Data accuracy in sustainability reports

The landscape of sustainability reporting is rapidly changing, with more companies disclosing information on material issues than ever before.

There are many reasons for an organization to report on its sustainability performance. But often, the primary reason for reporting is to build and maintain a strong corporate reputation—a result of stakeholders' increasing desire for transparency and dialogue.

In addition, a recent survey revealed that 43 percent of executives cited "alignment with business goals, mission, and values" as the top reason for addressing and reporting on sustainability topics.

Typically, sustainability reports have different data types, including carbon data, water usage, philanthropic donations, volunteer hours, as well as diversity and governance information. With such a large variability in data types, it can be difficult to consistently gather data accurately.

The current guidelines on sustainability reporting are useful for determining the subjects that should be addressed. However, there is no recognized methodology when it comes to how companies should collect, validate, and analyze the data contained within the reports.

That said, if there are concerns about the accuracy of the data, it is difficult for decision makers to glean any real business value from sustainability reporting.

Recently, a global water company released several restatements of sustainability data, citing data gaps and structural changes as the reasons for correcting data. According to this KPMG survey, 25 percent of the world's largest companies issued restatements of past data in their 2013 reports, highlighting the need for improved data accuracy.

There are a few good ways to improve the accuracy of your data:

• Implement a continuous monitoring process for key performance indicator tracking to spot anomalies. This also enables teams to accurately track progress toward targets and industry benchmarks and minimizes the need to go back and sift through data when it's time to report externally.
• Establish a robust set of goals and targets with a standardized method to measure progress, improve transparency, and reduce error in data collection.
• Generate regular progress reports and increase accountability for the data in order to streamline the data collection and validation processes. The KPMG survey of current trends in sustainability reporting found that the highest quality reports came from companies where responsibility for data rested with the CEO, Board of Directors, or a specific board member, such as the CFO.

In addition, the internal audit team can review the sustainability data from three perspectives: quality, pertinence, and provenance. The team can provide an internal, independent review of the data before the report is published.

Some companies engage the services of external assurance firms that specialize in verifying the accuracy of the whole sustainability report, specified performance claims, and/or report data. They provide an external, independent opinion on the reliability of the information. They may also weigh in on underlying reporting processes such as stakeholder engagement, materiality assessment, or data systems. A recent GRI study revealed that the number of externally assured reports by U.S. companies has more than tripled since 2008.

External assurance teams require access to the company’s data collection and internal review processes as well as the people responsible for the content of the report. After the audit is completed, a signed assurance statement is typically presented in the sustainability report or on the company website.

As stakeholder demands for transparency increase, companies can expect more pressure to report on material issues as completely and as accurately as possible. Given this context, the quality of sustainability reports can only grow over time, and companies need to think carefully about the process changes required to improve the accuracy of the data in their sustainability reports.

Whichever method companies choose to improve the accuracy of their reports, the trend of publishing better-quality, externally assured sustainability reports will surely continue.

Don’t wait! Register for a free Amplify account and stream select sessions until Oct. 31, 2023. Explore how financial reporting, ESG, and GRC intersect.