Main content

Unlocking the power of ESG data - from complexity to clarity

Caitlin Keam Profile picture for user Caitlin Keam March 27, 2024
Summary:
When it comes to ESG reporting, vast data can be unwieldy to navigate. Caitlin Keam of IFS breaks down what really counts - and how organizations can achieve lucid ESG reporting, aligned with relevant business metrics.

Sustainability and ESG Renewable Energy concept © jittawit.21 - Canva.com
(© jittawit.21 - Canva.com)

With a heightened global focus on sustainability practices, there is a real opportunity that data that can help to improve the operational efficiency of businesses across manufacturing, utilities, construction, and engineering.

A December 2020 survey from NAVEX Global found that about two-thirds of privately-owned companies have ESG initiatives in place, which is a sign that people are beginning to take further action to become more ESG-friendly.

What may not be as well understood is that in addition to being a green tick against regulatory compliance, ESG data can also provide a competitive edge in a busy marketplace. However, this can often be led by mandatory reporting requirements and a tick box attitude, with metrics that that are not fully understood - holding them back from unlocking its real potential.

This data can also go far beyond just carbon emissions which is what some associate with the term ESG. It encompasses all business functions, from supply chain labor transparency to social metrics. It is also everywhere – from Excel spreadsheets and siloed disconnected systems to disparate sites across the world, making it difficult for organizations to access it in a timely way. By not fully understanding the value of their data and the many sources it comes from, it can hold businesses back from unlocking its real potential.

This is the true test for organizations. It isn’t about having a huge volume and range of ESG data they to track and collect. Rather, it's about rendering the information accessible, intelligible, and ultimately, impactful. ESG reporting, when fueled by clear, comprehensive, and accurate datasets can have multi-faceted impacts, potentially influencing everything from day-to-day operational decisions to long-term strategic planning and global market trends.

Manufacturers, for instance, might leverage ESG data to understand where they can make changes within their processes to reduce energy use, while retailers might monitor their supply chains for opportunities for more ethical sourcing. The challenge, however, transcends mere data collection; it involves transforming this data into actionable insights. Achieving this means promoting transparency and equipping all sectors of a business with an understandable and actionable sustainability framework, embedding ESG considerations into every decision-making process.

The data dilemma in ESG reporting

Yet, the journey to lucid ESG reporting is convoluted due to diverse methodologies and conflicting data sources. Companies grapple with streamlining data capture and enhancing accessibility. Complicating matters further is the issue of data transparency and ownership. Some organizations are hesitant to share their ESG data, for fear of disseminating potential inaccuracies in their reporting, while others may turn to consultants due to a lack of knowledge or confidence to get hold of this data on their own. The necessity for companies to own their reporting process is clear, avoiding reliance on estimated data and instead focusing on accurate, holistic information that leads to precise environmental impact assessments and strategic decisions.

Additionally, contemporary consumers are increasingly value-driven, often seeking detailed insights into a company's ESG practices before patronage. Companies, therefore, must prioritize transparency in areas like carbon emissions and sustainable practices to meet these evolving expectations. For example, a software company that discloses accurate emissions data pertaining to product usage can foster deeper trust and satisfy the modern customer's desire for transparency.

Leveraging technology to navigate ESG complexity

So what’s the solution to all this? The emergence of cloud-based platforms that provide centralized data repositories for ESG data  is making it simpler for businesses across industries, including manufacturing, engineering and construction for example, to more easily access and manage data from across different departments within the business, as well as ensuring that it is consistent, accurate, and up to date.

Technology is also making it easier to connect and embed ESG data from various sources, including internal systems, external databases, and third-party vendors. This data harmonization ensures that data is standardized and compatible, enabling meaningful analysis and reporting. This is key as it enables ESG data to be used to efficiently drive the core operations of the business.

Rather than having a dedicated sustainability team capture data separately, organizations need to embed sustainability measurements into existing processes. For instance, having finance teams capture consumption data at the source, alongside financial data, not only saves time but also increases efficiency. By capturing that data and sharing it more widely, it helps those responsible for setting and succeeding against ESG targets to create greater alignment on their broader organizational strategy, eliminating the isolation of data within a single team.

By harnessing advanced analytics, businesses can gain a deeper understanding of their ESG footprint, allowing them to not only meet regulatory standards but also drive innovative solutions that enhance sustainability while optimizing costs. As the role of ESG continues to expand in business operations, AI will inevitably become an increasingly critical tool also in enhancing data accuracy and consistency.

Herein lies the opportunity for businesses – by using ESG data insights, they can enhance their operations, by identifying where there are opportunities to upgrade existing infrastructure and tools to lower emission alternatives, reducing costs and improving outcomes. For example, by reducing the energy consumption of machinery in the manufacturing space, or minimizing its waste production, that manufacturer can in turn, lower its overall operational costs and improve its profit margins, while also having a more positive impact on the environment. The trigger point for these reductions often lies in the operational data, which is why it is key to utilize technology and work with a partner who can help you to extract that data in a coherent and cohesive way. From here, an organization will be better placed to identify avenues for savings.

Concluding thoughts

In conclusion, while the ESG landscape is undeniably complex, it offers fertile ground for innovation and leadership in sustainability. However, this is only possible by steering the narrative from mere reporting to being part of the solution for empowering businesses to take charge of their ESG data and using it to drive their business forward. By working with partners and industry experts, organizations can take the next step in committing to data transparency, prioritizing accessibility, and embedding sustainability into the heart of their operations. With mandated reporting standards such as CSRD and GRI coming down the line, businesses can use this as an opportunity to unlock the transformative power of their ESG data, paving the way for a more sustainable and profitable future.

Loading
A grey colored placeholder image