying increasing attention to companies’ ESG performance when making decisions. It is therefore a question of trust and risk management for the company’s stakeholders.
Above all, sustainability helps companies to improve their performance. When ESG objectives are based on a company’s strategy, the data collected will support business decision-making. At the same time, the company avoids the risk of greenwashing by being able to communicate transparently to its customers and other stakeholders based on numerical results rather than just fancy targets.
Sustainable business development is therefore fundamentally about managing with data – and effective data management is only possible when data is up-to-date, consistent, and easily accessible.
Are you a pioneer or trailing behind?
So, in 2026, the odd cousin will be sitting at every table. Many people have already started a conversation with their cousin and discovered that they’re actually a very interesting character. Others are still shy.
In other words, all companies will soon have access to even more ESG data. Some will be the pioneers of data use, others will be the later adopters. The decisions you make now will determine which one your company will become.
Read more:
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Authors:
Katariina Kekkonen leads the development of Sofigate’s sustainability services, which combine a business focus on sustainability and data management.
Mikko Saari leads Sofigate’s Business Technology Integrator business, which combines end-to-end IT services for mid-sized growth companies, business technology management services, and world-leading platform solutions.
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