The “why” of sustainability reporting
Consumers today have more choice and more data available to them than ever before. This has led to demand for greater transparency and accountability by investors, governments and other stakeholders, leading Environmental Social Governance (ESG) disclosure to quickly become the norm. As markets become more transparent, factors that used to motivate consumers in the past are now considered basic expectations that businesses must meet to even be considered competitive. A consumer- or client-centric business, therefore, must not only have reporting in order to demonstrate its sustainability performance to stakeholders, but must work to make this reporting accurate, complete and relevant.
Today, over 86 percent of S&P 500 companies are opting to release voluntary reports which document their annual ESG efforts.[1] ESG reporting is one of the fastest growing voluntary disclosures in history and the lack of standardized reporting formats and transparent guidelines, coupled with a rapidly evolving regulatory and legislative landscape, has created challenges in effectively tracking and reporting ESG goals, managing data and ultimately driving insights.
As the ideal of sustainability becomes hard law, companies can no longer afford to “wait and see” what happens. The work of consolidating large amounts of data from multiple jurisdictions and distilling it into a report in a seamless way is no easy, quick task. As the demand for integrating ESG into investment decisions increases along with increasing regulatory requirements, it is likely that more companies will adopt more ESG data management practices to attract investment, meet the needs of their shareholders and remain compliant.
The “what” of sustainability reporting
In recent Economist Impact research commissioned by Cognizant, senior leaders were found to clearly see the link between environmental/social responsibility and being future ready. Certainly, now is the time to put plans into action. Yet, according to the research, while business leaders recognize the importance of ESG and the marked transformation in opinion from a wide range of stakeholders, a gulf is emerging between sentiment and tangible action. If one thing is certain, however, it is that executive sentiment for the importance of ESG is riding high. Nine out of ten respondents agreed that environmental sustainability is an integral part of being a future-ready business.[2]
So, what does “future-ready” reporting look like?
Cognizant is working to future-proof its non-financial disclosures by working diligently to validate the claims in these disclosures. Our reporting approach consists of identifying risks and controls; performing gap analyses; and developing an improvement plan and validating future state controls. As a testament to our adherence to core governance principles, we received recognition from independent analyst firm Verdantix for ESG Metrics and Reporting as part of their Innovation Excellence series in 2022.[3]
The “how” of sustainability reporting
Cognizant has worked to align its organizational culture and approach to doing business with the core values and foundational principles that undergird the transformation journey toward sustainability. We also work to align our operational processes and business performance to meet or exceed relevant ESG standards and guidelines prescribed by various internationally recognized standards authorities.
Cognizant has integrated sustainability thinking into our vision for the future and sees it as the next step in the evolution of business. We recognize that businesses are interdependent with the world’s social and environmental systems. Businesses can thrive only if society prospers, and the natural environment is protected. We use our technologies, knowledge and partnerships to engineer new levels of environmental benefits for our clients and communities. Our vision supports the transition to the more sustainable future our stakeholders desire.
Cognizant continually works to mature our ESG reporting program to investor-grade by evaluating the effectiveness of internal controls over the company’s ESG data. We have established a risk framework to determine the control strategy for each metric reported. Our work to ensure data integrity and consistency required a three-phase approach: (1) completing an inventory of externally reported data and assessing control strategies for each metric; (2) evaluating and documenting the process and controls underlying each metric and establishing the appropriate level of internal controls (as required); and (3) monitoring and testing control effectiveness. Our teams also developed a roadmap of metrics to be disclosed in future periods. To date, over 100 controls for data metrics were established and implemented.
Cognizant continues to monitor these activities, as well as the regulations and stakeholder priorities that underly them. This is the foundation of Cognizant’s ESG program, providing a transparent and quantifiable way to measure and communicate our progress toward our ESG goals. Our stakeholders expect data that is consistent, comparable and reliable, with governance, processes and controls as rigorous as those used to produce regulated financial data. This is what we strive to deliver.
[1] Rouen, Sachdeva, Yoon, Harvard Law School Forum on Corporate Governance, “The Evolution of ESG Reports and the Role of Voluntary Standards”, https://corpgov.law.harvard.edu/2022/11/21/the-evolution-of-esg-reports-and-the-role-of-voluntary-standards/
[2] Cognizant Insights, “Businesses need to close the gap between ESG sentiment and activity”, Businesses need to close the gap between ESG sentiment and activity (cognizant.com)
[3] Russell, Environment, Health & Safety, “Verdantix Announces Winners Of Its Innovation Excellence Awards”, https://www.verdantix.com/insights/press-releases/verdantix-announces-winners-of-its-innovation-excellence-awards
