ESG – How OneStream Can Support Emerging Global Disclosure Requirements

In this episode of the Business Excelleration^® Podcast, in Europe, the U.S. and worldwide, mandatory reporting requirements for companies’ environmental impact are on the rise. We discuss the issues around this emerging trend, and how companies can use OneStream to meet these requirements, with The Hackett Group Principal and OneStream Practice Leader Trey Robbins and Director Al Boyer

Welcome to The Hackett Group’s Business Excelleration Podcast,“where week after week we hear from experts on how to avoid obstacles, manage detours and celebrate milestones on the journey to world-class performance. This episode is hosted by Trey Robbins, principal and OneStream practice lead at The Hackett Group. Today’s episode will discuss how OneStream can support emerging global disclosure requirements. Trey is joined by Al Boyer, director and domain lead for ESG, at The Hackett Group.

To begin, ESG stands for environmental, social and governance, and Al shares what ESG is and why it’s important. ESG is a series of evolving frameworks that have assessed the sustainability of companies and countries. This includes climate change, human rights and adherence to the law. The term ESG was coined in 2004, following a UN global compact. Al continues by describing that there are two pieces of sustainability – the impact of environmental factors on a business and the business in its sector, and making the material factors sustainable for a company and measuring the company’s impact on the environment. Materiality includes the factors, products and resources required for the material practice in a company. This considers dual materiality, how factors impact the sustainability of a company and how it affects the environment.

Next, Al shares that clients need to address sustainability because we currently have a broken reporting system. We are not accounting for the implications of sustainable investing and not giving investors full insight into what a company is truly worth. There are three R’s to consider involving sustainability: regulations, revenue and the right thing to do. For regulations, the SEC will implement federal and regulatory environment laws where companies have to track and disclose the impact of their company on the environment. Revenue includes the disclosure numbers and sharing those to customers; otherwise, you may lose clients. The environment is important to customers, and there are opportunities to reduce costs and increase margins, and conduct carbon credits. You can also offer renewable energy credits like solar panel farms, which have lower emissions factors and are cheaper in the long run. OneStream can help with scenario planning, understanding all the routes and the conduct of the business. The last “R” is the right thing to do because we want to be good stewards of the places we live and work.

Also, Al describes that many companies and clients are unaware of these regulations, and don’t understand the implications or the downstream impact. One can see the movement of ESG and sustainability reporting throughout most of the world. Most want to know how to lower operating costs and grow ESG disclosure. There are five key considerations for why one should tackle sustainability. First, you need to start thinking of sustainability, and staying true to your company’s culture and your sector of business. If you start there, then you can realize what’s important. Then, you can start a sustainability framework in strategy. Think about where you want to go, why you want to accomplish that and how you will do it. Next, you need to find a platform and solution to organize the data. You have to trust your data and that includes having accurate traceability, being able to sign off on it and meet disclosure requirements. Finally, you can compare sustainability operations side by side, including cost, gains and revenue. There are three types of companies: one that doesn’t know sustainability is coming, those that are tracking it and doing it themselves, and other companies that are ahead of it and looking for a system. It can be really overwhelming to start this sustainability process, but those five considerations can help.

Finally, Al discusses what obstacles he foresees in 2024. First, he shares the first obstacle is trying to understand sustainability and materiality, and what it means. Next, helping companies figure out how to consolidate nonfinancial data is also an obstacle. The biggest challenge he sees is aligning stakeholders inside of a company. Disclosure and regulations will force many companies to disclose sustainability data, along with their clients and partners. ESG is not that complex or difficult, but getting everyone aligned is the biggest obstacle. In closing, Al shares that you can use a platform to collect nonfinancial data for ESG and the way the signups happen are going to follow the same legal hierarchy that you use for financial disclosures. OneStream has the legal hierarchy for the same dimensionality and can maintain a lot of data.

Time stamps:

• 0:49 – Welcome to this episode hosted by Trey Robbins.
• 1:49 – What ESG is and why it’s important.
• 3:07 – Sustainability and materiality, and how it impacts clients.
• 4:58 – The three R’s.
• 11:45 – The five key considerations for why companies should tackle sustainability.
• 18:05 – The obstacles expected in 2024.
• 21:38 – Could a platform like that be used to collect nonfinancial data for ESG?