Digitalizing Sustainability Data

The Digital Sustainability Disclosures Project (The DSD Project) aims to elevate the significance of digital sustainability disclosures, rendering them pertinent and valuable in the realm of investment decisions by both corporate leaders and investors. This transformative potential can only be harnessed if these disclosures attain a level of informational integrity akin to traditional financial reporting, harmoniously intertwining with financial data. The DSD Project and contributors commit to identifying the missing links within the reporting value chain and catalyzing their resolution to closing gaps that hinder progress.

Vast quantities of sustainability data are generated every day from a wide range of organizations around the world. Sustainability data flows between many players and across a global landscape from the point of creation through the point of consumption. But, as data moves through this information flow system, it runs up against numerous barriers. 

In many cases this data is challenging to locate, fragmented, devoid of context, created using unaligned definitions and vocabularies and is presented in a vast array of different formats, many of which are largely incompatible. Large quantities of data are not digitalized at all, some systems are manual, and consequently lots of important decision-relevant information falls between the cracks. The result: trusted data is lacking.

Data auditability remains a significant challenge, and subsequently information is often not as useful as it needs to be for organizations to make integrated, data-driven decisions based on the value of their impacts and dependencies across the capitals.

This information system challenge places a significant financial burden directly on organizations and other stakeholders. The financial services industry alone spends almost 800 billion USD each year managing data for compliance purposes alone. Extrapolated globally across all industries, trillions of dollars are spent each year on compliance activities that offer limited value to organizations and stakeholders. With a more robust and effective system, data becomes trusted and decision useful and compliance can be met while freeing up the cost savings which can be reinvested in initiatives that deliver value across the capitals.

Solving the challenges around digitizing sustainability information flows is larger than the industry can solve on its own. What is needed is for key players across the global system to collaborate under a common objective: actively collaborate towards an agreed global digitized data management structure for sustainability, treating sustainability data with the same or better control, governance, transparency and assurances as that of financial statement data disclosures.

The aim of this project is not to reinvent the wheel, but to drive global collaboration between the key systems and organizations within the current landscape. Together we will ensure that data can flow effectively across the system and that it will supply the information that organizations and stakeholders need to make better informed decisions that deliver value for nature, for people and for their organizations.

Workstream A: Will explain and illustrate the ecosystem stakeholder problem arising when organizations collect, manage, and disclose sustainability information. It will the data lifecycle challenges for ecosystem stakeholders due to the lack of connectivity between the technology standards available to help manage sustainability information. 

Why is this important? Solving the problem requires a mutual understanding of the underlying issues and the challenges. 

Workstream B: Will produce a globally agreed upon data exchange framework, common shared dictionaries and a verified accreditation program. This will be achieved via agreed-upon technical approaches (“best practices”) relating to data, a globally agreed upon data exchange framework, common shared dictionaries and a verified accreditation program improving the collecting and managing sustainability information. Shows how a shared dictionary that links the concepts, terms, works, metrics, etc. of sustainability standards, regulations, and frameworks could help mitigate taxonomy user risks associated with both divergent standards and divergent taxonomies. 

Why is this important? Aligning on a globally agreed upon data exchange framework, common shared dictionaries and a verified accreditation program is a necessity to achieve interoperability and reduce the cost of data management and reporting. 

Workstream C: Will produce examples that will help educate a range of stakeholders (including ESMA, IFRS Foundation, ISSB, EFRAG, FRC, GRI, security regulators among others) about digital disclosure in this field as well as examine and surface potential issues for taxonomy design, development, and maintenance in the sustainability arena; and agree on a set of specialized best practices for taxonomy design and digital disclosure in this field. 

Why is this important? Standard setters need to agree on a common taxonomy data structure and methodology to achieve interoperability for regulated disclosures and best practices. 

Workstream D: Will assess for the readiness of the draft European sustainability reporting standards (ESRS) for digitization purposes and write a strategic plan for the development of a Taxonomy Style Guide. This will be developed under an international expert panel for EU review and approval in preparation for public comment.

Why is this important? Standards currently lack a digitized mindset in design and end up not fulfilling the needs of the data ecosystem