Eimund Loo, Partner – Digital Advisory, ERM
With the debate on whether climate change significantly impacts society and the global economy largely being settled, companies are now transitioning from simply defining what climate change means to them and developing Environmental, Social and Governance (“ESG”) strategies, to how such plans will be executed and measured to demonstrate tangible results and communicate progress to an ever-expanding number of stakeholders.
As companies get more tactical on their ESG-related activities, global frameworks like TCFD and government and regulatory disclosures requirements are helping organizations to define what a company should measure and report (see our earlier ReThink Insights post on the sustainability disclosure landscape here), but how a company creates, generates, extracts, consolidates, processes and analyzes the data needed to underpin their disclosures has been largely left to each organization to figure out by themselves. While Environmental datapoints are typically more quantifiable, e.g. greenhouse gas emissions, calculating the data required needs technical and scientific guidance whereas Social datapoints tend to be more qualitative in nature and the raw data may not be readily available or even exist. Furthermore, significant time and resources are needed to collect the required data, particularly for first-time disclosures, as spreadsheets and email are still the primary modes of data collection from disparate, inconsistent, and/or unstructured data sources across multiple departments.
Recognizing these challenges and leveraging the lessons learnt from financial reporting and disclosures, new and evolving ESG-focused digital solutions are now able to support and accelerate an organization’s ESG data management requirements across different company sizes, budgets, operational maturity, locations and industries. Whether it’s augmenting existing Enterprise Resource Planning systems with new ESG modules, integration and orchestration solutions that connect multiple existing systems to generate ESG-related insights, or cloud-based Software-as-a-Service digital workflow platforms, companies are now able to find solutions that can meet their specific needs and digitally-enable their workflows to collect, process, analyze and report ESG data efficiently and automatically, saving time and allowing their team to focus on impact and results. Enterprise data vendors have also expanded their portfolios to include ESG data and ratings, enabling companies to benchmark, assess and perform due diligence on themselves as well as their peers and partners easily and beyond just financial considerations.
Digital ESG also addresses future challenges, such as using blockchain technologies to provide transparency and validity of data provided by third-parties to improve the visibility and traceability of the entire value chain. Artificial Intelligence can also be used to improve operational resiliency and agility as machine learning can help predict physical climate change risk and financial impact, or chatbot technologies to engage and promote better health, safety and wellbeing with employees.
As companies continue their sustainability journey and head towards a net-zero economy, there will be bumps along the road such as the recent greenwashing scandals as well as geopolitical and economic instabilities. Developing a robust and resilient sustainability program that is digitally enabled will empower organizations with the agility and capability to get the right information to the right people at the right time to make better informed decisions that go beyond public disclosures and positively impacts their employees, stakeholders, customers and the broader global community.