73% of companies don’t know what ESG data to track – here’s how HR teams can help

Corporate climate action is no longer a ‘nice-to-have’, but mandatory for companies to regulate on.

However, 73% of companies reported not knowing what ESG data to track or how to do so, according to risk management provider Alcumus. 

To overcome this, regulators from the US Securities and Exchange Commission (SEC) to the EU are cracking down on corporations to measure and disclose their carbon emissions and to assess the risk that climate change imposes on businesses. 

Alyssa Rade, Chief Sustainability Officer at Sustain.Life

But as these rulings are relatively new, businesses must learn what data to report on – and quickly – especially as practicing measuring and disclosing emissions will become the norm of doing business over the next decade.

For example, the EU’s rules – CSRD – impacts 50,000 companies worldwide, and will therefore indirectly affect other businesses across the globe. 

In an exclusive conversation with Alyssa Rade, Chief Sustainability Officer at Sustain.Life, we look at how the new wave of regulations is causing problems for businesses that are unprepared, as well as how HR leaders can support them through the learning process. 

How can HR support businesses to more accurately report ESG data?

“For businesses that are not prepared for these new regulations, it’s equivalent to being asked to file your taxes if you’ve never tracked financials,” Rade explains.

“These are entirely new systems and metrics to track, and it will take time for companies to gather the necessary data and expertise to do this right.

“It’s important to highlight – failure to act is no longer just a climate risk, but a business risk.” 

She continues to explain that in California alone, there is a $500K fine for non-compliance and SMEs risk losing revenue from large corporations if they can’t keep up with disclosures. 

Although businesses are given a grace period, and this is currently only impacting the largest companies with significant resources, companies of all sizes need to begin upskilling their teams and investing in the necessary tools to help them stay compliant.

This is where the role of HR leaders come into play.

“HR leaders have the unique opportunity to understand corporate ESG ambitions and how they translate to company impact and employee experience,” Rade says.

“Younger generations seek out value-driven companies that align with their personal beliefs. As a result, climate action has become a key component of what applicants seek in their potential employers. 

“Additionally, climate action can also be a great way to upskill and engage current employees.

“In training employees, companies can hit two birds with one stone: they can build internal expertise in this nascent industry, and help employees grow their skill sets.”

As a result, Rade shares the belief that talent is a major blocker when it comes to climate compliance, rather than data. This should therefore be a top priority for HR leaders to tackle. 

Unsurprisingly, a key tool to help companies better understand their emission data is technology. 

“Doing this the old-fashioned way – spreadsheets, trackers, complicated manual calculations – is time and labor-intensive,” Rade highlights.

“Tech can bridge that gap, and make the entire process a whole lot more straightforward by integrating with existing operating platforms and systems of record to automate emissions outputs.”

She continues to highlight that climate action – the next step – involves engaging relationships with suppliers, creating reduction plans, and overseeing disclosure – relies on an informed and engaged workforce.

As expected, major corporations typically have dedicated budgets for consultants and in-house climate teams.

However, smaller businesses may not have this luxury, but they will still be expected to comply – especially to comply with their larger customers’ demands.

We’re seeing small businesses literally use Excel sheets to track emissions,” Rade says.

“It’s not just inefficient, it also puts them at risk with their customers, especially as more rigorous, global regulations come into play.”

According to Rade, Sustain.Life is seeing “massive momentum” from both the regulatory stance as well as corporate voluntary climate action programs.

The world’s largest companies will be required to disclose emissions in the EU requirements as early as 2025, creating a ripple effect with more companies being impacted by these rules every year. 

Sharing her concluding thoughts, Rade says: “Regardless of size, companies need to upgrade their ability to measure and disclose emissions in a rigorous manner – from hiring expert talent to investing in great technology tools.”

With this in mind, HR, where does your company fall in ESG reporting? And is it utilizing the right tech to do it effectively and efficiently?