How To Evolve Your Sustainability Reporting Process
Reporting sustainability metrics is becoming a widely accepted practice. Regulatory agencies are requiring the reporting of EHS performance data, and more customers, partners, investors, and non-governmental organizations (NGOs) than ever are requesting that same data. There are numerous benefits to having all the information about metrics in hand. Companies that have consistent, comprehensive data demonstrate responsibility, accountability, and commitment to sustainability. They can also score well in the many public indices that have emerged to track progress against commitments. At the same time, this is still a relatively new business process for many, and the emerging process is rife with opportunities and pitfalls.
One thing is for sure: Sustainability reporting is here to stay. The scope will only expand in the coming years. Fortunately, whether your company has just started to work on sustainability reporting or is in the middle of a rapidly expanding program, there is light at the end of this tunnel.
Start with a solid foundation. Numerous customers have told me that their sustainability reporting initiatives started out as internal initiatives charted by the board of directors, the CEO, or the vice president. As organizations begin sustainability reporting, we typically see them launch a new business process to collect and report their data. Often the solutions start out low-tech, such as data entry into a spreadsheet that is completed by the business unit and site EHS staff. These spreadsheets then make the rounds as email attachments.
Recently a customer told me that they released a spreadsheet for sustainability reporting that contained 40 metrics. No single person at their facilities dealt with all the data. One person took rows 1 through 6, pasted them into a separate spreadsheet and sent them to a second person to complete rows 7 to 23. Rows 24 through 30 went to a third person, and so on. Ultimately, the data came back piecemeal and the process had become an administrative nightmare. Did anything get overlooked or entered incorrectly? Quite possibly.
We cannot escape the spreadsheet as an easy and flexible business tool, but that ease and flexibility represents challenges to the sustainability reporting process. Starting with a spreadsheet can help meet short-term deadlines. However, in the long-term you want to consider systems that better facilitate data entry, provide robust audit logs, and have the capacity of linking the sustainability reporting with the regulatory reporting process.
Prepare for an expanding scope. As companies evolve sustainability reporting, they see the data scope and detail expand. One common metric that our customers track is total waste generated. Looking at the first year of tracking, they might just have one metric on the spreadsheet requesting total hazardous waste. The second year they include hazardous waste and non-hazardous waste. In year three, they add recycled and reused hazardous waste, and recycled and reused non-hazardous waste. So, even though the process started out tracking one metric, soon they have many more. Think ahead and work with stakeholders early on to understand desired changes and create a plan to handle an expanding scope.
Data can change over time. Another challenge customers struggle with is how to handle data that changes over time. Common examples include errors in initially reported data, the categorization of data changes, and the reconciliation of production data 60, 90, and 120 days past the period close. In all of these cases, the corrections can lag by months, which represents a hurdle to sustainability reporting. When data shifts, those updates need to flow through the entire reporting process — both regulatory and sustainability reporting — and be reflected accurately and consistently.
Synchronize regulatory and sustainability reporting. Customers frequently struggle with whether sustainability reporting should be its own independent business process or simply an extension of regulatory compliance reporting. As they gravitate toward more detail, having two processes with overlapping data starts to introduce potential risk. If a number changes in one system and doesn’t get reflected in the sustainability reporting process, that discrepancy can have negative consequences down the road. Differing figures raise questions: Which number is correct? Why the inconsistency? It could easily end up being a spiraling situation.
Customers typically have a waste management system for regulatory compliance tracking and reporting. The waste management system generally contains data for metrics like the amounts of hazardous and non-hazardous waste generated, what has been shipped, what gets recycled. The data requested for the sustainability report is already in the regulatory compliance system. Having a separate sustainability process where data is re-entered into a spreadsheet or separate system increases the likelihood of introducing errors. It also weakens traceability and auditability of data, and makes it possible for changes in data to get overlooked.
In order to ensure accuracy and consistency, sustainability reporting should be aligned with the regulatory reporting business process and system. This synchronization will yield higher business process efficiencies, saving time, as well as avoid discrepancies and errors, and provide insights into data changes. At a minimum, you want to have a plan for aligning systems if synchronization hasn’t been implemented yet.
Approach reporting with a financial mindset. Every public company gets audited and has prescriptive guidelines on how to manage financial information. We see parallels between the rigorous management required for financial data, and that of sustainability reporting. Similar to financial information, customers should audit and certify their sustainability data and reports. Achieving this requires having a process and system that ensures consistency and traceability from the point of origin all the way through to the reporting. You wouldn’t want to put 10,000 pounds of hazardous waste in the sustainability report when your waste management system shows there are actually 11,000 pounds.
Ideally, you want to have a system that can pinpoint exactly what changed and when. The system should have an audit log that tracks what changed, why it changed, when it changed, and who changed it. Returning to the waste example where one side says 10,000 pounds and the other says 11,000, an audit log will help reconcile them. Here, the system can quickly illuminate that a shipment record was modified and increased by 1,000 pounds after the snapshot was taken, ensuring consistency and providing complete line of sight. Access to this information helps companies become efficient in determining whether data changes are material, and warrant updates to regulatory and sustainability reports alike.
For asset-intensive companies sustainability reporting is a major factor in financial and long-term success. It can have a significant impact on operations, and on the communities where companies operate. What used to be something nice to have has become a must-have in an era where investors evaluate asset-intensive companies by their commitment to sustainability. Communities are demanding responsible neighbors and customers are responding by evolving their purchasing decisions. Don’t get left behind. The new normal is a smooth integration of regulatory and sustainability reporting in a common system, improving data integrity and accountability.
Mike Easley helps customers plan and deploy enterprise environmental, health, and safety EHS solutions. He has more than 20 years of experience in this industry, which benefits customers during the implementation of their EHS solutions. He has spent his career learning and refining best practices in the EH&S industry, working on projects ranging from single-site implementations to global deployments. Mr. Easley holds a B.S. in chemical engineering from University of Missouri–Rolla.
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