Why Excel is Not the Best Solution for ESG Reporting

Sustainability reporting has evolved from a voluntary practice into a regulatory requirement, largely driven by frameworks like the Corporate Sustainability Reporting Directive (CSRD), as well as rising expectations from stakeholders. Companies are required to provide transparent and comparable Environmental, Social, and Governance (ESG) data to comply with these mandates.

Despite the increasing complexity of ESG reporting standards and frameworks, many businesses still use traditional tools like Excel. However, these tools lack the advanced capabilities required for efficient ESG reporting such as accuracy, scalability, auditability, timely analytics and complex data management.

A recent survey carried out by Verdantix revealed that as organizations prioritize sustainability and ESG reporting, most of the companies are moving away from spreadsheets in favour of software solutions for supply chain sustainability and ESG data management and reporting. In this blog post, we will explore some of the shortcomings of spreadsheet programs like Excel in the context of ESG reporting, and the reasons why the shift towards advanced software solutions is necessary.

Data Collection and Consolidation: An Imperative for ESG Reporting

The environmental, social, and governance data required for sustainability reporting include large sets of qualitative and quantitative data, both internal and external to the organization. The information is typically recorded and stored in disparate systems or in paper-based or electronic documents and spreadsheets. Businesses need to collect and unify the siloed data from various stakeholders along their value chain to meet the reporting requirements.

Consolidating structured and unstructured data and handling large volumes of data in spreadsheet programs like Excel is challenging and involves slow, manual processes that are prone to human error and data corruption. Collecting and recording such data requires advanced data ingestion and integration capabilities, which Excel and other spreadsheet tools lack.

Firms should adopt advanced software solutions that seamlessly integrate with different tools and import data from multiple sources into one platform to create a ‘single source of truth’. Automating the data collection and consolidation process not only facilitates continuous execution to ensure availability and access to the latest information, but it also enables organizations to implement data quality controls, identify anomalies, and prepare for accurate and transparent reporting.

Data Collection - Emissions (mtCO2e)

Reporting & Compliance: Meeting ESG Standards with Precision

As firms grow and expand operational activities, their organizational structures evolve and their ESG reporting process becomes more complex. In addition, they become subject to increasing reporting requirements as regulatory frameworks continuously evolve. One example is the recent developments in the new reporting format required (iXBRL), which involves XBRL tagging of sustainability reports. Companies need a flexible and efficient way to process new operational data, calculate and report information at different levels of the organization as per the reporting requirements, and effectively close out the year, ensuring compliance and readiness for the next reporting period.

Although tools like Excel can be used for formulating calculations, they are unable to adapt to changes quickly as new data becomes available. Moreover, implementing a hierarchical reporting logic and maintaining calculation models and data in different reporting periods can be complex and error prone.

On the other hand, specialized solutions like the Terra ESG Platform provide built-in standards and templates to digitally capture ESG data, along with ready-to-use calculation models to measure impact instantaneously, and advanced reporting capabilities for year-end closing, ensuring data integrity for the reporting year.

Monitoring and Execution: ESG Impact in Real Time

Corporate sustainability is a continuous practice that extends beyond annual ESG reporting. Producing an ESG report highlights various aspects of the business and its operations that may not align with regulatory standards. Businesses need a systematic approach to continuously monitor the impact of their operational activities and project future performance. As a result, they must implement policies and plan initiatives for taking preventive or corrective actions and manage the execution.

Tools like Excel are unable to provide the real-time and dynamic insights required to stay abreast of the firm’s operational impacts. Manual effort is required to process new data at specific intervals, which leads to delays and increases the risk of missing critical information in a timely manner. In addition, the reports and visualizations that Excel generates are static and lack the advanced capabilities required for impact analysis.

Meanwhile, the Terra ESG Platform offers advanced analytics and interactive dashboards for stakeholders to monitor impacts and trends based on the latest information, perform “what-if” analysis, set sustainability targets, and track action plans and their progress in real-time.

Monitoring - Goals & Details

Engagement and Collaboration in Corporate Sustainability

Managing corporate sustainability involves various stakeholders throughout the process, from evaluating both inside-out and outside-in materiality as part of the double materiality assessment (DMA) to identifying impacts, risks, and opportunities (IROs), gathering ESG data across the organization, generating the ESG Report, and acting on different initiatives. Companies need a comprehensive tool to enable coordination amongst team members, manage activities, capture notes and conversations around different work items, and ensure that the information in the system is valid and accurate.

Unlike Excel and other spreadsheet tools that do not provide workflow management or version control capabilities, the Terra ESG Platform enables cross-functional collaboration amongst internal stakeholders and cooperation with external stakeholders when evaluating inside-out and outside-in materiality and throughout the ESG reporting process. Organizations can standardize their business processes by configuring workflows to assign tasks and responsibilities to different team members, track their progress and status, and ensure integrity of the data in the system by implementing approvals and creating an audit trail of all changes made to the data in the system.

Time to Move Beyond Excel

While Excel may still be helpful for smaller organizations, its limitations make it unsustainable for businesses facing more complex reporting requirements. As frameworks like CSRD continue to evolve and organizations grow, companies will need to adopt advanced solutions that enable more reliable, transparent and continuous reporting capabilities.

Gartner Market Guide ESG Market Direction

As illustrated in the Gartner market guide, as the ESG reporting and management practices of organizations become more mature, the process moves away from manual, periodic reporting using spreadsheets and siloed data to a more continuous, automated process with data centralized in an ESG software. This is what the Terra ESG Platform provides; an advanced analytical solution to collect and report ESG data that is auditable, scalable, and highly available.

Contact Terra Reporting’s team of experts to see how our Terra ESG Platform works. Future-proof your organization with sustainable actions!