Why is Data Security Important in ESEF and ESG?
The European Commission, on 21 April 2021, proposed the creation of a new Corporate Sustainability Reporting Directive (CSRD). This directive will require all large and listed European companies to report on Environmental, Social, and Governance (ESG) matters. The ESG reporting aims to give financial stakeholders and investors the ability to analyze how companies operate and manage ESG challenges. Simply put, ESG reporting is becoming a critical part of ESEF reporting for European companies.
While companies focus on their ESG challenges, they leave cybersecurity to the regulators and insurance industry to handle. However, it’s high time that companies realize why data security is an important part of their ESG reporting.
Reasons Why Data Security Needs Should be Included in ESG Reporting
The three main reasons for including cybersecurity in ESG include:-
- It Prevents a Threat to Value
The value of intangible assets now represents almost 90% of the asset value of organizations. Especially during the Covid-19 pandemic, organizations accelerated their shift to digitizing their assets. Today, data is the most critical asset in determining a company’s value. As the company grows, it requires storing the growing amount of data in additional hard drives, physical server space, and other electronics.
The growth in the company’s intangible value causes an increase in the potential of a data breach. To manage this data breach, companies need to rethink their strategies. Instead of trying to protect every system, they should focus on protecting the critical assets without which the company cannot operate. As a result, the threat to the value is minimized in the event of a breach.
2. It Prevents a Threat to the Society
To improve consumer convenience and experience, organizations in every industry are adopting digital transactions. Moreover, companies collect their customer’s personal information to enhance their buying experience. This increases their social responsibility to protect this information. But it also increases the risk of breach of privacy.
3. Insurance Can’t Help Mitigate the Risk Indefinitely
The governance factor in ESG reporting refers to the corporate management structure and the company’s policies regarding standards, compliance, and disclosures. Instead of implementing governance to manage data security, companies have excessively relied on insurance companies to safeguard them from risks. However, with increased demand for cyber insurance, insurers will continue to limit the extent to which companies can rely on it to mitigate risks. As a result, understanding and managing security risks have become more critical than ever.
What Does It Mean for Your Company?
Companies must implement robust data security and privacy programs in alignment with their ESG strategies. This not only improves your ESG score but it helps attract ESG investors to your commitment to sustainable practices.
And to ensure data security in ESEF reporting, all you need is a service vendor with stringent privacy policies in place. DataTracks is ISO certified for the data security measures they take. All your data will be securely stored in a cloud-based data center in Germany. So without worrying about the risk of a data breach, ensure an accurate and error-free compliance report with DataTracks.
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