Danish technical paper on ensuring a well-functioning Single Market for digital ESG
solutions reducing administrative burdens for companies.
Having a well-functioning European market of digital ESG-solutions can significantly reduce administrative
burdens for companies by making it easier for them to comply with EU sustainability reporting requirements
and showcase their sustainability to business partners, investors, and customers. This requires that data,
system, and service providers, as well as calculation tools, sustainability certification schemes and data
platforms adhere to a
set of minimum requirements on methodologies and digital functionalities for ESG
solutions
making sharing of and access to ESG data easy among companies.
Analogue and fragmented data handling creates unnecessary administrative burdens.
For the past years, European companies have been faced with an increasing range of comprehensive new
EU-legislations requiring them to report on sustainability at both the product and company levels. To
efficiently comply with these new legislations, companies will need to digitize their product information and
adopt new digital systems. However, many companies currently handle data and information in an analogue
and fragmented manner, creating unnecessary administrative burdens for businesses, hampering European
competitiveness, and hindering the realization of a true digital single market.
As reporting requirements are still in development, companies and ESG solutions currently collect
sustainability data manually across value chains from a range of sources such as spreadsheets, PDFs, different
digital solutions, platforms, questionnaires, and online forms. This makes it complex and unnecessarily
burdensome for companies, especially SMEs, to supply their sustainability data multiple times in parallel to
their various larger customers. Different ESG solutions also use different methodologies and display varying
degrees of transparency in how they calculate and measure a
company’s
sustainability performance. This
makes calculations non-transparent and results incomparable. For example, available calculation tools for
GHG-emissions offered to European companies often differ in methodology, which hampers comparability.
Furthermore, ESG solutions are fragmented, using various digital and even proprietary standards, protocols,
and data formats, keeping data in closed platforms. This limits the possibilities for the free flow of data, cost-
effective data validation, and integration into companies’ existing IT-systems and interfaces, as well as
portability between different solutions. Consequently, the emerging market for ESG solutions is also
fragmented and non-transparent. The Commission has recognized the risks of a fragmented market of service
providers for digital product passports (DPP) and will adopt requirements for the emerging market of DPP
service providers in the Ecodesign for Sustainable Products Regulation by introducing provisions to establish
rules and requirements to be followed by product passport service providers, including a certification scheme
to ensure compliance with requirements, if appropriate.
1
Harmonising requirements for ESG data and solutions, creating a single market for ESG solutions.
To counter the tendencies towards fragmentation in the emerging market for ESG solutions, we need to set
minimum requirements on methodologies and digital functionalities of the ESG solutions. This is in order to
ensure transparency, robust methodologies, and a minimum level of interoperability of data and ESG
1
Ecodesign for Sustainable Products Regulation (ESPR), article 10 paragraph 2.