Sustainability Reporting is the disclosure of a company’s Environmental, Social and Governance (ESG) goals. It communicates a company’s positive and negative progress and efforts to reach those goals. It enhances the organization’s reputation, builds consumer confidence, and leads to improvement of risk management.

Many companies in Kenya, beyond the publicly listed ones, are increasingly adopting ESG reporting. However, several challenges have emerged in the process, with key concerns including the consistency of these reports, the accuracy of the data provided, and the potential for greenwashing.

Since ESG reporting is still a relatively new concept for many Kenyan companies, these challenges are expected and while businesses may want to produce reports that genuinely reflect their environmental, societal and governance impact, they often lack the tools and resources needed to ensure that the reports are both comprehensive and efficient.

Key challenges in ESG (Sustainability) reporting:

Lack of Structured Data

The credibility of ESG reports is often impacted by outdated, incomplete and erroneous data. This is because many companies still are reliant on manual data entry such as using Excel sheets for collecting ESG information, increasing the risk of transcription errors and incomplete records. Another challenge is managing unstructured data on climate change, diversity, equity, inclusion, and human rights without a centralized system, resulting in inefficiency and confusion.

Multiple ESG Standards and Frameworks

There are many ESG reporting frameworks and many companies are finding it difficult when it comes to selecting the appropriate reporting framework, a framework that aligns with their materiality and specific needs. Additionally, navigating varied ESG reporting frameworks requires significant time and effort thus making a centralized system essential for handling evolving standards and regulations.

Lack of Auditability

Audits are important as they enhance the reliability of reports. They provide objective assurance and independent verification of the effectiveness of ESG risk management. A prevalent challenge in ESG reporting has been on lack of auditability. Ensuring data integrity is difficult without an audit trail, and therefore traceability and accuracy are crucial for reliable reports.

Lack of Rules and Robust Metrics

Defining industry specific ESG metrics is challenging due to gaps in expert education and standards alignment resulting in several complex issues. Different industries have unique environmental, social, and governance impacts, and understanding these nuances requires specialized knowledge that many professionals lack, thus the need for software tools.

Lack of Cultural Nuances and Local Understanding

Ensuring balanced and inclusive perspectives is important when coming up with an ESG report. But often a challenge is presented when ESG software overlooks cultural nuances and local regulations that result in less effective solutions.

How is SQUARELY by Sustainable Square addressing the challenges of ESG reporting?

Advanced Collaboration

SQUARELY offers the flexibility for internal stakeholders to easily and effectively submit, review and collaborate on data points.

Data Integrity

SQUARELY ensures accuracy with thorough data reviews, giving users full ownership of their data points. It also ensures a clear audit trail ensuring traceability and accountability.

Customization, Scalability, and Flexibility

SQUARELY has the ability to tailor disclosures based on your needs. It allows for easy creation of disclosures with data visualization. You can also add or remove disclosures as a company’s ESG journey evolves.

Continuous Support

SQUARELY ensures continuous technical support with in-house tech team. It offers support in materiality, industry compliance and strategy.

Locality

With Sustainable Square having done business for 12 years in the region, SQUARELY caters for regulatory requirements and the unique needs of organizations at various stages of their sustainability journeys. It knows the key ESG data points required in the region.

Future Readiness

SQUARELY stays ahead of compliance and market trends with our updates to frameworks and standards on a company’s behalf. It focuses on innovation and continuous improvement to meet client needs and prepare for emerging priorities.

Conclusion

The complexities of ESG reporting are many, especially when considering the diverse and evolving nature of sustainability issues across industries. Companies must therefore, navigate regulatory requirements that are often unclear or in flux, and where the expectations of investors, customers, and other stakeholders are constantly shifting.

Moreover, the lack of standardized reporting frameworks leads to inconsistency in how ESG data is presented, making it difficult for stakeholders to compare companies’ performance or evaluate progress. There’s also the challenge of ensuring the reliability and accuracy of ESG data, which requires sophisticated software such as SQUARELY by which streamlines the collection, validation, and management of diverse ESG data. With its scalable platform, companies can digitize and centrally store ESG details and related documents, removing the need for physical records. The software also simplifies defining key performance metrics, making it easy to set, measure, and report on ESG targets.  It leverages AI to provide you with a first draft of your ESG report, saving you time and resources.

To request a demo, contact us at: info@sgb.co.ke or www.sgb.co.ke; https://sgb.co.ke/ Call us on 0700524589