The end of ESG reporting software: why businesses now need an extra-financial ERP

The first generation: ESG reporting software

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The first generation of ESG tools developed around a simple need: facilitate reporting.

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Faced with the multiplication of frameworks and questionnaires, companies had to answer:

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• regulatory frameworks (CSRD, Taxonomy, etc.)
• voluntary standards (GRI, TCFD...)
• questionnaires from investors or rating agencies (EcoVadis, CDP...)
• customer requests or any other stakeholder in the value chain

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ESG software therefore provided an initial response: centralizing responses, structuring collection and facilitating reporting. This approach is still useful. But it is based on a logic that is now showing its limits: The logic of the questionnaire.

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In this model, companies respond to a succession of external requests, each with its own format and structure. The extra-financial data is then produced in response to requests, and not as a strategic business asset.

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The second step: the multiplication of reference frames of reference

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To adapt to this growing complexity, publishers have developed solutions multi-referential in order to allow companies to respond to several frameworks from the same information base. A logical evolution, but which still remains in a logic of Reporting.

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It is incomplete. Because businesses need to go further:

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• produce trackable data
• document their methodologies
• pilot action plans
• monitor the evolution of their risks and opportunities
• connect this information with strategy and finance

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It's not just about knowing How to respond to a framework But to know how to govern the company's extra-financial data over time.

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The switch to data governance

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This change is largely due to CSRD. Even though its scope has recently evolved, it has established two structuring principles: double materiality and auditing. These requirements are profoundly transforming the role of extra-financial data.

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It is no longer a simple statement. It gradually becomes:

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• traceable
• Documented
• audited
• Comparative
• used in strategic decisions and in operational performance management.

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This movement progressively brings extra-financial data closer to financial data. However, businesses already have a system for managing financial data: The ERP.

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An ERP organizes the collection, traceability, controls, audit and management of information. The same logic is starting to apply to extra-financial data today.

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Extra-financial ERP: a data infrastructure

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Unlike traditional ESG software, an extra-financial ERP is not limited to reporting. It acts like an infrastructure for managing extra-financial data.

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Its role is to enable businesses to:

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• structure their data
• document their methods
• organize collection processes`
• govern responsibilities
• follow the action plans
• and connect this information to strategic decisions.

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In this architecture, the repositories no longer constitute the core of the system. They become A layer of interpretation.

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The company produces structured and governed data at the source, which becomes The reference system for extra-financial data within the organization. This data can then be used to meet various uses:

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• regulatory reporting
• Investor quizzes
• risk analysis
• strategic management
• access to finance.

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Extra-financial data then ceases to be an administrative constraint to become a strategic asset.

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An evolution driven by finance and risks

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Another factor is accelerating this transformation: the increasing integration of extra-financial considerations into risk assessment.

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Banks, insurers and investors are increasingly relying on this information to analyze:

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• business resilience
• their exposure to climate risks
• the robustness of their value chain
• their critical dependencies

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In some strategic sectors, this dimension is becoming even more visible.

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In the defence industry, for example, access to finance increasingly depends on the ability of companies to document:

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• their industrial dependencies
• their energy resilience
• their geopolitical risks
• their risk governance.

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The real challenge: transforming data into capital

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The current evolution of the ESG market should therefore not be interpreted only as a consolidation of players. It reflects a deeper transformation.

Businesses are gradually moving from a logic where they produce responses To a logic where they manage a wealth of extra-financial data.

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In this new data economy, the tools that can survive will not only be those that aggregate repositories.

They will be the ones that allow businesses to:

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• produce reliable data
• Govern it over time
• share it with their stakeholders
• and use it to manage their strategic, financial and operational decisions.

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In other words, extra-financial data becomes capital. And like any capital, it requires infrastructure to be managed.

This is precisely the role that extra-financial ERPs are called to play in the years to come.

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