FRC publishes ESG data production framework

September 2, 2022

Identifies three key elements of data production.

A step-by-step ESG data production framework for boards of directors has been published by the Financial Reporting Council (FRC).

The framework has been laid out in a report that has identified three key elements of ESG data production: motivation, method, and meaning.

Respectively, this involves asking what motivates a company to collect ESG data, how is the data collected, and how is the data used to impact decision-making?

The FRC has broken down its framework in line with these three elements.

With motivation, the FRC recommends companies perform a materiality assessment to understand what ESG topics and data points are relevant to the company.

This will involve collaborating with peers through industry bodies to identify sector-relevant commonalities, and then identifying internal champions to raise awareness.

In terms of method, the FRC advocates for companies to identify data producers and owners, internal and external sources, and then decide whether a manual or automated system of collection is the best route to pursue.

This should include assessing the need for internal or external assurance and documenting the responsibilities of these processes.

The FRC also advocates for companies to share lessons about this process so it can be continually improved.

Finally, the FRC is encouraging companies to consider training and education so boards and other internal stakeholders and effectively use ESG data and maximise its meaning.

Crucially, this involves not treating ESG data as part of the annual reporting cycle and instead integrating it into regular processes.

 This can include reviewing existing data and data quality to determine whether it is already supporting strategic decisions and if further investment is needed.

Chair of the FRC ESG and Climate Group Josephine Jackson said: “High-quality data is critical to high-quality decision-making. Improving the systems and processes for the production of ESG data, as well as embedding a joined-up approach to data collection will result in better decision-useful information.

“In turn, this will lead to more relevant and reliable disclosures for all users who rely on companies for clear reporting of ongoing performance and future prospects.”

The FRC report also includes 32 questions directors need to ask themselves when reassessing how they produce and monitor ESG data.