The scarcity of clean data has emerged as a prominent challenge in Climate Reporting, but it should not prevent a company from starting with its Climate Reporting. We recommend companies must take action and enhance their Climate Reporting by investing in digital technologies, establishing clear data collection processes, and collaborating with stakeholders.  

Data related Challenges  

• Lack of data and data fragmentation: Unavailable or scattered data pose significant challenges in Climate Reporting, as necessary data may not be tracked or readily available in a central system, making it difficult to obtain, especially for scope 3 emissions. Gathering the required data from various sources and coordinating with different departments and stakeholders can be time-consuming and resource intensive.  

  
  

• Low data quality and persistent data inaccuracy: There needs to be more consistency regarding data tracking across various sources. This inconsistency can be attributed to several factors, such as the absence of data quality controls and, in general, the existence of weak data governance practices. This makes it challenging to maintain a high standard of data quality, and there is a risk of errors and inconsistencies creeping into the data collection process. Furthermore, although applying expert knowledge and adopting data proxies in the form of estimated values is encouraged at the initial stages of Climate Reporting to fill the gaps in data collection, it can further exacerbate the data quality issues if not replaced in the mid to-long term. 

  
  

• Missing data traceability: As data is collected and aggregated across an organisation, it is subject to passing through various teams, data platforms and repositories and undergoes required transformations. For audit and reporting purposes, solid data lineage is in place to guarantee transparency in the end-to-end tracking of data sources and appropriate visibility over any modification that is applied to the source data before it makes its way into external disclosures. Insufficient data documentation: The entire data collection process should be documented, including assumptions, calculations, and modifications to the data. Accurate documentation takes not only time but also expertise and knowledge.  

  
  

• Growing demands due to mandatory external data validation: The collected data and its documentation will be subject to an external validation as part of the soon mandatory Sustainability Reporting audit. As a result, there is increasing pressure to present a well-orchestrated complete picture which should guarantee the highest standards of accuracy.  

  
  

• Increasing data requests: Another significant challenge facing companies is the increasing demand for data disclosures related to Scope 3 emissions. As more organisations recognise the importance of measuring and reducing their carbon footprint, they seek more extensive and detailed data from their suppliers, customers, and partners. This trend has increased the number of questionnaires sent across companies in their respective value chains. This growing demand for data disclosure can strain the resources of reporting companies, leading to difficulties in managing the workload effectively. Moreover, the need for standardisation in data request formats and data quality requirements can create further challenges for companies.  

  
  

• Requests for revealing sensitive data: As companies are asked to report data, they also face the challenge of how much and what kind of data they can disclose without revealing information that should not be disclosed without it causing a disadvantage from, for example, revealing highly sensitive competitive information. 

  
  

• Increasing complexity with a move from historic to forward-looking data: With the implementation of the regulatory requirements as outlined in the Swiss ordinance on Climate Reporting ordinance on mandatory climate disclosures for large companies and per TCFD, companies will also have to start working with forward looking data, for example concerning the disclosure of exposures to transition risks or to evolving physical risk conditions. Handling such data comes with more complexities than simpler, backwards-looking historical data.  

  
  

• Inadequate data management tools: Many organisations approached sustainability data management and reporting with basic tools such as Excel or similar technologies, posing a significant risk of errors and other consequences. 

Deep Dive - Consequences of using Excel and other simple data management tools for sustainability reporting:  

As data required for Climate Reporting often involves complex and diverse datasets with multiple variables, manual maintenance of Excel can lead to errors in data input, processing, and analysis. These errors can undermine the accuracy and reliability of sustainability reports, potentially leading to reputational damage for companies (e.g. “unintentional” greenwashing resulting from inaccurate disclosures).  

Another typical challenge of using inadequate technologies is managing, maintaining, and analysing large datasets. As the volume and complexity of sustainability data increase, it becomes challenging to process and analyse data efficiently. Lengthy processing times and errors are often a consequence, which makes it challenging to generate timely and accurate reports. Moreover, using tools like Excel to manage sustainability data can create a lack of transparency and accountability. With multiple users accessing and updating worksheets, it becomes challenging – if not impossible - to track changes, implement appropriate controls, monitor data quality, and ensure consistency. 

Climate Reporting Data – worthwhile actions & opportunities   

New sustainability and climate regulations allow companies to enhance transparency, bolster their reputation, and attract investors by showcasing their dedication to sustainability. Effective data management enables companies to identify areas for improvement, demonstrate sustainability performance to stakeholders, achieve cost savings, and drive innovation.  

Action - Make reporting decisions relevant:

Companies should shift from using Sustainability and Climate Reporting as a pure marketing tool to making it a valuable resource for decision-making.  

Opportunity: Climate reporting has the potential for enhanced strategic planning and informed decision-making processes; by integrating Climate Reporting into decision-making frameworks, companies can gain valuable insights and data-driven perspectives that can guide their actions and strategies. 

Action - Follow established reporting frameworks and standards:

Companies should use internationally recognised and recommended reporting frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD), or the Global Reporting Initiative (GRI). Additionally, companies should ensure they stick to proven reporting approaches that are more likely to be accepted regionally and globally.  

Opportunity: Following well-accepted approaches is necessary to ensure the quality and reliability of Climate Reporting and make it easier for stakeholders to understand and use the information presented. 

Action - Simplify reporting language and use correct terminology:

Companies should use standard reporting language associated with the respective standards and framework and limit technical jargon to ensure a wider audience easily understands the reports.  

Opportunity: Simplifying the language used in Climate Reporting can make it easier for stakeholders to understand the presented information, increasing the likelihood that they will engage with it. 

Action - Join associations & expert networks:

Companies should stay updated on changing regulations and requirements. A cost-efficient way could be to join relevant corporate associations and networks. Examples include the Center for Corporate Reporting, Swiss Sustainable Finance, XBRL Switzerland or similar. 

Opportunity: Joining associations and expert networks can provide companies with access to knowledge and expertise on sustainability topics and opportunities to collaborate and share best practices with peers. The decision can help companies stay current on emerging sustainability trends and issues and identify opportunities to improve performance.

Action - Choose TCFD Reporting:

Swiss companies can adopt multiple reporting standards to comply with local and international requirements, but the one that is clearly asked for is TCFD. 

Opportunity: By implementing TCFD reporting per the ordinance on mandatory climate disclosures, the company is choosing a cost-effective approach and is focusing on what is necessary.  

Action - Develop XBRL competencies:

Companies should invest in a basic understanding of what it means to report in XBRL, as this will be fundamental moving forward.  

Opportunity: Since this will be a must in the future, a company has little choice but to work in a digital format; however, it can streamline their Climate Reporting process and improve the accuracy and comparability of their sustainability data and, in the future, be the basis for more accurate benchmarking of competitors.

Action - Assess double materiality:

Companies need to start incorporating a double materiality analysis into their Climate Reporting by considering both the impact of their operations on sustainability issues and the impact of sustainability issues on their business.  

Opportunity: Not only is this the starting point for a holistic sustainability strategy for corporations, but the approach can also assist companies in identifying and prioritising sustainability issues that are most significant to their business and stakeholders.