Why Australian organisations must act now to meet new ESG reporting requirements
New global Environmental, Social and Governance (ESG) standards are coming to Australia next year, but many organisations could be under-prepared to meet the new requirements.
The first International Sustainability Standards Board (ISSB) standards were announced in June and will bring a new era of sustainability-related disclosures for capital markets around the globe. The ISSB standards and Australia’s disclosure obligations will ensure greater transparency when it comes to annual financial reporting around carbon footprint, greenhouse gas emissions, and climate risk.
The topic of ESG has been widely discussed in business and political circles for many years. However, the requirement for accurate reporting is now paramount due to increased global regulatory standards, combined with the Australian Government’s ambition to reach net zero by 2050, and the recently released Intergenerational Report that spotlights climate change as a driver of productivity challenges.
Good intentions hindered by bad data
Many Australian organisations are making a firm commitment to new ESG standards but may be hindered in achieving their ESG targets across every department as a result of factors such as data issues in the supply chain. This can inadvertently result in unintended greenwashing. The Australian Competition and Consumer Commission recently identified 57% of 247 businesses as having made claims that may constitute greenwashing.
A key concern lies in the way that organisations are managing ESG reporting data. A new UiPath survey shows that over 80% of Australian organisations still rely on spreadsheets to collect, analyse and report ESG-related data, and around 50% use manual data entry and online forms to collect this information.
According to more than 70% of Australian senior business leaders surveyed, data collection was found to be the most challenging aspect of the entire ESG reporting process, with 47% of respondents identifying incomplete and missing ESG data as a significant obstacle. Meanwhile, 33% reported that their organisation had inconsistent and irregular data collection procedures, and 47% cited poor data quality as a key obstacle.
To counteract this issue, organisations are now turning to AI-powered automation to capture, track, measure, and report on performance against ESG targets. However, despite the increased adoption of automation, it is still not being fully utilised or prioritised, which could be a pitfall when mandatory ESG reporting comes into play.
Automation: the solution to achieving ESG compliance
When organisations use AI-powered automation to its full potential, they can much more efficiently capture, categorise, analyse, and report data in accordance with ESG regulatory requirements. Importantly, this can be achieved in near real-time, so organisations don’t need to wait until the end of the business quarter to discover how they are tracking against ESG deliverables. In this way, AI-powered automation gives organisations a much better understanding of their ESG performance and risks. It lets companies track the progress of trends over time to achieve greater levels of agility when environmental or regulatory shifts occur in the ESG landscape.
It also supports productivity growth, with the UiPath study revealing that 50% of Australian organisations achieved a moderate improvement since adopting AI-powered automation for sustainability management.
While new ESG reporting requirements are yet to hit our shores, one thing is certain. Without AI-powered automation, it will be almost impossible for organisations to capture, consolidate and report on accurate ESG information throughout their supply chains. As mandatory ESG reporting requirements come into effect, ultimately, the only way to reliably achieve compliance will be through AI-powered automation.