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IMPROVING PROCESS OF ESG DATA MANAGEMENT

situation

A Hang Seng Index constituent, our client has been disclosing ESG performance even before HKEX announced the “comply or explain” provision. For the past few years, increasing pressures for improving ESG disclosure level were coming from every facet including institutional investors, regulators, customers, the public, etc. Data accuracy and consistency have been scrutinized more than ever before. Investors are screaming for data integrity. The client was determined to respond fast to meet the expectation, planning to undertake external assurance in two years’ time.

CHALLENGE

While the client has been performing well financially, resources put into management of non-financial data has remain lacklustre, resulting in challenges in at least four areas: 1. data definitions not consistent 2. inadequate data management 3. absence of an approval process 4. disruptions due to change of responsible personnel These problems present huge potential risks of data inaccuracy. If the situation prolongs, the client may fail to meet demands of stakeholders, unable to comply with regulations, and lose competitive advantages to its peers consequentially.

Solution

The outcome of external assurance would not be ideal if the in-house data management mechanism is absent or poorly executed. Alaya was brought in by the client to sort out the ESG data situation. Learning that the client aimed to conduct external assurance, Alaya recommended straightening out the internal mechanism first. We took a 3-step approach: 1. Observation & Interviews; 2. Analysis & Recommendations; 3. On-site facilitated workshops. First, we had been observing data flow as this was the second year of advising the client. Leveraging on this advantage, we organized more than 20 interviews with the relevant data owners to learn the “as-is” status including data definitions, data flow, management control, etc., and mapping out the data flow in process flowchart for all raw ESG data. Secondly, we analysed the “as-is” process, identifying issues as well as recommendations. And we started creating the “to-be” process map illustrating what an improved data management process would look like, including segregation of duties, strengthened management covering data generation, storage, approval, etc. Lastly, we prepared a data collection manual for the client to ensure the “to-be” process would not be influenced by staff turnover. To ensure the employees get used to the new process, we also set up workshops on site to facilitate the change. Today, our client operates with a streamlined process that minimizes redundant steps and clarifies roles and responsibilities achieving better data reporting in less time. Their ESG reports have been receiving industry accolades and our client has been included in two sustainability indexes, enjoying an ESG rating better than its peers. *For confidentiality purpose, the name of the company is kept anonymous