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How to Maintain ESG Compliance with Technology

ESG Compliance

This article breaks down the best methods for achieving ESG compliance with automation tools – no technical skills required.

When it comes to complying with environmental, social, and governance (ESG) regulations, where do you start?  

Organizations are scrambling to maintain ESG compliance in the face of evolving regulations and increasing social pressure. For most, the manual process of collecting, analyzing, and reporting on data to comply with ESG regulations is time-consuming and error-prone, creating an opening for unnecessary risk.  

But there is a better way, and some leading organizations have already set an example for how to confidently maintain ESG compliance with proven tech-driven methods. Below, we describe the challenges of remaining compliant with ESG regulations, and strategies for how to start managing the process more easily by automatically generating the required reports with technology.  

What is ESG compliance?

ESG compliance is the fulfillment of the requirements posed by the different ESG regulations that are in effect around the world. ESG regulations are a broad category, and many regulations could arguably fall into one of the three ESG categories. In most cases, compliance is met by regularly publishing reports on the company’s ESG performance to inform stakeholders: investors, employees, or the general public.  

To improve performance in the first place, ESG compliance can also entail following data privacy protection regulations, putting inclusive hiring practices into place, or tracking the transparency of supply chains.  

While ESG compliance is currently limited geographically and specific to industries or company sizes, the number of mandatory regulations that have been proposed for enactment in the next several years is only going to increase, and so will steep fines for non-compliance.  

Facilitating ESG compliance with technology

One of the core challenges of ESG compliance is manually collecting, analyzing, and presenting the relevant data — in most cases, a massive undertaking. Automating these steps can save organizations substantial resources, and help them avoid the errors that arise from such disconnected manual workflows.  

Though companies often don’t know where to start with automation, especially when ESG presents so many varied challenges, modern legal and compliance automation software presents out-of-the-box solutions that can be easily customized to fit the unique needs of a company and constantly evolving ESG requirements. BRYTER, for example, is a no-code automation platform that can be used by Legal, Compliance, HR, and Finance professionals to automate their work, and is especially valuable for standardizing processes like data collection and reporting — making it particularly relevant for businesses coping with ESG requirements. 

Here are the top ways companies are using technology to make ESG reporting less resource-intensive and more efficient:  

Automate ESG performance data collection

As the velocity of new ESG regulations increases, the amount and complexity of data to analyze increases alongside them.  This makes it all the more critical to streamline the highly manual, time-consuming key performance indicator (KPI) collection process.  

In the collection phase, back-and-forth communications between different stakeholders can slow down ESG operations before teams even get a chance to process the already high volumes of raw data. Calculations and further audits are performed through unspecialized tools like Microsoft Excel, or sometimes even with calculators. Finally, the lack of a centralized intake point leading to a single source of truth for further audits creates an inefficient and risky workflow. 

The process of gathering information, alone, can take a medium-sized corporate up to a month. Auditing and processing raw data requires additional time and trained expert knowledge, creating a bottleneck in the ESG reporting workflow, and the data is already outdated by the time it’s collected and reported on. ESG professionals are forced to work reactively due to a lack of automation and limited staff, rather than being able to monitor live data as it comes in, and work proactively with the time they’re not spending on manual processes. 

It’s possible to build customized questionnaires that collect ESG KPI data from multiple departments, business units, and regions automatically as needed, so organizations can store and display data in one transparent, centralized database from which further audits are easily performed.  

This streamlines the entire KPI collection process and enables those responsible for ESG at a company to focus on important matters, such as implementing organizational ESG strategy. Automated ESG reporting tools also dramatically reduce the risk of reporting errors through a standardized intake and calculation process.  

ESG performance data collection tool built on BRYTER
An ESG performance data collection tool built on BRYTER, the no-code automation platform. 

Automated ESG reports

Employees working on sustainability initiatives are increasingly facing Board pressure to be ready to present live updates through scorecards about how the organization is performing in correlation to the internal sustainability strategy. These updates can be difficult to produce.  

Sustainability departments often lack the resources to regularly collect data from various sources and produce a coherent report. Once the data is gathered, the risk of human error during calculations remains relatively high due to the manual nature of data processing at most organizations.  

Using document automation via BRYTER is one way to ease this pressure: companies can upload standardized templates connected to ESG Performance Collection tools (as discussed above). This automatically creates an information collection and processing workflow with all calculations processed automatically, so users can regularly produce scorecards of the most recent ESG standing and accurately communicate progress on strategy. 

The process map of an automated ESG report generator.
The process map of an automated ESG report generator.

This solution reduces the risk of human error in internal and external reporting, and facilitates educated decisions on up-to-date, accurate ESG performance data.  

ESG investment checkers

The ability to regularly track and audit investment performance in an ESG context is a competitive advantage for investment firms and large financial organizations. Typically, these investment checks are conducted using lengthy questionnaires, requiring wasteful back and forth communication. Further, the lack of a centralized audit trail exposes the investment firm to risk.  

Automated ESG investment checkers built on BRYTER aid investment firms in conducting regular ESG audits according to internal material requirements. All answers are tracked in a centralized database that allows for information to be easily communicated with stakeholders. Further dashboard visualizations offer full transparency of the portfolio’s ESG standing and simplify benchmarking exercises. 

The ability to regularly track and audit investment performance in an ESG context is a competitive advantage for investment firms and large financial organizations. Typically, these investment checks are conducted using lengthy questionnaires, requiring wasteful back and forth communication. Further, the lack of a centralized audit trail exposes the investment firm to risk.  

Automated ESG investment checkers built on BRYTER aid investment firms in conducting regular ESG audits according to internal material requirements. All answers are tracked in a centralized database that allows for information to be easily communicated with stakeholders. Further dashboard visualizations offer full transparency of the portfolio’s ESG standing and simplify benchmarking exercises. 

ESG investment checker built on BRYTER
An example of an ESG investment checker built on BRYTER.

As a result, the investment firm reduces risk with a centralized audit trail that is maintained automatically. More efficiency can be yielded by benchmarking individual portfolio company performance in an ESG context and focusing efforts on improving internal standing — and these checks can be run without requiring any additional support from IT. 

ESG social performance tools

Social data collection across organizations is often conducted in outdated spreadsheets. Social benchmarking is rarely uniform across the business, with inconsistencies in monitoring demographics and activities. And if data is stored in disconnected spreadsheets, e-mails, and documents, it’s often not easily accessible. As a result, organizations struggle to communicate social targets to stakeholders. 

BRYTER’s ESG Social Performance assessments enable businesses to collect data on the performance of a company according to specified social criteria. Streamlining the process and monitoring intake of social data ultimately leads to higher transparency about organizational social performance, one structured data flow with a centralized audit trail, and a cross-departmental workstream that can be easily administered by a small team. 

Social performance assessment tool
A social performance assessment tool built on BRYTER.

Vendor evaluation tools

Transparency in the supply chain is an important requirement for organizations. For instance, every organization conducting business within the UK must produce a slavery and human trafficking statement for each financial year in compliance with the Modern Slavery Act. Failure to comply can lead to heavy fines. Implementing sustainability in the supply chain is also a highly labor-intensive task, requiring regular audits of usually thousands of vendors and long implementation periods of new documentation requirements, such as GDPR certification or certified worker health and safety training.  

When done manually, this takes weeks of department time to sort through vendor documentation and keep track of the most up-to-date vendor evaluation templates, with limited benchmarking capabilities for different vendors’ performance. 

Organizations with self-service solutions that enable vendors to complete evaluations regularly will avoid this challenge. Vendor evaluation tools offer a platform for multiple departments such as compliance, the ESG team, and the QHSE team to build an interactive evaluation questionnaire with integrated risk scoring. Vendor answers are recorded and presented in a centralized database, leaving a transparent audit trail and enabling benchmarking capabilities. Approval flows are further automated, providing an end-to-end solution. 

ESG compliance vendor evaluation tool
BRYTER can be used to create an easy-to-use vendor evaluation tool like this one.

Using this technology, significant time is saved when communicating and preparing vendor audits, and data is stored as a single source of truth for vendor evaluation documentation. Actionable data on vendors can be utilized to address liability risk and benchmark individual vendor performance, and the evaluation process is easy to update as requirements change and new standards are introduced. 

These are just some of the ways automation tools can be used to make the entire ESG data management process less resource-intensive and more streamlined, saving time for the business that can be refocused on higher-value tasks. For organizations with clear ideas about the types of ESG data they need to report, the next step is to consider using workflow automation platforms that can be customized by business experts to create powerful tools.  

ESG compliance checklist

ESG compliance is an ongoing process, but there are a few steps you can take to ensure the basics are covered as you get started. We’ve put together a list to kick off a more comprehensive compliance strategy: 

  • Research the regulations and requirements that are relevant to your organization. 
  • Identify the risk areas in your organization: where and how is the company in non-compliance? Are best practices being followed with partners and procurement? Is consent being granted for collected customer data, in compliance with GDPR? Consider conducting a gap analysis and auditing existing data flows. 
  • Develop policies to address known risks and prevent unknown risks. 
  • Educate staff about the steps they need to take to help the business remain compliant. 
  • Adopt automated tools to streamline the collection and storage of data and generate reports with all of the necessary and correct information. 
  • Stay informed, conduct regular audits, and update processes as needed. 

Examples of ESG compliance solutions in action

ESG technology is already proven and in use by top organizations, and has created opportunities for law firms to develop digital solutions for their corporate clients. Below are two real-life success stories of how automation technology enables better, faster, and more efficient compliance with ESG directives. 

Ashurst’s “ESG Ready”

Automated ESG tools have already been adopted successfully, typically after being introduced by law firms that developed solutions servicing corporate clients. One such case is international law firm Ashurst LLP’s ESG compliance tool, ESG Ready, created using BRYTER in response to the new EU Sustainable Finance Disclosure Regulation (SFDR).    

Pullquote: “BRYTER’s out-of-the-box platform offers numerous functionalities and integrations which can be amplified with complimentary legal technology products. We have a very powerful tech stack at our disposal; this is important as in many cases the best solution is a consolidated one that seamlessly connects two or more best-of-breed digital tools.” — Rob MacAdam, Head of Digital Products in EMEA for Ashurst Advance Digital. 

Financial services firms are being asked by governments and regulators to incorporate ESG factors into processes and disclosures. To support clients, Ashurst embedded market-leading EU financial services expertise within a simple and cost-effective digital legal advice product, making it a one-stop shop for clients’ ESG regulatory compliance. 

Taking less than 6 months from conception to launch, 99% of the product development was done remotely, collaboratively with Ashurst Advance Digital, BRYTER, and Ashurst’s ESG regulatory experts using the BRYTER platform.  

Read about their story here. 

Simmons & Simmons’ “ESG Conquest”

Simmons & Simmons is another law firm that has produced a user-friendly tool for automating ESG review using BRYTER, making it easier for their clients to navigate changes to the SFDR and stay compliant in a timely manner.  

The new EU requirements drove substantial changes to corporate investment processes and disclosures, and navigating these changes often fell to Simmons & Simmons as a trusted advisor. Beginning by analyzing client needs, they found opportunities to provide ESG services, like an offering to help asset managers categorize investment funds and fulfill pre-contractual, reporting, and website disclosure requirements.  

Recognizing that helping clients decipher ESG requirements and frameworks manually would be too time-consuming and difficult to scale, Simmons & Simmons decided to build a solution using the BRYTER platform. The tool guides asset managers through a series of questions, then delivers a preliminary assessment of the category their investments fall into. With the knowledge of where these investments are categorized, the tool then provides guidance on how the client might qualify the product under a different ESG category.  

While Simmons & Simmons is a leader in the adoption of legal technology, the manner of delivery for ESG Conquest was different, with lawyers and subject matter experts building the tool themselves. While ESG Conquest is a complex proposition, with a large decision tree dictating categorizations and advice, and deep logical complexity underlying each of those options, its delivery by the Simmons & Simmons legal team ensured that this complex nuance was reflected in the tool.  

Learn more 

FAQs about ESG compliance

What is ESG compliance?

ESG compliance is the process of following regulations and guidelines that relate to environmental, social, and governance (ESG) issues. ESG compliance is currently primarily voluntary, but increasingly ESG compliance is becoming a legal requirement for organizations depending on their location and industry.

What is an ESG checklist?

An ESG checklist is a series of tasks that an organization can take to ensure they have met the requirements of any applicable ESG regulations. You can build your own based on the checklist we provided above. 

How do I report on ESG?

Reporting on ESG performance requires collecting data from the relevant areas of the business, processing it, and compiling the findings into a publishable report. Accurate and up-to-date reports can be generated automatically with automation tools.  

How do I start an ESG strategy? 

The first step to begin developing an ESG strategy is to decide who will take ownership of the organization’s ESG strategy, so this person can identify goals for what the company hopes to achieve with regards to ESG. Next, they can build processes to achieve each of those goals. 

What is an ESG framework? 

An ESG framework is a system for standardizing the reporting of a company’s performance on ESG metrics, often proposed by governments or non-profit groups. Compliance is typically voluntary, but in some cases may be government-mandated.

Create your automated ESG compliance action plan

Managing ESG compliance is challenging, but introducing standard processes for tackling it head-on pays off in saved time, minimized errors, reduced risk, and a healthier business.  

To start making your ESG compliance processes more efficient, book a demo with one of our experts today. Or if you’d like to know more, check out our  Workflow Automation and No-Code guides.

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