The Increasing Demands for High-Quality ESG Data

Better insight with ESG data

We’re living through a period of deep change. Climate is changing. Trade routes are being reshaped. Supply chains are facing regular disruptions. Volatility and uncertainty have become the norm. In such a world, understanding a business’s sustainability is not a luxury — it’s a necessity.

Sustainability today goes far beyond a simple checklist. It’s multifaceted, encompassing how a business uses resources, its exposure to climate hazards like floods or wildfires, its resilience to supply chain disruptions, and its preparedness for emerging environmental challenges — from PFAS to microplastic pollution — and social regulations. It includes whether it’s contributing to or protecting biodiversity, and how fairly it treats its workforce and those of its suppliers. And it demands strong governance — to actively prevent exposure to corruption and reputational risks.

This isn’t just critical for the business itself. Financial institutions, investors, regulators and customers all rely on this information to make sound decisions. High-quality, granular ESG data has become as essential as financial metrics and is even more crucial for long-term planning and credible ESG reports.

Banks and insurers are making ESG data mandatory

Financial institutions are already moving ahead. The EU’s “banking package” — CRR III and CRD VI — is making ESG risk a core part of prudential rules. No longer just a disclosure obligation, ESG risk now affects capital requirements, board responsibilities, and supervisory expectations. Banks must gather data on emissions, energy efficiency of real estate, location of physical assets, exposure to high-emitting sectors, and clients’ transition plans. They’ll need the data to model the impact of climate scenarios on default probabilities, collateral values, and sectoral risk.

This transforms how banks assess credit and portfolio risk. Climate-adjusted cash flow projections, forward-looking stress tests, and integration of ESG factors into internal models will become the norm. Institutions lacking reliable ESG data will be forced to use proxies or third-party datasets — with all the governance and audit implications that come with it.

Insurers face similar obligations. The updated Solvency II framework hardwires ESG into every part of risk management — from underwriting to scenario analysis. Sustainability-risk plans must be board-approved and quantified. Climate scenarios must span 30-year horizons and feed into solvency assessments. Weak ESG modeling won’t just be frowned upon — it may lead to capital surcharges.

The message is clear: ESG isn’t a side issue. It’s part of core financial stability, and regulators are watching closely.

The solution: one ESG report, done right

So how can companies keep up with this growing demand for high-quality, consistent ESG data and simplified ESG reporting?

The answer lies in simplification and standardization. At Karomia, we champion the VSME standard — one report, done well, built for verification and reuse. No more fragmented disclosures across formats and frameworks. No more bureaucracy for the sake of compliance.

Instead, companies should produce one high-quality ESG report that serves all stakeholders — banks, insurers, investors, customers and regulators. Automation plays a key role: not to generate meaningless boilerplate, but to help collect real ESG data, track progress, and ensure consistency over time.

This kind of streamlined, high-quality ESG reporting allows institutions to confidently incorporate non-financial risk into their models. It reduces the burden on companies while increasing trust in their ESG reports. And it supports the broader shift toward a more resilient, future-proof economy.

In a fast-changing world, we need long-term thinking. ESG isn’t just a buzzword — it’s a powerful lens through which we understand business resilience, risk, and opportunity. Let’s assess the risks and opportunities our businesses face and provide institutions with high-quality ESG data in a way that’s smart and efficient, not burdensome.

One ESG report. Done right. That’s the future of ESG.