The hidden costs of manual ESG reporting: A financial perspective

The hidden costs of manual ESG reporting: A financial perspective

Feb 18, 2024


Greg Taylor

In the complex realm of ESG reporting, the push towards stringent regulatory frameworks like the CSRD has underscored the urgent need for precision and efficiency. Despite a recent KPMG study revealing that 83% of organizations believe they are ahead of their peers in sustainability reporting, a startling 47% still rely on spreadsheets for data aggregation. This juxtaposition of confidence against outdated practices sets the stage for a deeper examination of the true state of ESG reporting.

This reliance on traditional methods not only contrasts sharply with modern efficiency standards but can also significantly impact an organization's bottom line in several ways. Companies failing to comply with the CSRD face fines of up to 10 million Euros or 5% of their annual revenue. Moreover, French law specifies that corporate directors could be subject to fines of up to €75,000 and imprisonment for up to five years for non-compliance! Such stark penalties highlight the growing necessity for smart, automated systems in ESG reporting.

As we delve into the specifics, it becomes clear that beyond the regulatory risks associated with spreadsheet reliance, the financial ramifications of persisting with outdated reporting processes warrant thorough investigation. The move towards automated solutions not only mitigates these risks but also aligns with the evolving landscape of ESG reporting, where accuracy, efficiency, and compliance are paramount.

A Closer Look at the Financial Impact

Before diving into the specifics, let's first examine three distinct scenarios to understand the theoretical financial impact of current reporting practices. These scenarios set the stage for a later look into potential savings when transitioning from traditional methods to intelligent ESG reporting software.

Scenario 1: In-House Reporting Costs

This first scenario considers groups of people sharing the ESG reporting burden part-time, spending just 15% of their time yearly on ESG-related tasks, based on an average salary of €60,000:

Scenario 2: Full-Time Manual Reporting Costs

Now let's look at the financial implications for businesses allocating full-time employees solely for ESG reporting tasks, with the same average salary of €60,000:

Scenario 3: Supply Chain Reporting Costs

Finally, let's explore the costs associated with a company's supply (or value) chain, assuming companies of varying sizes each have one employee spending 10% of their time on ESG reporting across the year, again with an average salary of €60,000 so we can compare:

Although these costs might not impact your organization directly, gathering data from your supply chain means that the people doing the work need it to be as simple as possible in order for you to get the data without endless chasing. One could also argue that that the more costly it is for people in the chain, the less likely they will be inclined to send accurate data to you in a timely fashion.

Potential Savings with Automated Software

When comparing the three manual reporting scenarios above to the potential savings achievable with automated ESG reporting software, the efficiency gains can be significant. By transitioning from traditional, inefficient spreadsheet-based processes to sophisticated software solutions, organizations can experience substantial cost reductions even when taking into account the cost of the software and onboarding the organization. The key features of our software, for example, that facilitate significant savings include:

  • Intelligent Data Transfer: Automated processes ensure data is efficiently shared and utilized across networks of unlimited entities, eliminating the need for repetitive manual entry across the entire value chain.

  • Calculation Automation: The software automatically performs complex calculations required for ESG reporting, reducing the time and potential for error associated with manual computations.

  • Data Reuse Across the Network: Once data is entered into the system, it can be reused in multiple reports and analyses, enhancing efficiency and consistency.

  • Dynamic Real-Time Compliant Reporting: The software stays updated with the latest regulatory requirements, ensuring that reports are always compliant. This feature not only saves time but also reduces the risk of non-compliance penalties.

  • Enhanced Security: By securing ESG data with encryption and controlled access, our software helps avoid fines and repetitional loss associated with data breaches, ensuring compliance and safeguarding your company's integrity.

  • Auditability: Streamlines the audit processes, making them less time-intensive with comprehensive logs and transparent data trails, ultimately saving money and enhancing trust.

Comparison of Costs and Savings

The following table illustrates the direct correlation between the initial scenarios and the potential savings through automation that our customers at Atlas Metrics are experiencing. It is based on the assumption of an average salary of €60,000 per employee and the percentage of time spent on reporting tasks, showing how the adoption of our software can lead to significant financial benefits.

Part-time, full-time and value chain costs and potential savings vary

This table shows that regardless of the specific scenario, the transition from manual to automated ESG reporting systems not only enhances operational efficiency, but also offers significant financial savings (not to mention reducing business risk). The savings potential varies by the extent of the reporting requirements and the size of the organization, but demonstrates a clear advantage in favor of adopting automated solutions.

The Path Forward

The stark contrast in costs between manual reporting and the potential efficiency of modern solutions underscores the financial and operational imperative for businesses to adopt new ESG reporting solutions. As regulations tighten and the business landscape evolves, the need for efficient, automated ESG reporting solutions becomes not just a strategic advantage but a necessity.

Leveraging cutting-edge technology to streamline ESG reporting processes is key to ensuring compliance, enhancing accuracy, and optimizing resource allocation. In an era where sustainability performance increasingly influences stakeholder trust and investment decisions, the time to act is now.

Simplify ESG
Automate Compliance

Simplify ESG
Automate Compliance

Simplify ESG
Automate Compliance