If Global Reporting Initiative (GRI) chief executive Eelco van der Enden had any doubts that a Sustainability Innovation Lab (SIL) it recently co-founded in Singapore would attract interest, he only had to wait a few moments into its launch to find out. No sooner had a chat bot been activated for interested parties to inquire about the ESG data reporting initiative than it crashed, unable to cope with the surge of queries.
Scores of users logged in at the same time, all trying to learn more about what van der Enden describes as a marketplace of ideas that’s intended to solve for difficulties in reporting sustainability data.
SIL envisages a digital space in which representatives of all stakeholders in the ESG ecosystem can gather on neutral ground to discuss challenges faced by companies in reporting data. There, they can devise, test and deploy solutions that can then be applied to real use cases.
The lab is aimed primarily at helping supply-chain corporates more effectively report their data. But van der Elden tells ESG Insight that SIL’s goal is to bring order to a sustainability data space that in many ways is failing to provide financial institutions with the information necessary to direct capital towards mitigating climate and social crises.
“We need investments for the just transition, we need the innovative power that businesses have and they can only execute when they find the resources and the money to make it work,” he says. “If the flow of information out of those supply chains is cumbersome or even wrong we will have reports with improper data that will help no one.”
SIL was launched late last year in conjunction with the IFRS Foundation, the umbrella organisation for the International Sustainability Standards Board (ISSB). It was launched in Asia because, said van der Enden, more than four fifths of companies that report their sustainability data do so in alignment with the GRI’s framework. That figure rises to 99.6 per cent in Singapore. Its aim is to harmonise reporting practices and standards across the corporate space, recognising the shortcomings companies are facing in their disclosure “journey”.
Investors, regulators and standard setters are all represented in SIL’s roster of users. For them, the founders have set out a four-point plan of action, which will focus on data validation, the creation of a broad taxonomy to enable easy and low-cost reporting, engagement with smaller and private companies and the inclusion of governments and other public entities in the discussion.
A former partner at big four accountancy firm PwC and current chair of the tax policy group at advocacy organisation Accountancy Europe, van der Enden’s engagement with the SIL project was cemented by the need for data assurance frameworks.
The validation of data is a growing part of the ESG regulatory landscape. The EU’s Corporate Sustainability Reporting Directive (CSRD), for which firms must begin making disclosures this year, requires data to be assured by third-parties to ensure quality and accuracy. The US’ Securities and Exchange Commission (SEC) is also expected to include data assurance clauses in its anticipated sustainability disclosure regulation, due this year. The proposed standards of the ISSB and its sister code, the SASB, also include similar requirements.
With CSRD about to oblige more than 50,000 companies to send their data off for validation, van der Enden says he wants to create a platform in which auditors and other assurance providers could better prepare themselves for the huge task ahead.
“That’s massive,” van der Enden says. “Traditionally, accountants have been financial historians – they look back to make sure that the facts are presented as they happened. But sustainability reporting is more about long-term risk manage – it’s forward looking.
“How are we going to make this huge audit population ready and able to assess so many companies? That’s where the first research focus will be” for SIL, he says.
Even before its launch, SIL was preparing to expand into other countries in Asia, with Malaysia, Japan, Indonesia and Thailand already on the list. Van der Enden says GRI and the IFRS Foundation are dedicated to encouraging the development of initiatives from individual jurisdictions rather than from a centralised body of thought. This will better enable tailored solutions to individual jurisdictions. Further out, SILs are likely to open in the rest of the world.
One of the most acute challenges to accurate reporting, however remains the inability of smaller businesses – which GRI says accounts for about 80 per cent of world GDP – to have the data gathering and disclosure mechanisms in place. Key to achieving this, says van der Enden is ensuring reporting can be achieved easily and cheaply. To this end, SIL will examine the application of AI and other forms of automation among mechanisms for cost-effective data gathering and reporting.
“We know, of course, that things will go better if they’re easy to comply with and even better at low cost because that will always incentivise more adoption and create less obstruction,” he says.
The collaboration between GRI and ISSB on the Singapore project has been a symbolic as well as a practical one. At a time when market participants are clamouring for straightforward guidance on reporting frameworks, their joint efforts in SIL sends a signal that the different reporting standard setters are not in competitions, as has been suggested by some critics.
Van der Enden is proud that the two organisations, whose remits overlap in some places, can work closely together, although he is quick to stress that the Singaporean project is no indication that the two will be merging. Nevertheless, he sees SIL as a vehicle for solving the challenges associated with companies and institutions the world over reporting according to different frameworks.
Within the SIL, he believes, participants can get their own data pieces right without the need for standards to converge into one common framework.
“The ISSB and GRI standards are not the same but they are complementary,” he says. “And it’s logical that they are not entirely the same because the target audience between the two is different.
“But there are a lot of commonalities and what we now do with mapping and digital processing is we point out the commonalities in a digital way so that it will be easier to comply.”
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