Excel and Word have three basic advantages. In almost every company, all employees have access to them and are usually sufficiently proficient in using them, so there is no competence barrier. The cost is also negligible, because these programs are needed in companies anyway; we do not buy them just to prepare a report on sustainable development. Finally, both tools (especially Excel) are extremely flexible, meaning that we can customize them almost any way we want to suit our needs.
However, they also have certain limitations. The larger our capital group and the greater the number of data sources, the more difficult it is to collect and consolidate them using Excel. Word, on the other hand, does not allow us to tag reports with XBRL tags, which is not yet mandatory, but will become so in the coming years. Neither tool supports the process of collecting and sharing audit trails.
Reporting support tools serve two basic purposes: they support data collection and consolidation, as well as the calculation of metrics based on that data, and they facilitate the process of creating report content in a manner consistent with standards. Both of these functions can be included in one tool or two, as their creators have different approaches to the sales model. Sometimes we buy a „combine” that can do everything, and sometimes we buy individual modules tailored to our current needs.
Good reporting tools should always meet several criteria:
- Compliance with standards
This refers, of course, to ESRS standards. The data monitoring tool should calculate specific metrics in accordance with the requirements of these standards. It often happens that a tool allows, for example, the calculation of greenhouse gas emissions in accordance with the GHG Protocol, but does not allow the configuration of organizational boundaries that would be consistent with ESRS E1. Or we can enter data on raw materials and materials, but without dividing them into biological and technical materials. In such cases, we face a series of frustrating moments and the need to „patch up” the purchased tool with additional calculations, which we will probably carry out... in Excel 😉
- Facilitating the reporting process
If we purchase an additional tool, it is to make the reporting process more efficient. Usually, many people are involved in creating a report and they perform different roles, so it is good if the software allows these roles to be assigned appropriately. Some software developers clearly had no experience with the process of creating a sustainability report, and their starting point was the EFRAG IG3 guidelines (list of data points) or even the XBRL taxonomy project. This usually results in a zero-one approach to reporting, in which, instead of a process of working on content, we have a very long checklist of points to be fulfilled (and this is not what a due diligence-based reporting model is about). In the case of a few tools, it is clear that the workflow was developed as a result of detailed consultations with practitioners.
- Adaptation to the size of the organization
Some reporting support tools are clearly designed for very large organizations. If we represent a single company or a small capital group, choosing such a tool may involve high costs, both one-off and recurring. A good tool should be scalable and, above all, adapted to the complexity of our organization.
The middle of the reporting season (for listed companies that prepare their mandatory reports for 2024) is obviously not a good time to choose a reporting support tool; that will come after the reports are published. On the other hand, many private companies are already looking for a tool that can be used in the future. If you are looking around and checking what to choose, I recommend considering the three criteria I mentioned above. In one of my next newsletters, I will write in more detail about good reporting support tools 😊
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