Why Excel Falls Short in ESG Reporting: Embracing Advanced Tools

Over the last decade, the importance of sustainability reporting has risen dramatically, evolving from a peripheral activity, needed to meet regulatory compliance, to becoming a central pillar of corporate’s strategic planning. Fueled by the recent surge in reporting requirements from legislations such as the Corporate Sustainability Reporting Directive (CSRD), the EU Taxonomy, and the International Sustainability Standards Board (ISSB) standards, along with rising stakeholder expectations for more sustainable practices, sustainability reporting has become a top priority for corporations worldwide

If one had inquired five years ago about the tools companies were using for sustainability reporting, the vast majority would undoubtedly have answered: "Microsoft Excel". Excel has long been a cornerstone for data management and reporting, and by all means, it has met expectations by finding the right balance between simplicity and adaptability.

In recent years, however, the complexity of measuring sustainability performance, managing large volumes of data, and meeting reporting requirements has skyrocketed. This raises the question: are we reaching the limits of Excel regarding ESG reporting? This article explores the shortcomings of Excel for sustainability reporting, particularly under the CSRD, and highlights the need for more advanced and specialised reporting solutions.

The Evolution of ESG Reporting: Accountability, Compliance, and Transparency 

For years sustainability reporting globally consisted of voluntary standards (GRI, TCFD, CDP) and a small set of legally binding frameworks such as the Non-Financial Reporting Directive (NFRD) in Europe. While the voluntary standards offered a structured template for reporting, the legal frameworks gave corporations much more “freedom” to report on broad sustainability topics as they saw fit. This rendered the associated disclosures nearly “unusable” for stakeholders due to the lack of comparability and transparency.

Today, the paradigm of ESG reporting has shifted to mandatory and structured disclosures, to enhance the transparency of the disclosures as well as corporations' accountability towards their own non-financial reporting. Ultimately, this seeks to ensure that stakeholders, including investors, consumers, and regulators, have access to reliable and comparable sustainability data.

Taking the example of the CSRD, two key elements have been introduced compared to the regulation it has replaced, the NFDR.

An Auditable Structured Sustainability Report to Increase Accountability

The CSRD imposes strict requirements on companies to ensure accountability and auditability in their sustainability reporting. Indeed, a company’s CSRD report will be under the direct supervision of its board of directors, who will be held responsible for the accuracy and overall quality of the report.

The directive also requires companies to demonstrate a certain degree of engagement with their stakeholder regarding a diverse array of sustainability topics, as well as to explain how their retrieved feedback has influenced the sustainability strategy of the company. 

Finally, the CSRD initially mandates that sustainability information undergo limited assurance (soon reasonable assurance which will be more stringent) by an independent auditor to verify its reliability and accuracy. It is foreseen that the next step will be for a company to provide reasonable assurance. For all of the above, a complete audit trail of the data used for the reporting will be necessary.

Compliance with ESG Frameworks Bring Standardisation

The CSRD is supported in its application by the European Sustainability Reporting Standards (ESRS) which lay out the criteria to be answered depending on the characteristics of the organisation. These standardise the output of sustainability reports in Europe and enhance their usability for external stakeholders. Excel, not being a sustainability reporting software at its core, does not inherently support these standards (nor their continuous updates), making compliance challenging as it will only be one of many interlinked tools needed to generate the end report. 

One may use Excel for their quantitative analyses and KPI generation, under the guidance of an expert to know precisely which KPI to provide, then may use Word or any other “text processor” software to create and format their quantitative reports, and finally would have to bring both parts of the report together for its electronic tagging (see next paragraph) and final formatting. 

Having to juggle multiple tools can create friction in their integration, data loss and is not efficient in terms of time management. On the other hand, advanced ESG reporting solutions such as Greenomy, have those standards, and their inherent rules, fully digitised, integrated and maintained into their tool to ensure that the companies meet their reporting obligations effortlessly, knowing very easily what is relevant to their specific use case. 

Transparency and Comparability: ESRS and The European Single Electronic Format (ESEF)  

As explained above, the ESRS have helped standardise sustainability reporting and enhance its usability for external stakeholders. The increased usability of these reports mainly stems from the required transparency of methodology (standardised for all companies) and the comparability of reported data that results from the enforced standards. Indeed, similar institutions will have to produce the same KPI according to the same methodology, which in turn means that benchmarking will be much easier because you will have the assurance to compare information.

To further improve the usability of the reports in the market, and adapt to the new digital era, the European Commission has mandated the CSRD to be produced in an electronic format (starting in 2026 for the reporting year 2025). For this, they extended the ESEF, which is a regulatory mandate requiring companies to prepare their annual financial reports in a digital, standardised format. Indeed, companies will now be required to also prepare their non-financial reports using ESEF, specifically in the Inline XBRL (iXBRL) format to streamline the reporting process and facilitate the analysis and integration of financial and sustainability information.

Why Won’t Excel Meet the CSRD Reporting Requirements? What are the Alternatives? 

Even though Excel remains an extremely helpful and versatile tool, the new constraints imposed by the CSRD will not allow companies to use it as their “default’ reporting tool. The sheer complexity and volume of data to be treated and manipulated as well as the additional legislative requirements regarding the format and auditability of the report will simply not be possible to be tackled solely with Excel, you will find few insights on the reason behind this conclusion.  

Excel Struggles with the Complexity and Volume of ESG Data

The underlying requirements of the CSRD, mandate companies to report on extensive and complex ESG data across the entire company structure. Excel is not designed to handle large volumes of data efficiently, especially when considering the various sources where they may lie (internal unstructured documents, multiple ERP systems, etc). Consolidating, standardising, and managing such extensive datasets in Excel manually, can lead to performance issues and human-induced errors. 

Advanced ESG reporting solutions can offer better data handling capabilities, ensuring data accuracy and the streamlining of your ESG data repository. These tools not only facilitate compliance with regulatory requirements but also empower you to analyse and track your sustainability strategy effectively, helping you achieve your targets. For example, from the outset ESG reporting software like Greenomy saves time by utilising AI to extract data directly from your uploaded documents, minimising manual entries.

Connectivity, usually natively supported by advanced ESG softwares, is also key to ensuring that the data flows seamlessly from its source (i.e. the company’s internal system) to the reporting solution, reducing potential human error, and keeping track of the data from its source to the report. 

Collaboration in Excel Can Be Challenging

To cope with such data complexity and volume, collaboration across actors of the entity structure will be key. The ability to set tasks and responsibilities, monitor progress, ask for reviews, validate final answers and keep track of the changes (i.e. versioning,  audit logs) will be the stepping stones of a successful reporting journey. 

Having the ability to set up clear workflows with a potent ownership and task system, backed by more advanced collaboration features (i.e. users’ modifications real-time tracking, versioning, deadlines and review settings, etc) will ensure that all actors of the ESG reporting journey will understand what is expected of them, will be able to contribute to the answers, and ask for approval. In turn, managers will be able to monitor the overall progress, set new tasks and deadlines to continue the effort, as well as review existing answers to seamlessly generate their end report.  

Unfortunately, such features are not the core offering of Excel and can lead to the generation of several versions of the same file, the loss of data across versions and complexity in monitoring the ownership and progress at a granular level. Advanced ESG reporting softwares such as Greenomy, on the other hand, foster a culture of collaboration with built-in workflow features for easy task management.

Data Integrity, Auditability and Tagging 

Excel’s balance between simplicity and adaptability, as mentioned earlier, will, unfortunately, hinder the need for accuracy, integrity and auditability of the data. Excel often leads to human errors (manual data entry, formula management, etc) and lacks a robust audit trail capability (audit log, data lineage, etc), making it difficult to track changes and ensure data integrity over time. 

Advanced sustainability reporting solutions can provide detailed audit logs, version control, and full data traceability, enabling companies to maintain complete transparency and avoid creating black boxes during the reporting process.

Excel is also not well-suited for producing a regulatory-compliant machine-readable CSRD because it lacks native support for digital tagging standards like iXBRL. Specialised ESG reporting tools are better equipped to meet these requirements, ensuring accuracy, compliance, and ease of use.

ESG Reporting Softwares as an Alternative to Excel Shortcomings

As the landscape of ESG reporting evolves, businesses will progressively need to move away from Excel and adopt tools designed to meet the intricate demands of these evolving requirements. In this article, we demonstrated some of the most striking limitations of Excel, highlighting why it will fall short of meeting CSRD and other ESG regulations’ reporting requirements, and how ESG reporting software could fill the gap. Opting for ESG reporting software not only improves the accuracy and efficiency of reporting but also grants a competitive edge by offering profound insights into one’s sustainability performance.

To sum up, although Excel has served as a tool for managing data and generating reports, it seems that today it is no longer sufficient alone to prepare and comply with ESG reporting standards (such as the CSRD, EU Taxonomy, and ISSB). Companies will benefit from transitioning to a dedicated ESG reporting software to comply with the regulatory demands and ensure data accuracy, traceability and auditability, hence providing stakeholders and regulatory bodies with high-quality and comparable ESG KPIs and reports.

Discover how the Greenomy solution streamlines your ESG reporting, book a demo.