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A new culture of sustainability

Jörg Plass, Director Operations DACH at Wol­ters Kluwer, explains „ESG and Sustainability“ in the context of current regulations and requirements.

Mr. Plass, what is the relevance of ESG compliance and ESG reporting for companies and what do they have to be prepared for?

Every company will deal with the topic of ESG. The reasons may be legal regulations, such as the EU taxonomy or the planned CRSD directive, but also “voluntary” reporting according to common ESG standards, such as GRI, SASB or others. However, the issue is much more than a compliance requirement. ESG is the strategic factor for companies when it comes to the business models of the future. Moreover, it is an economic as well as a political issue, in short, a “survival issue”.

Even “voluntary” reporting based on the standards is not really voluntary: as access to the capital market or the cost of capital are affected as a result. In extreme cases, companies will no longer receive money if they do not meet certain KPIs. Finally, ESG addresses the question of what kind of world we want to leave to our children and how our children evaluate economic success.

What requirements must a software solution for the area of “ESG and sustainability” fulfil today in the context of current regulations and requirements?

It must fulfil three things: It must include the current standards and regulations; it must be constantly expanded by the manufacturer, and it must have a high degree of flexibility. In addition to reporting, the software should also address ESG planning. Furthermore, the control of processes is essential; we are talking about worldwide processes and a multitude of systems that are connected. Similarly, it is depth of functionality and extensibility that make the value of the solution.

Wolters Kluwer CCH Tagetik has a long and successful background of project experience in collecting relevant data worldwide, calculating it as required and presenting it very flexibly in reports. We have been offering data logistics, process control, and a secure as well as stable infrastructure in the cloud or on-premise for many years. At present we supply software to thousands of corporate finance groups.

How and through which features can your solution help to embed a long-term sustainability culture in the corporate culture?

Financial indicators have been influencing the culture of corporations for a long time; business models, targets and goals are derived from them. This influences actions and thinking. Through ESG, new perspectives on the company become standard. Investors, partners and employees now have knowledge of sustainability, social aspects and compliance. A rating is the logical next step. This shift in perspective, the new requirements and the expanded external assessment are changing the culture.

ESG is a new control aspect that fits very well into the tradition of CCH Tagetik. Control means first reporting, but then also planning and successful task management. With CCH Targetik, a uniform platform can be established for this purpose. The CFO can see his financial data as well as the ESG data at any time and manage based on this.

Can simulations be carried out to assess various ESG scenarios and their effects?

For successful group management, simulations are an essential building block. WK CCH Tagetik provides extensive functions for this purpose, which are finally presented in attractive reports. Simulating a group of companies means applying alternative assumptions to all the figures, i.e., changing the structures and models. In addition to simulation, the software also has an action and target control function. Simulated models then often become plan specifications.

It is crucial to start from a retrospective view in order to shape the future of ESG. Therefore, planning and simulation should always be possible until this goal is achieved. Compliance must be reliably implemented now and in a parallel process so that the auditor can also issue his certificate in the future.

“ESG is the strategic factor for companies when it comes to the business models of the future. “

Jörg Plass

Jörg Plass, Director Operations DACH, Wol­ters Kluwer

How should companies go about reconciling short-term financial performance with long-term sustainability?

Short-term financial performance is necessary for survival. However, there will be a rethinking of valuation by investors and financial institutions. High profits with poor sustainability will increase the cost of capital and thus reduce profits, and reputation and the willingness to invest in the company will decline. ESG investments will be valued in the same way as other investments in machinery or sites. The SASB standard already takes this view into account today.

Of course, money must be available for a necessary rebuilding.  For an example, in the future it will be more likely be able to get a loan for a conversion to hydrogen, compared to a replacement investment based on fossil fuels, which might be cheaper, if you are an energy carrier.

What prerequisites do companies need to start with your solution? Which interfaces (APIs) do you provide? Are there updates and upgrades in terms of future legislation?

Wolters Kluwer CCH Tagetik has an open architecture, which makes it possible to connect to upstream systems. With our customers, we often see many different systems in which the data is stored. The processes around ESG are very comparable to other CPM processes, so no special requirements are necessary. We have subject matter experts, and we also work with big-four and boutique partners. We continue to develop the solution.

It is a so-called pre-packaged application, and is subjected to maintenance. The advantage for our customers in working with partners is to combine technical expertise with content expertise, thus we cover a broad range of requirements. WK CCH Tagetik is also very well suited for SAP customers, as SAP HANA is a possible architecture component.

About the Expert

Jörg Plass is an expert for CPM-solutions, particulary for group accounting and financial planning. He has been working in the field for 25 years.

He has been working in the Tagetik Ecosystem since 2010, including as Director Pre-Sales in the Central & Nordic region. Since January 2022, Jörg Plass has been Director Operations DACH.

To what extent can companies become more resilient through their digital maturity and digital transformation?

We see the benefits of digitization every day in our personal environment through companies like Amazon or HelloFresh. Granted, their business models are indebted to the digital idea. All companies will not only gain cost advantages from digitization, but will also become faster in terms of changing processes. The productivity of processes will also increase enormously. Costs and speed are key competitive advantages that unfold their value especially in times of crisis. Wolters Kluwer’s CCH Tagetik has been supporting digitization at its customers since its inception. As a result of the projects, we see a much greater flexibility to react to changes, new business models can be deposited without delay. Planning processes become faster. 

What significance do ESG criteria now have for companies in the context of long-term and sustainable growth?

ESG is not just a new reporting standard imposed on us by the EU. ESG is an overall social, political and economic act of strength in relation to Germany, the EU and the entire world. It is about nothing less than our prosperity, perhaps our very survival. My thesis is, growth in the future will only be possible in a sustainable way. It is not only laws that demand ESG standards, but also people. By now, it should have dawned on all companies that, in addition to legal requirements, capital and financing costs are also affected. In a few years, when Generation Z has the money to invest in stocks, ESG criteria will probably be on an equal level with financial metrics. Entire industries will be reshaped, from energy supply to process consulting.

What role do AI and ML play in the context of your products, solutions and services?

We concentrate on corporate controlling, we provide companies with the “right” figures at the “right” time. These figures are based on the current status and are the baseline for future considerations. AI and ML are located in all sub-areas. In the actual, for example, this can be support for intercompany matching at the document level, where the machine learns to find and match corresponding documents. In planning, this can be the connection between product sales and marketing measures. There are many uses for this. Our software has built-in AI and ML functionalities that can be used by business departments. So we do not need years of training to become a data scientist. The algorithms are provided both application-wise and generically.

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