Ontology-Driven Architecture for Managing Environmental, Social, and Governance Metrics

Abstract

The burgeoning significance of environmental, social, and governance (ESG) metrics in realms such as investment decision making, corporate reporting, and risk management underscores the imperative for a robust, comprehensive solution capable of effectively capturing, representing, and analysing the multifaceted and intricate ESG data landscape. Facing the challenge of aligning with diverse standards and utilising complex datasets, organisations require robust systems for the integration of ESG metrics with traditional financial reporting. Amidst this, the evolving regulatory landscape and the demand for transparency and stakeholder engagement present significant challenges, given the lack of standardized ESG metrics in certain areas. Recently, the use of ontology-driven architectures has gained attention for their ability to encapsulate domain knowledge and facilitate integration with decision-support systems. This paper proposes a knowledge graph in the ESG metric domain to assist corporations in cataloguing and navigating ESG reporting requirements, standards, and associated data. Employing a design science methodology, we developed an ontology that serves as both a conceptual foundation and a semantic layer, fostering the creation of an interoperable ESG Metrics Knowledge Graph (ESGMKG) and its integration within operational layers. This ontology-driven approach promises seamless integration with diverse ESG data sources and reporting frameworks, while addressing the critical challenges of metric selection, alignment, and data verification, supporting the dynamic nature of ESG metrics. The utility and effectiveness of the proposed ontology were demonstrated through a case study centred on the International Financial Reporting Standards (IFRS) framework that is widely used within the banking industry.