Sustainability reporting: working with estimates

Key findings

• The need to work with estimates and the extent of this may not be apparent at first. It may be only when the organisation starts collecting and evaluating the data that issues with data availability and quality become apparent. 
• Revisiting assumptions, updating methodology and revising estimates are part of the process to continually improve the quality of sustainability information.
• When hard figures aren’t available, estimates may provide decision-useful information. 

Why use estimates?

Organisations are currently working with incomplete, uncertain, or unavailable granular data to create sustainability information. When hard figures aren’t available, organisations may use reasonable and supportable information to make assumptions of a present or a future situation, to guide decisions. There could be instances where more than one scenario is possible. As the number of variables and assumptions increases, then judgements would become more subjective and complex too.  

Alternative approaches when direct measurement is not possible

Approaches to estimate sustainability information 

Organisations may use estimates when creating sustainability information, before robust data systems are available to conduct direct measurements. The IFRS Sustainability Disclosure Standards, for example, allow organisations to use all reasonable and supportable information that is available to the organisation at the reporting date without undue cost or effort. This report explores the current approaches to estimate sustainability information for present situations. These approaches include: 

• using third-party or proxy data, and 
• deriving sustainability data from financial and other data. 

Ways to access better-quality data

Some organisations are pursuing better-quality data through these measures:  

• ensuring staff know what they are doing – make sure staff understand the purpose and value of the data collection exercise. 
• designing systems and processes to collect sustainability data - organisations must set up processes and systems to capture some of the most important sustainability data. Organisations may already have plenty of sustainability data, but it’s scattered. Scattered data sources often make it very challenging to collect large volumes of data from across the organisation and from third parties.
• integrating systems and processes as much as possible – think holistically about how the data will be used for creating both financial and non-financial information.
• implementing processes and controls – these are critical for improving data quality and reliability. Collecting high-quality sustainability data requires iterative improvement – it’s not a one-off exercise. Organisations need people with deep expertise in setting up processes and controls, plus sustainability understanding.
• collaborating with the value chain - work together to identify the underlying data for producing sustainability information and overcome obstacles in data collection.

While the pursuit of reliable sustainability data through direct measurement should continue, we need to acknowledge that estimates are sometimes necessary due to uncertainty or our evolving understanding of what needs to be measured. In the absence of high-quality data, the iterative improvements of estimates is a practical way of creating decision-useful sustainability information.   

Reasonable estimates do not undermine the usefulness of the information if the estimates are accurately described and explained. Estimates should be revised over time to produce more decision-useful information as:  

• knowledge of a sustainability topic improves,  
• assumptions are refined,  
• processes and systems improve, and  
• better-quality data becomes available.