How Can Businesses Reconcile Discrepancies Between Internal SDG Reporting and Third-Party Evaluations?

 As businesses increasingly align their strategies with the Sustainable Development Goals (SDGs), reporting and evaluation have become central to their sustainability efforts. Internal SDG reporting provides companies with a way to track their own progress, while third-party evaluations offer an external perspective on their achievements. However, discrepancies often arise between these two forms of assessment, which can create challenges for businesses. These discrepancies can occur due to differences in methodologies, data sources, or even differing interpretations of the SDGs.

Reconciliation of these discrepancies is essential for businesses to maintain credibility, improve performance, and foster trust with stakeholders. In this blog, we explore how businesses can effectively reconcile discrepancies between internal SDG reporting and third-party evaluations.

1. Align Reporting Frameworks and Standards

One of the primary reasons for discrepancies between internal SDG reporting and third-party evaluations is the use of different reporting frameworks and standards. Businesses may follow their own internal metrics and goals that don't align fully with third-party evaluation methods. For example, a company might use its own set of sustainability indicators, while third-party evaluators may rely on standards like the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), or United Nations SDG indicators.

Actions to Reconcile:

• Adopt standardized reporting frameworks: Businesses should align their internal reporting processes with widely recognized global standards to ensure consistency with third-party evaluations. Frameworks such as GRI, Integrated Reporting (IR), or SASB are designed to offer transparency and comparability, making it easier to reconcile internal and external assessments.

• Use SDG-specific indicators: Ensure that the business uses the same SDG indicators that third parties use when evaluating progress. The UN has provided specific indicators for each SDG, and these can act as a benchmark for both internal and external assessments.

By adopting standardized frameworks, companies can ensure they are measuring their SDG performance in a consistent way, reducing discrepancies when external evaluations occur.

2. Ensure Transparent Data Collection and Methodology

Discrepancies may arise when the data collected for internal reporting is inconsistent with third-party data or when different methodologies are used to evaluate progress. Third-party evaluators may have access to different data sources, use different metrics, or apply more stringent criteria, which can lead to varying results.

Actions to Reconcile:

• Standardize data collection processes: Businesses should create a transparent, well-documented process for collecting data related to SDGs. This means ensuring that data is collected using consistent methodologies and is comparable across reporting periods.

• Provide clarity on internal metrics: Businesses should explain their internal metrics clearly when presenting their SDG reports. This can include detailing how data is collected, which sources are used, and the methodologies applied. Offering transparency into the reporting process can help external evaluators better understand and contextualize the internal reports.

• Engage third-party evaluators early: If possible, companies can engage third-party evaluators during the planning phase of their SDG strategy. This way, both parties can agree on data collection methods, key performance indicators, and reporting processes in advance, which can help avoid discrepancies later on.

3. Address Differences in Scope and Boundaries

Internal SDG reports often focus on the business’s direct operations, while third-party evaluations may consider a broader scope, including the entire supply chain, regional impacts, or indirect effects. For example, a company might report progress on reducing emissions within its own facilities, but a third-party evaluation may take into account emissions across the entire supply chain, leading to discrepancies.

Actions to Reconcile:

• Clearly define scope and boundaries: When preparing both internal and external reports, companies should be clear about the scope of their SDG efforts. Define whether the evaluation covers the company’s direct operations, supply chain, or both. Providing clarity on these boundaries will help mitigate confusion and help stakeholders understand the full context of the SDG strategy.

• Include full supply chain data: Companies should consider extending their internal reporting to cover the entire supply chain, not just direct operations. While this may be more resource-intensive, it can help reconcile discrepancies in external evaluations, which often assess the full scope of impact.

• Use lifecycle assessments (LCAs): Businesses can adopt lifecycle assessments (LCAs) to measure the environmental and social impact of their products from production to disposal. This approach can help reconcile internal and external reports by providing a comprehensive view of product impacts.

4. Engage in Dialogue with Third-Party Evaluators

Discrepancies between internal and external SDG reports may stem from differing interpretations of data or goals. To understand these differences better, companies should engage in open communication with third-party evaluators to clarify any misunderstandings.

Actions to Reconcile:

• Request feedback: When discrepancies arise, businesses should seek constructive feedback from third-party evaluators. Understanding the rationale behind their evaluations and their interpretations of the data will help businesses adjust their reporting processes and improve future assessments.

• Participate in collaborative efforts: Consider joining multi-stakeholder forums, industry groups, or workshops that bring together businesses, third-party evaluators, and other stakeholders. These collaborations can help standardize measurement methods, create shared understandings, and develop solutions to reconcile discrepancies in SDG reporting.

5. Align Stakeholder Expectations and Communication

Another reason for discrepancies is the differing expectations of various stakeholders, including investors, customers, and NGOs. Internal SDG reporting is often tailored to a specific audience, while third-party evaluations may be aimed at a broader group of stakeholders.

Actions to Reconcile:

• Align stakeholder expectations: Businesses should engage with their stakeholders to understand their specific expectations for SDG reporting. This includes discussing what types of data are most relevant to their audience, how they prefer the data to be presented, and what outcomes are prioritized.

• Communicate challenges transparently: If discrepancies do arise, businesses should not shy away from addressing them in their communications. Transparency about the reasons behind the differences—whether due to different methodologies, data sources, or boundaries—can help manage expectations and maintain trust with stakeholders.

6. Leverage Technology for Data Integration

Discrepancies can sometimes be caused by the lack of integration between internal reporting systems and external third-party evaluation platforms. Technology can play a key role in harmonizing these two approaches.

Actions to Reconcile:

• Invest in integrated reporting software: Businesses can use sustainability software solutions like SAP Sustainability, EcoReal, or Enablon to collect, analyze, and report data in real-time. These tools often allow businesses to track their SDG performance against industry standards and third-party benchmarks, helping to ensure consistency between internal and external reports.

• Use blockchain for transparency: Blockchain technology can enhance transparency by securely recording all data and making it tamper-proof. This can help businesses reconcile discrepancies by providing a clear, immutable record of data that can be independently verified.

7. Commit to Continuous Improvement

As businesses continue their journey towards sustainability, it’s important to view discrepancies between internal and third-party reports as opportunities for improvement rather than failures. By addressing discrepancies proactively, companies can strengthen their SDG strategies, refine their reporting processes, and ultimately achieve better outcomes.

Actions to Reconcile:

• Regularly review and update SDG strategies: Regular reviews allow businesses to identify gaps in data collection, reporting, or alignment with third-party evaluations. This continuous improvement cycle ensures that companies are always advancing their sustainability goals in line with evolving standards and expectations.

• Benchmark against peers: By comparing their SDG strategies and performance against industry peers, businesses can identify best practices and areas where their efforts might be falling short.

Conclusion

Reconciliation of discrepancies between internal SDG reporting and third-party evaluations is crucial for businesses to maintain credibility and enhance their sustainability efforts. By aligning reporting frameworks, ensuring transparent data collection, addressing scope differences, and engaging in open dialogue with third-party evaluators, businesses can minimize discrepancies and improve the accuracy of their SDG performance. Ultimately, businesses that effectively reconcile these discrepancies will not only achieve better results in their sustainability efforts but also foster trust with stakeholders and strengthen their reputation as leaders in the global drive toward sustainable development.