At MATERIALITY, we have recently been considering how new regulations are changing our work as consultants and how they are affecting our clients' sustainability functions. An interesting voice in this discussion comes from an article published over a month ago in GreenBiz by Marshall Chase.
Taxonomy has led to the involvement of financial controlling departments in sustainability issues. The CSRD directive and ESRS standards mean that information and data in sustainability reports will be treated as seriously as data in financial statements. This requires not only obtaining missing data, but also improving the quality of data that is already available. Should those who have been involved in planning and implementing changes aimed at improving the impact of businesses on people and the environment focus on data?
Chase rightly points out in his article that you don't need super accurate data to make decisions about the direction of change. This is consistent with the principle of materiality, which I always remind people about. If I have calculated total greenhouse gas emissions for the first time and 80% of them come from a single category of scope three, then I should focus on that first and plan its decarbonization. At the same time, or even later, I will work on improving estimates and data accuracy.
At the same time, many companies today are in a situation where they have no idea what their impact on the environment and people is. In their case, there is no other way to start than by collecting data, calculating indicators, conducting analyses and research. In order to change something, to set goals in relation to sustainable development issues, we first need to know what our current impact is.
The emphasis placed by report recipients, and consequently also by regulators, on data accuracy also stems from the rather lax approach taken by many companies to information quality in recent years. So-called „impact reports” and „CSR reports” were often promotional publications that omitted uncomfortable information. Few companies submitted their reports to voluntary verification by external certification companies. That is why this must now change.
Accounting cannot replace management in the case of sustainable development. Just as financial accounting cannot replace financial planning and management in a company. Both of these functions must coexist, and without solid accounting, it is impossible to manage reliably. But how to organize these functions within an organization so that they work well together is a topic for discussion in one of our future newsletters.
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