Are you planning to invest in ESG software?

Are you considering investing in an ESG software solution? To assist you in selecting the most suitable tool from the outset and to identify your needs, we have compiled some key considerations in this article that you may find beneficial before making a decision.

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At what stage is your company ready for an ESG tool? The brief answer is: When you know what you want – both from your ESG-reporting and how you plan to use the tool – since ESG is a wide area, it is important to have clarity on tool requirements in order to navigate the wide selection of software solutions.

Choosing the right solution to support your company’s needs in the ESG area requires knowledge about the reporting requirements of your business. Unfortunately, there is no software in the market that can tell you exactly what it is mandatory for your company to report. It’s an exercise that you must go through yourself, and if you haven’t done that yet, that’s an obvious first step.

ESG reporting is more than just compliance. Therefore, it’s a good idea to identify both your company’s external and internal demand for data – be it in the form of KPIs or policies.

External demand may, for example, be customers’ requests for data that it is not mandatory to report, but could be a competitive advantage to your company if you had the option to provide it. An example could be CO2 emissions per product where your customers can use the figures in their own ESG reporting.

Internal demand could refer to data that holds intrinsic business value, such as insights related to gender equality and diversity, or the tracking of overtime hours and employee turnover.

Understanding the specific data points that are in high demand before choosing an ESG software solution positions you to make a more informed decision. This is crucial because some software solutions primarily support the ‘E’ part of ESG, and it would not be ideal to opt for such a solution if your company has a higher demand for data on either the ‘S’ or the ‘G’ elements of ESG.

Another issue that it would be an advantage to have examined before choosing an ESG software solution, is the sources of your ESG data. – would it come from another system, or do you want to use the ESG system to collect new data?

Your company likely already has access to a vast amount of ESG data. For instance, your HR system may offer insights into the 'Social' aspect, while your Facilities Management (FM) system could add to the 'Environmental' component of ESG.

It’s a good idea to distribute the responsibility for data collection and data controlling processes before choosing an ESG system.

Who has the responsibility for the correctness of the data – those submitting the data, those owning the system, or those owning the ESG reporting? And who is in charge of sampling and controlling to ensure that what has been reported makes sense?

Ensuring the quality of your company’s ESG data can also benefit the broader business by detecting potential issues early on – and this is advantageous beyond the ESG area.

If, for example, your company has two warehouses in the same country, and one of them reports a comparatively high gas consumption per square-metre compared to the other, you probably need to examine and address this right away.

It would also be an advantage to clarify which data quality requirements your company makes, since there is no ESG tool available in the market that can tell you which data are good or poor.

A good way to ensure the data quality is to choose an ESG tool that allows you to upload documentation directly into the system. Thus, you ensure correlations between your business data as well as the availability of all relevant documentation from the same place in the system so that everybody who needs the documentation has access to it – and can easily control it.

Once you have identified your company’s needs, you are almost ready to select an ESG tool. However, for the tool to be successfully integrated and to add value to your ESG processes, it's crucial to consider if your company …

Allocating time and budget for anchoring the ESG reporting process in the company is essential. Without this commitment, there is a risk that the task will not be prioritised.

You must allocate resources beforehand for implementing the system as well as establishing the processes and the reporting itself.

One thing is to buy a system, but it won’t ‘live’ in the organisation if resources have not been set aside for implementation. It requires hours, training, or external assistance in case the necessary expertise is not available in-house. 

Consider the number of employees who will be working with the ESG reporting before you choose a software solution.

For a company with 80 employees using the tool, a system designed for multiple users and efficient data consolidation is vital. However, a smaller company with lower organisational complexity will not have the same need for a large system. And this brings us to the final point, which is whether your company …

Before committing to new software, it makes sense to evaluate whether your company already has some reporting tools that are effective and in use – and if so, to extend these systems rather than invest in a new one.

The process of introducing a new system to an organisation requires a lot of effort and you may potentially save time, money, and frustrations by building on top of the system that the company already has and that people are familiar with. Once you have been through the above considerations, you will be better prepared to identify the best ESG software solution for your company’s needs.

Should the current market not offer an exact match, there's no need for concern.

The ESG software sector is experiencing rapid growth, with a steady influx of innovative tools and functionalities as the field gains traction. If the ideal solution isn't available for you at this moment, you might find it beneficial to start with the tools at your disposal and stay vigilant for future solutions that align with your evolving requirements.

When you are ready to choose an ESG software solution for your business, it may be a promising idea to include a number of functions in your considerations. We have chosen three of the best functions here:

• Emission/conversion factors
  Some reporting tools can provide you with emission factors for your energy consumption. They can match the building locations with the most recent, updated emission factors. This eliminates a time-consuming task for your team, and you’ll get an external guarantee of the correctness of the figures.
• Mandatory upload of documentation
  Having a feature that enables mandatory upload of documentation enables easy controlling and ensures documentation storage. It makes the documentation and validation process much smoother – and makes you less vulnerable to key-person risk.

• Onboarding and support
  This is not a software function, but nevertheless it may be a big advantage to examine whether your future ESG software provider offers to train your employees in using the system – and offers implementation assistance, if needed.

  By doing so, you can ensure that the system has been built correctly and that you are able to use all the functionalities of the system.

Read this and more articles in the magazine Content (in Danish) here.