Data to leverage a decarbonization strategy

Wed 01 Mar 2023

The reliability of ESG data is becoming a central issue, whereas it often remains a pain point. To ensure the reliability of data, it is necessary to make the top of the company resonate with the field

Faced with the challenges posed by ecological, energy and economic transitions as well as the regulatory changes regarding organizations' sustainable reporting, the management of environmental, social and governance (ESG) data plays an increasingly strategic role in steering their decarbonization objectives. The new dynamic of convergence between the extra-financial and financial reporting of companies will be transformative.

The strategic role of data management in steering decarbonization objectives

A detailed accounting of the non-financial data related to the company's activities is the basis for the quality of information that organizations with more than 500 employees must communicate to the French public authorities, according to the Grenelle II law. These regulatory requirements on the reporting of greenhouse gas emissions converge with the growing expectations of external stakeholders, including customers, investors, rating agencies, etc.

This pressure responds to a need: companies must improve, "doing their part" in the same way as the State and citizens to participate in the objectives of the Paris Agreement. To achieve this, the role of data is strategic in ensuring that the projections developed by the company allow it to set ambitious and achievable decarbonization targets. The role of data is therefore critical in prioritizing the most emitting activities and establishing efficient long-term management.

New challenges in managing carbon accounting data

Companies face different challenges depending on their size. Those subject to the BEGES1 are required, since January 1, 2023, to quantify and report their Scope 3 emissions. These indirect emissions, linked to the company's upstream and downstream activities, generally represent a very large part of its carbon footprint. For an operator, it often represents more than 70% of its greenhouse gas emissions2! Accounting for Scope 3 poses significant challenges to the company.

  • It forces the company to work on its entire value chain, on which it depends, to reduce its indirect emissions. At the same time, it offers a unique opportunity to bring together a large number of stakeholders, some of whom have different levels of maturity and sensitivity to the challenges of decarbonization: purchasers, suppliers, employees, customers, etc.
  • In order to account for its greenhouse gas emissions, the company must also choose the appropriate method and framework with which to build this accounting. Several reference frameworks exist: the GHG Protocol3, which was a pioneer in defining and formalizing Scope 3; the Bilan Carbone®; and the ISO 14064 standard, based on the GHG Protocol3. These choices of method do not prevent ongoing questioning and evolution in order to refine the way carbon is accounted for over time. For example, the unit on which to base measurements is a fairly recurrent question: physical data (volumes, weights and distances) or monetary data, which is often already captured by finance? These trade-offs generally depend on the very existence of the data and the gradual development of a data collection culture that requires step-by-step progress.
  • Another choice concerns the tool or tools used to collect and calculate emissions. This is essential to facilitate the collection, consolidation, and dissemination of source data, especially since the arrival of Scope 3 will considerably increase the amount of data to be collected.

Another revolution at the European level is the arrival of the "Corporate Sustainability Reporting Directive" (CSRD), which, in France, will replace the "Non-Financial Reporting Directive" (NFRD), as of 2024, but whose concrete application is still unclear. The CSRD extends the requirements of the NFRD, which apply to companies with more than 250 employees. It aims to clarify the content of extra-financial reports by detailing the information that these companies must publish on the subjects of sustainability and climate change and the evaluation of their impact on the environment and society. Standards, developed by EFRAG4, are expected to further standardize reporting by explaining these requirements and what companies should actually publish.

Data reliability, a key issue

Faced with these developments, the reliability of ESG data is becoming a central issue, whereas it often remains a pain point, especially in large groups aggregating numerous data elements from several more or less independent entities and often working in different regulatory contexts. To ensure the reliability of data, it is necessary to make the top of the company resonate with the field.

  • It is up to the general management to set a clear framework, an agreement, that gives all employees visibility regarding the data to be prioritized with respect to the strategy, their definition and a common calculation method. ESG data is infinitely variable, and the company cannot calculate everything. It must define and prioritize relevant, accessible, readable and comparable indicators that reflect the history and vision it wishes to share with its stakeholders.
  • On the ground, it is important to ensure that the data exists, that the people likely to collect or consolidate it are identified, that the collection methods work and that the tools guarantee reliable feedback.

Employees will have to be trained to maintain this permanent interaction between headquarters and the operational and technical teams in order to develop a data culture within each entity.

Convergence towards ESG and financial reporting

The CSRD also introduces the concept of double materiality. It requires companies to take into account the impact of climate change on the company in the same way as the company's impact on the environment. This is a highly transformational approach that few companies have yet really integrated. It indicates a dual need: the need to decarbonize in order to reduce its impact on the environment, which has already been taken into account, and the need to adapt its infrastructure and activities to avoid the financial risks associated with climate change. It directly introduces the notion of the financialization of ESG risks, particularly those related to climate change, which were not really taken into account until now.

Faced with these requirements, companies are undertaking profound changes to evolve their accounting methods by integrating non-financial aspects. Some of the most advanced companies have already begun to test integrated methods such as the CARE5 model of triple sustainable accounting, developed by researchers and based on a strong sustainability approach. Based on the idea that no capital can be substituted for another, this method integrates financial, ecological and even human aspects into the accounts, completely integrating financial and socio-environmental issues. As a sign that a real transformation is underway in the ecosystem, the IFRS Foundation (International Financial Reporting Standards), which develops accounting standards to ensure the transparency of financial markets, is also working on this dynamic convergence, which is bringing finance teams closer to CSR teams.

The emergence of new roles, new professions and new skills

This need to integrate financial and non-financial data requires a significant collaborative effort to develop a robust global model. Indeed, financial data and CSR data have often not been designed to converge. Finance and CSR teams have different benchmarks. Depending on the position of CSR in the organization, in large groups, many of these departments may still interact very little. Bringing together the financial and extra-financial dimensions is a real challenge but also an opportunity to infuse CSR into the company. It is a real paradigm shift that will allow CSR to integrate sustainability requirements into the core of the business model. The search for greater resilience in the face of climate change and the consideration of the financial risk posed, for example, by the depletion of resources are ESG issues that can push a company to develop a circular economy policy. These developments are seen in a very concrete way in the requests from operational teams to develop management KPIs that combine financial and ESG dimensions, such as CO2, clearly demonstrating the transformation that is taking place.

The need for close collaboration and coordination between CSR and finance teams is leading companies to create new roles such as “Sustainable Finance Manager.” Other positions will also become more important: extra-financial analysts, governance analysts, ESG managers, purchasing and responsible sourcing managers, and all the professions in charge of carbon issues, particularly Scope 3, reporting and biodiversity.


The increase in regulatory requirements that lead companies to manage their growth in close relation to environmental issues, including decarbonization, and the geopolitical context of the energy crisis linked to the war in Ukraine place CSR (still often considered a secondary component of company strategy) firmly at centerstage.

The demands of various external stakeholders are leading to profound transformations that organizations must manage within a short timeframe. The success of these transformations depends above all on the company's ability to establish and maintain proximity between the various departments, particularly finance, CSR, strategy, risk, etc. These transformations also require a global mobilization of the value chain to build decarbonization models that will embrace all the components of the activities in order to sustainably transform the business models.


1Greenhouse Gas Emissions Report

2Les opérateurs télécoms face au défi de leur empreinte carbone | Les Echos

3Created in by the WBSCD and the WRI

4European Financial Reporting Advisory Group (EFRAG)

5Accounting adapted to the Renewal of the Environment.

Thérèse De la Perraudière

CSR consultant Sofrecom

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