Today, most companies have committed to improving their environment, social, and governance (ESG) performance and disclosures to meet growing demands from investors, regulators, and customers. As a result, annual ESG reporting has become a practice that's increasingly being done with specialized ESG reporting software instead of spreadsheets or generic file management systems.
An ESG report is a communication and disclosure tool designed to increase corporate transparency about an organization’s ESG performance, risks, and opportunities. ESG reports should be clear, data-driven (rather than vague, anecdotal, or solely qualitative), authentic (not “greenwashing,” spin, or misrepresentation), and tell a clear story about how the company is pursuing better social, environmental, and equitable outcomes for its employees, customers, external communities, and the planet, backed by evidence.
ESG reports are typically published by the ESG, investor relations, or corporate affairs department of a company, and creating ESG reports is a collaborative, cross-functional effort.
In most countries, ESG reporting is voluntary, not mandatory. However, recent 2022 and 2023 legal changes, announcements, and impending mandates in the United States, Canada, European Union (EU), United Kingdom, Singapore, Australia, and other regions are creating stricter disclosure obligations for many types or organizations - particularly publicly-listed companies - to measure, report, and disclose their ESG performance.
Moreover, many investors and large companies - including Walmart, Disney, and Amazon - are increasingly asking their investments, vendors, suppliers, and partners to complete ESG and sustainability commitments and disclosures. Employees, customers, and communities are also increasingly likely to advocate for larger and more impactful ESG commitments from companies.
ESG reporting can be a complex process, particularly for larger enterprise businesses or organizations. For a lot of the same reasons why it's better to use dedicated accounting software like Quickbooks or Oracle Netsuite to produce corporate financial reports like a 10-K, manual and spreadsheet-based ESG reporting and data management is error-prone, inefficient, and has major visibility, collaboration, accuracy, and governance issues. It also just takes a lot more time.
Given that ESG disclosure requirements are being written into everything from SEC regulation to procurement contracts in 2023, this is information that needs to be accurate, consistent, structured, and easy to access - and shouldn't tie up all your time to collect and communicate.
Moreover, ESG reporting is a recurring annual obligation. It's much more efficient to use a system that's purpose-built for auditing, archiving, historical comparison, and benchmarking.
Brightest's integrated, all-in-one ESG reporting platform
Given the nature of our work, we get asked questions like "what's the best ESG reporting software" a lot. And, our honest answer is, there is no best solution overall. What really matters is what's the best solution for your organization and needs. The best solution for one company may not be the right answer for another.
So instead of trying to rank specific tools and brands, we thought it would be more helpful to share the evaluation framework we recommend companies consider when they're considering carbon accounting tools, or developing RFP or RFI requirements for an ESG reporting platform.
For ESG technology buyers, researchers, and analysts, consider these seven criteria to determine what the best ESG reporting software is for your organization:
Let's walk through each one:
A global, enterprise brand has very different ESG reporting needs and complexities compared to a small or medium business (SME). Smaller organizations need an easy-to-use, automated, lower-cost solution that can likely be used by one or two administrators to share data with larger customers and answer questionnaires. By comparison, global organizations have larger teams and more resources, but also require enterprise workflow and governance support, ESG report audit and approval workflows, strict IT security, and comprehensive account management.
Be sure to consider:
Generally, there are five value chain archetypes or organizational structures when it comes to ESG reporting:
Many ESG reporting tools focus or specialize their product in specific industries, value chain types, or company sizes. Make sure to understand which use case(s) and sector(s) an ESG reporting vendor serves through their website, case studies, client testimonials, and product roadmap.
This is another area where it's important to be clear (internally) what your top priorities and criteria are. These can include:
While Brightest and many other ESG platforms offer "all-in-one" solutions, by necessity every vendor has to prioritize and focus on specific capabilities at the expense of others. What's most important to your organization? What priority workflows do you want to set up first?
Make sure your specific needs and priorities align with the strengths of the carbon accounting solution(s) you evaluate.
It's always good to be honest in self-assessing your own internal capacity and ability to integrate an ESG reporting platform. This includes:
Different ESG reporting software tools and platforms require different internal commitment levels and resourcing. They also offer different levels of ongoing support and service tiers. Be sure to discuss and understand this during your evaluation.
After you assess your internal capacity and carbon accounting expertise, you may decide you need additional external support. Will that come from the ESG platform provider? Do you need to hire specialist consultants to support your ongoing deployment, data collection, and/or reporting? Make sure you adequately resource this project for success.
As we've written before, your organization structure is another important variable in selecting the right ESG reporting technology for your company. Where does your ESG data live today? Spreadsheets? Other software tools? Do you need to conduct surveys? Do you need help from other departments and stakeholders in the organization to collect specific data? What about supplier and value chain engagement?
Most organizations don't focus enough on developing ESG data collection workflows. Think about what's most needed in your organization, look for opportunities to improve, and engage your ESG reporting partners on best practices and ways they can support this.
Brightest automates ESG data collection from different departments, sources, and systems, including integrations, spreadsheets, and surveys
If you operate in a region with higher levels of ESG and environmental regulation like the European Union (EU), are a publicly listed firm, or work in a regulated industry like healthcare or finance, your organization will need an ESG reporting management solution that supports capabilities like:
In addition to other strong compliance and security controls. Make sure to work with your IT business partners to evaluate the security and controls of your ESG solution provider.
Another related capability to consider is sustainability reporting. Most companies perform carbon accounting and sustainability measurement as an input into their broader ESG reporting. Does your ESG reporting platform offer integrated sustainability reporting? Or does that require an integration or add-on with one or more separate vendors? What are the costs and workflows for that type of solution?
It can be helpful to identify an ESG reporting platform that also streamlines and supports your firm's sustainability reporting efforts.
Hopefully this guide has shared some helpful questions you can use to determine the best technology partner to meet your ESG reporting needs and support you on your journey. And, of course, be sure to also consider important vendor intangibles like honesty, expertise, business ethics, and the quality of the relationship. Look for ESG technology partners who are truly invested in supporting you and your organization.
These relationship aspects really matter.
And finally, a word of caution. Given the ESG software space is so new, there's a lot of hype and marketing around it. Ultimately, every company does marketing (including us), and it's expected companies will try to position themselves in the best light. That said, be wary of buzzwords and marketing lingo like "Artificial Intelligence (AI)" and ask thoughtful questions. What does this AI actually do? Is it going assist me with a priority need or workflow?
Most modern software companies (including us) use AI and machine learning - the important question is 'why' and how does it actually help you? Is it essential to your success with the platform, or a nice-to-have?
Similarly, does the product actually exist and work the way it's being demonstrated? Is it in use by companies? Or are you being shown a demo environment that isn't actually in production and widespread use?
Above all, we wish you all the best as you continue ahead with your ESG roadmap. If we can be helpful at all (at any step in your process), please get in touch. A central part of our mission and work here at Brightest is enabling better data-driven decision-making (and actions) that lead to a better future for us all.