By Riaan Mellet, Director of Futuresense
There has been an increasing buzz in the market in the past 12 months around the topic of environmental, social, and governance (ESG) reporting. As ESG factors become increasingly important to mining companies, these reports have evolved from touching on the basics, such as environmental and socio-economic impact assessment studies, to more in-depth analysis of environmental and social practices across the mine life cycle and supply chains.
For many years, ESG reporting was a voluntary way for mining companies to show their commitment to improving their environmental and societal impact. Recently, however, “sustainable” mutual funds and ETFs have become popular investment opportunities, leading to increasing demand for more detailed and frequent ESG disclosures.
As a result, corporate sustainability and climate change efforts are fast transitioning from voluntary to mandatory. There is therefore a clear driver for mining companies to develop robust sustainability and ESG strategies with transparent reporting to stakeholders.
CFOs and finance teams are paying attention.
While ESG reporting is by no means something new that organisations need to deal with, it has increasingly come under the purview of finance teams. The challenge for CFOs and their teams is that sustainability teams, facilities, human resources, or other groups are responsible for much of the data, making it difficult to ensure the same level of governance, control, accuracy, and auditability as financial reporting.
The ability of companies to raise capital will increasingly be tied to sustainability objectives, according to a recent Accenture survey, despite the fact that “deficiencies in the ability of companies to target, manage, measure, and report sustainability performance still hamper the ability of businesses to effectively deliver on their sustainability commitments”. In fact, only 47% of large companies have identified how to gauge the sustainability of their operations, the survey found.
This is mirrored in statistics recently released by the Switzerland-based Responsible Mining Foundation (RMF). For mining sites that kept adequate ESG data, no site scored more than 50% on its assessment criteria, the RMF found, and most sites with adequate data only fulfilled between 1% and 9% of the report’s ESG criteria.
Aligning ESG with financial reporting
The results of both surveys indicate it is vital for finance teams to become more engaged in ensuring the accuracy and integrity of ESG and sustainability reporting. The Accenture survey, for example, found that only 26% of finance leaders said they had clear, reliable data to back up their ESG metrics.
This is not merely a function of the many different data points involved in ESG reporting. Many financial processes rely on spreadsheets and email for the collection and consolidation of data, but these severely limit control and accuracy. As a result, there are a growing number of purpose-built
ESG/sustainability reporting tools
These, however, are unnecessary if ESG metrics can be collected and processed in the same system as financial data. Enterprise Performance Management (EPM) solutions—specifically, the financial close, consolidation, and reporting capabilities of EPM solutions—are filling the gap in ESG reporting.
Unfortunately, only some EPM solutions support the required features needed to enable the efficient collection, consolidation, and reporting of ESG metrics. Those that do support the collection, consolidation, and reporting of ESG data and commentary not only provide deep analysis but also allow the business to apply controls, validation, and governance. With these types of solutions, ESG data is consolidated according to the same principles as financial data, with the same level of control, governance, and audit trails.