ESG reporting automation
Environmental, Social, and Governance (ESG) has become indispensable to our global economy. ESG reporting is a complex process, but AI can help enterprises reach their ESG goals faster.
Feb 07, 2023 by Craig Woolard
Since ESG compliance can give you a giant leap ahead of the competition, this guide will cover everything you need to know about ESG reporting, why it’s essential, and how AI can help you automate an ESG strategy for a competitive advantage.
What is ESG reporting?
ESG is an abbreviation for “Environmental, Social, and Governance.” It refers to a form of risk management that addresses sustainability issues — including environmental and social issues.
Essentially, ESG reporting is an organization’s effort to meet its environmental, social, and governance goals and disclose its performance to stakeholders. The information in ESG reports can include:
- Details about a company’s carbon emissions.
- Waste management practices.
- Employee diversity/inclusivity policies.
- Anti-corruption safeguards in place.
What do ESG reports include?
The main goal of ESG reporting is to provide investors, customers, and other stakeholders with a clear and transparent picture of a company’s overall sustainability goals and performance. So, companies can include a wide range of information in their reports.
ESG reports generally focus on three “performance” pillars:
- Environmental performance: This could be the company’s efforts to reduce its environmental impact through renewable energy, recycling programs, and responsible use of resources in the supply chain.
- Social performance: This could involve special community involvement activities and ethnic or gender diversity/LGBTQ+ policies in place that nurture people in the workplace.
- Governance performance: This may include safeguards, special audit committees, or whistleblower programs that prevent corruption, fraud, and other criminal activities.
Currently, companies have a lot of flexibility when it comes to disclosing information about ESG performance. Companies can present the data in any format they consider helpful to their investors and stakeholders. Unfortunately, this makes it challenging for investment firms to find the most critical data points.
However, several global organizations have established ESG reporting frameworks to regulate the process. Today, the European Union (EU) offers the most mature framework for ESG regulations — created to advance Europe’s commitment to climate change through the EU Green deal.
Why is ESG reporting important?
ESG reporting is essential for many reasons:
- ESG reporting provides transparency into an organization’s activities (good or bad) regarding its sustainability initiatives.
- Investors are increasingly interested in how companies address sustainability issues. ESG reporting demonstrates a company’s investment in how it impacts society and the environment — and this instills trust in the company that can also raise its profile in the public domain.
- ESG reporting is a legal requirement in certain countries. Organizations can conduct ESG reporting voluntarily, or laws may require it. Companies might also be required to disclose ESG performance in their financial reports or specialized reporting frameworks — such as the Sustainability Accounting Standards Board (SASB) or the Global Reporting Initiative (GRI).
How automation assists with ESG reporting
The problem for investors, however, is a need for more consistency in ESG data reporting methods and how organizations ultimately decide to present ESG data.
Presently, companies have a long leash when it comes to disclosing ESG. Some companies may publish ESG data in various semi-structured formats — such as the company’s website, a PDF report, or even machine-printed paperwork — making it nearly impossible to evaluate and compare ESG scores for an array of organizations.
Since there is no standardized format, method, or framework for reporting ESG information, financial institutions and investors must manually read various unstructured documents to find the key data points that reliably evaluate a company’s ESG impact. And for companies following ESG guidelines, the data collection process for ESG compliance can be time-consuming and labor-intensive.
Adding to the complexity of ESG compliance, ESG scores can vary between providers and may not align. Many third-party organizations — such as rating agencies, research firms, and index providers- assign ESG scores to companies.
Each of these agencies uses a different set of criteria to assign ESG scores, so it’s worth mentioning that some ESG scores are based on publicly available information, such as the open-source unstructured data on the company’s website or the engagement on its social media channels. Others are based on additional research, data, and interviews with the company.
Since there is no standardized scoring system nor a single standard for ESG regulation, it’s essential to consider the methods, data sources, and scope of the ESG score when evaluating ESG performance. There must be a better way.
Fortunately, intelligent document processing (IDP) can help solve these problems and much more.
Using intelligent automation to ensure ESG compliance
Intelligent automation technologies can improve the accuracy and efficiency of ESG reporting, reducing manual data entry errors and freeing up time for more in-depth analysis.
Automation can also help companies monitor and communicate their ESG performance more effectively, so they can focus on providing stakeholders with reliable, real-time data.
Next-gen intelligent automation technologies with advanced AI/cognitive capabilities, such as intelligent document processing, can completely automate many tedious steps in ESG reporting.
Here are seven key opportunities IDP can automate:
Key opportunities for automation in the ESG sector
- Collecting and managing ESG data: Collecting data is one of the biggest challenges for any organization. Since intelligent document processing reads and understands documents, end-to-end IDP platforms can automate every tedious step in the data collection process. Our IDP platform uses an advanced AI model to automatically sort documents into categories, making document management for ESG reporting a streamlined process. For example, when a new email comes in that is related to ESG, Hero Platform_ uses a classification AI model to classify the intent of the message. Is the email an energy, gas, or water utility bill? Hero Platform_ detects the intent and intelligently sorts the email into an appropriate category for the department overseeing the collection of ESG materials. Additionally, our API makes it easy to connect to any existing REST API and quickly extract the necessary data. As a result, you can immediately start using Automation Hero’s built-in intelligent document processing to build an automated infrastructure that speeds up tasks at every step of the way.
- Extracting ESG data points accurately: The key data points you are looking for can be buried within invoices, contracts, emails, reports, and other semi-structured documents. Since nearly all data points essential to ESG reporting are locked away in various documents, manually capturing the unstructured data from them is tedious and time-consuming. Fortunately, Hero Platform_’s intelligent document processing (IDP) is a proven solution that unlocks this unstructured data and turns it into valuable, actionable data for ESG reporting. Hero Platform_ uses a Context-aware OCR model that improves data extraction speed and accuracy. It can even read and extract handwriting 281% more accurately than the leading competitor’s OCR — making it a viable solution for organizations that still use paper applications but want to improve processing speed significantly.
- Integrating ESG data with other tools: Once extracted, intelligent document processing can read the data in multiple languages. If you have operations in different countries — this allows you to reuse the data for ESG reporting standards in multiple regions. Furthermore, intelligent document processing technology can enter the data into accounting software or an internal database — such as your ERP, ECM, or CRM system. With the ESG criteria extracted, Hero Platform_ can look up information in another system and verify it — helping your organization comply with the ESG reporting framework in your region. Additionally, Automation Hero is the only end-to-end platform that allows automations and document AI processes to be deployed as highly scalable, highly reliable microservices. Hero Platform_ is a modern platform that supports calling external microservices; it can also be called as a microservice by other platforms. For processes stuck under a mountain of unstructured data — such as ESG reporting — our API will serve as an intelligence “fabric” that connects all of your microservices together with other business process automation systems and existing internal data systems.
- Augmenting existing systems: According to a survey conducted by Enterprise Strategy Group, most well-established enterprises drove their early digital transformation initiatives in the 2010s by successfully implementing Robotic Processing Automation (RPA) across several business processes to help automate ESG compliance. However, this automation requires hundreds, if not thousands, of RPA bots. Today, they have progressed to the next level of digital transformation by leveraging the power of “Hyperautomation” through machine learning and AI-integrated RPA solutions. For organizations invested in RPA and other legacy tools — or required to migrate incrementally from older technology — Automation Hero can integrate with pre-existing systems to further augment ESG processes. For example, many companies still extract data using simple, legacy OCR solutions. However, Automation Hero supports a “Business-Process-as-a-Service “architecture, allowing organizations to improve workflow speed, accuracy, and performance quickly and easily without “ripping and replacing,” which reduces cost and overhead for your company. Automation Hero’s API can serve as a connective fabric between systems to fill in the gaps — creating cohesion between your databases and existing software tools. Even better, Hero Platform_ provides a central enterprise dashboard to manage all interlinked automation workflows.
- Validating data for ESG compliance: With an end-to-end intelligent document processing platform to automate ESG reporting, organizations can have more accurate and actionable insight into their ESG metrics. For example, an IDP platform, such as Automation Hero’s Hero Platform_ is particularly adept at comparing information from various unstructured documents and verifying the key data points for ESG compliance with above-human accuracy. In addition, since measuring KPIs with a traditional ESG framework is cumbersome, an IDP platform, such as Automation Hero’s Hero Plaftorm_ provides an “intelligence” framework that allows companies to compare documents and validate ESG performance for future risks and opportunities.
- Driving efficiency while meeting ESG goals: Each compliance requirement, including ESG, can cost large organizations 10,000 hours of work. Data breaches — either from scammers or human error — are costly to companies and their reputations. Since automation removes human error from many business processes, including ESG, there is less likelihood of a leak or corrupt employees having easy access to sensitive data that could result in identity theft or other problems. Automated systems are also more accessible to log and audit. For example, if a company wants to do an ESG audit of its vendors or supply chain, intelligent document processing can help. This allows the company to easily track data from all departments and provide more effective oversight. Likewise, if an investor or a bank wants to compile ESG data from multiple companies simultaneously, then IDP is extremely beneficial in this use case.
- Enhancing security and compliance: ESG risks — such as human rights violations or weak governance practices that oversee executive board members and compensation policies — can significantly impact an organization’s reputation. The right programs, policies, procedures, and technologies can help companies protect themselves against fraud, bribery, and other criminal activities. ESG reporting is one of the safeguards that companies have to identify, assess and manage these risks. But, companies need to be armed with the right automation platform to minimize mistakes so they can reliably protect their long-term viability. Unfortunately, the World Economic Forum reported — only 9% of companies worldwide leverage technology for data collection, analysis, and ESG reporting, which is an alarming concern. IDP is the most secure safeguard companies can incorporate to reach ESG compliance goals.
Automation is a valuable asset in an ESG reporting framework. But what does it look like in practice?
Automated ESG reporting in action
Hero Platform_ reads documents — including handwritten documents — the same way as humans. It uses next-gen AI to extract essential ESG criteria locked away in semi-structured and unstructured emails, websites, interview transcripts, or annual reports. Then, it transforms it into business value for ESG compliance.
Once unlocked, Hero Platform_’s intelligent document processing can read the data in multiple languages. If you have operations in different countries — this allows you to reuse the data for ESG reporting standards in various regions.
Likewise, intelligent document processing technology can enter the data into accounting software or an internal database — such as an ERP or HCM system. Then, with the ESG criteria extracted, Hero Platform_ can look up information in another system and verify it — helping your organization comply with your chosen ESG reporting framework in your region.
Using IDP to automate ESG reporting
Element22 found a use case for Automation Hero’s intelligent document processing for its own ESG reporting tool. Element22 is a data analytics consultancy firm that provides a software solution to help financial institutions and investment firms find and benchmark ESG ratings. Their online platform is used by investment groups to collect and aggregate ESG-related data from multiple companies.
Since many data points that financial institutions and investors look for when evaluating a company’s ESG are found on its website or in semi-structured annual reports, the data is challenging to locate. Element22 recognized the lack of accurate data collection and extraction solutions for its ESG reporting system, so it reached out to Automation Hero to fill in the gap.
Element22 turned to Automation Hero’s IDP for help pulling in the data from a vast array of ESG reports to extract the essential data points for input into its platform. Using Hero Platform_’s Application Programming Interface (API), Element22 pulls ESG information from hundreds of semi-structured reports. Then, it analyzes the data within its software platform for its clientele.
Before they reached out to Automation Hero, Element22 manually entered the data into their platform. After integrating IDP through our platform’s API, they reduced their average handling time from three weeks to less than three days.
IDP has many use cases in the banking and finance sector — including ESG compliance and evaluation. Watch the ESG use case with Element22 and discover how our intelligent document processing platform’s API completely automates the process for fast and accurate ESG evaluation.
Start automating ESG reporting today:
The laws and regulations pertaining to ESG compliance change fast, and keeping up with them is not only a challenge — it’s simply impossible. However, that’s where artificial intelligence (AI), specifically intelligent document processing (IDP), can help.
- Learn how IDP works — our guide to IDP will guide you every step of the way.
- See how IDP works — watch dozens of use cases. Filter by industry and see what IDP can do.
- Try Automation Hero — our free trial is one step closer to digital transformation.
- Speak with an expert — tell us about your specific use case.
- Get a personalized demo — schedule a demo, and our Heroes will get in touch!