Atlab CFO Agenda #2: ESG and value driving sustainability reporting 

In Denmark, there are approximately 245,000 public and private limited companies. It might surprise many that only about 1% of these – around 2,600 legal entities – are directly covered by the new reporting requirements. This may seem like a small percentage, leading one to question why we even addressed the topic if so few are affected.

But here comes an important point: The largest companies in Denmark and the EU are now required to report not just for themselves, but on their entire value chain. This means they also need to know about their customers’ and suppliers’ CO2 emissions and ESG efforts. Therefore, far more than just the 1% will feel the impact of these requirements in the near future.

If you supply to or collaborate with one of these large companies, you may – perhaps already today – be asked to provide various data and documentation regarding your ESG performance. So, even though only the largest companies are formally covered, ESG reporting will become a requirement that cascades down the value chain, affecting us all. This is something that many have already started to notice. And for those who haven’t yet received inquiries in this area, we can assure you, they will come – possibly sooner than you think.

By being proactive now and starting to work with your ESG data and processes, you will not only meet future requirements but also position yourself more competitively. Our assertion is simple: it will provide a competitive advantage to be able to proactively account for ESG efforts – otherwise, that advantage goes to a competitor.

That’s why we felt it was a highly relevant topic to address at our Atlab CFO Agenda.

In the program, we covered several angles of sustainability reporting. We discussed both the strategic advantages of ESG and how sustainability reporting can create value and competitiveness in today’s market. Additionally, we had visits from Burkhart Franz, Jesper Diget and Jakob Wichmann who shared their practical experiences in this area, including useful tips and input on how to implement a scope that fits the business and creates value.

In this article, we’ve gathered some of the key takeaways from the day:

The bar for ESG is constantly rising. What’s considered ambitious now will become standard tomorrow. This has been a characteristic of ESG development over many years, and we expect that the requirements – from authorities, customers, and suppliers – will continue to rise in the coming years. This means that companies are forced to keep ESG on their agenda, and the longer you wait to get started, the greater the complexity and task when you’re eventually forced to begin. 

Many large companies have already been working on this for years, and some have begun to release truly qualified sustainability reports. A good tip is to follow the large companies operating in the same or similar industries as yours. There is plenty of inspiration and learning to draw from when building your own strategic ESG roadmap.

Likewise, it’s also good advice to consult specialists. There’s no need to reinvent the wheel, and you certainly don’t have to figure out ESG compliance alone. Bring in specialist advisors to guide you through the process, which will save you valuable time and effort. However, choose your advisor wisely, and our advice is to pick one who is independent and doesn’t have an interest in driving up complexity.

In essence, ESG doesn’t have much to do with the finance department. It involves sustainability, water consumption, pollution, the company’s impact on the world, gender diversity, anti-corruption policies, employee safety, whistleblower schemes and much more. These are not exactly areas that typically land on the Finance agenda. Nevertheless, we believe it’s necessary to involve Finance. Why? For several reasons.

First, Finance is already highly skilled at analyzing, quality-testing, and validating data. They already do this on a monthly basis when preparing the financial reporting. Second, Finance already has a system infrastructure for reporting that spans across the organization. It makes sense for them to handle the same consolidation and reporting when it comes to ESG data.

On the other hand, Finance cannot manage it alone, because ESG is an area that, in terms of importance and impact, extends far beyond just numbers.

For companies subject to audit requirements for their ESG reporting, it’s especially important to keep the CFO closely involved in the project, as they are used to negotiating with auditors about materiality levels and audit scope. It can be costly not to be prepared for this dialogue. Auditors can be tough negotiators, and even worse when you’re unfamiliar with the industry. To mitigate this, it’s important to have financial management and your specialist advisors lead discussions with your auditors as a way of managing and controlling a reasonable-sized scope of ESG efforts.

Working on collecting data and improving processes is simply common sense for all companies – regardless of size. And if you can optimize the consumption and use of resources in your daily operations, it’s good for business. Moreover, there’s the overarching purpose of it all: the impact on our planet, climate, society, diversity, and more.

It will make a difference if we all contribute just a little.

Last but not least, a recurring theme across all speakers was that ESG compliance is about breaking it down into manageable milestones you can achieve in the short term. With the help of trusted, expert consultants, this process doesn’t need to be overly complex, and the sooner you start implementing a good ESG strategy, the sooner you can begin reaping its long-term benefits.

At Atlab, our view is that it doesn’t need to be expensive or complicated to start working with ESG. ESG reporting can be simpler than you think. We believe that with 20% effort, you can get 80% of the way simply by analyzing and implementing data that already exists.

As a company, you can either start by working with the voluntary parts of CSRD – with a simple carbon footprint calculation, where you measure the company’s CO2 impact, and the most common HR metrics and policies, which you can then use when your next major customer comes and asks for your readiness.

Be proactive and start early with the process, so you have time to develop it yourself. If you end up coming under pressure from customers or suppliers, it will be both more difficult and expensive to implement.