When ESG reporting translates into empty action, a firm can be accused of greenwashing. A sound data-driven approach can prevent that.
It has been a shaky year so far for environmental, social and governance (ESG) proponents. The banking sector fallout earlier in the year, global layoffs and the slow rate at which inflation is coming down have cast a shadow over the world economy. The uncertainty has made organizations shift their focus to increasing profits, reducing costs and scaling back on activities deemed less critical — which in some cases may include ESG.
However, walking away from ESG may prove to be a short-sighted approach as more consumers and investors place greater emphasis on sustainability and are making demands that businesses be made accountable for reducing their environmental footprint.
With more ESG and sustainability pressures on organizations to do more, how do the latter guarantee that they meet their ESG targets, satisfy stakeholders’ increasing expectations and seize business opportunities?
ESG, sustainability and data
While ESG and sustainability are often used interchangeably, it is crucial to note:
- Sustainability, as it relates to business, is “how an enterprise coordinates its economic, environmental, and social demands to ensure it is successful in the present and the future.” Sustainability is a “holistic approach that includes ethical and responsible business practices.”
- ESG, on the other hand, is a set of quantifiable criteria that measures an organization’s environmental, social, and governance efforts. Organizations are focused on hitting performance metrics and reporting their results. It should be noted that when reporting does not translate to action, organizations can often be accused of “greenwashing”. With the International Sustainability Standards Board (ISSB) now requiring firms to disclose their Scope 1, Scope 2 and Scope 3 greenhouse gas emissions, there is renewed urgency for firms to set out the areas that they would like to measure, and identify the data required for accurate reporting and proactive action.
The good news is that many modern firms can turn to the vast amounts of data they have at their fingertips: the unstructured and structured data stored across a variety of public and private cloud and on-premises environments.
The three steps to data-driven ESG
Through good leverage of data and analytics, firms can become more competitive by having a comprehensive view of the various factors within their organization that can affect sustainability goals and be guided to improve their ESG performance.
For example, collecting and analyzing data on an organization’s carbon footprint and energy usage is a step toward reducing an organization’s impact on the environment.
Also, firms can measure their performance in human capital management (HCM), which include aspects such as diversity, equity, and inclusion (DEI), hiring practices and fair pay. For data-driven ESG, firms need to embark on a three-step process:
Establish an organization-wide, integrated, and holistic data strategy that addresses how data is handled and managed. To complement the data strategy, there needs to be a data-focused culture where management supports and reinforces a set of shared beliefs and values regarding how data is managed and used, which will in turn influence employee perception and behavior.
With many organizations storing their data both on premises and across multiple public clouds, data must be tracked, managed, and ultimately, trusted. Having a data strategy builds this trust, which is critical considering more organizations are making data accessible to various functions and as a basis for more advanced applications like training AI models.
Deploy a centralized data management platform that addresses the challenges of data collection, integrating new data sources and utilizing data for insights. With many organizations having data across multiple environments, this data management platform must be able to access, manage and analyze the data no matter where it resides. Using a vendor-agnostic platform also prevents organizations from being locked into any particular service and avoids compatibility issues with other systems and types of data.
Lastly, what sets apart a future-ready business from the rest is its ability to perform data analytics on real-time data in a way that is scalable, able to have data moved seamlessly from any source to any destination, that can provide real-time streaming analytics for key insights and immediate action.
Walk the data talk
With some studies showing that investors across the Asia Pacific region believe that firms should invest in ESG improvements even if it impacts short-term profits, the path forward is to commit to ESG and reduce the risk of losing credibility and customers.
While it may be unclear as to how organizations can integrate ESG with their corporate strategy and its impact, taking a data-driven approach helps provide clarity and purpose. By assessing performance and uncovering areas of improvement, firms can move beyond simply reporting on their ESG performance to taking quantifiable actions based on metrics and facts.
Having the right data strategy and action plans allows firms to have quick and easy access to deep and reliable insights that pave the way for meeting increasingly ESG-conscious public expectations while improving their bottom line.