Why is ESG data critical for sustainability?
Ultimately, ESG data and subsequent reporting correlates with corporate sustainability. Companies able to establish a history of ESG data collection, reporting, and action are companies that stakeholders want to invest in.
Additionally, as the public grows more savvy and demands more transparency and accountability of the business they purchase from, companies that harness the power of ESG data are companies that the public will trust.
More importantly, companies that are on board with ESG data collection and reporting requirements are those that also work towards a future that is sustainable, greener, and more equitable. But in order to get there, companies need a meaningful way to collect this data and understand it.
In the long run, ESG data needs to lead to actionable insights. Otherwise, it’s just an exercise.
Why is ESG data a sustainability challenge?
As we look to the future and assess the impact that industry and manufacturing has, it becomes clear that we need efficient and effective ways to collect and analyze ESG data for analysis and reporting. Additionally, collecting and disseminating data is an actionable task, something that companies can use to create real, sustainable change, both locally and globally.
International standards associations such as ISSB, TCFD, PRI, and the UN’s Sustainable Development Goals have all articulated global sustainability standards that many nations are taking very seriously. Environmental policies in the US are evolving to meet these standards in an earnest effort to work towards sustainability.
All of this, of course, is with good intentions. However, there are very real challenges that companies face. One of the challenges – and the primary roadblock – is the actual collection and recording of this data.
Without accurate and verifiable data across every arm of the company, claims of sustainable action can’t be measured or expanded. Simply put, it becomes an exercise in greenwashing, and an effort in futility.
How can we address ESG data roadblocks?
Addressing ESG data roadblocks is one of the crucial challenges that companies face when working towards sustainable operations. It can even stop some companies from undertaking new initiatives.
But with policies in the US and abroad rapidly changing, and ESG reports and transparency becoming not just standard, but expected, addressing the challenges in effectively and efficiently collecting and reporting on ESG data is the first step moving forward.
Let’s have a look at some of the biggest challenges in ESG data collection and management.
Accurate and efficient data collection
The first hurdle is always: how can all that data be collected, across departments, and organized in a way that is clear and action-driven? Without an effective data collection and dissemination system, a lot of critical errors can occur. And errors are costly, for everyone.
Even with company-wide systems and regulations in place, a lot of companies also rely on external data sources from suppliers, customers, and outsourced companies, such as transportation. There are a lot of variables that could lead to errors and redundancies.
Data complexity
When it comes to ESG reporting, there is a lot of data to collect. Particularly for companies with multiple global locations and distribution centers, data comes in from a lot of points and disseminating it into coherent and actionable reports is a massive undertaking… and roadblock. This significantly impacts a company’s efforts towards sustainability.
Additionally, the more complex the operations, the more complex the ESG data will be. This can stop companies from taking real action towards sustainable goals.
Reporting framework
As we’ve discussed before, there are several ESG frameworks that companies can choose from, including GRI, TCFD, and ISSB. Additionally, these frameworks are constantly evolving as new policies and expectations crop up. While this is a good thing – the evolution of sustainability being paramount to moving towards sustainability – it can present some challenges for ESG teams.
Selecting the right framework for your company can be a challenge. You need one that aligns with your industry, needs, and goals. Additionally, once that framework has been selected, gaining company-wide buy-in is essential to adherence and ongoing sustainability.
You can see how data challenges can present roadblocks to earnest sustainability.
investor and stakeholder requirements
Companies have a wide range of stakeholders, including customers, employees, regulators, advocacy groups, and investors. And all these stakeholders have expectations, particularly when it comes to ESG reporting and the future of sustainability. It’s only natural that meeting those expectations can become yet another daunting task.
ESG reporting is all about transparency, and that’s a good thing. To do so, data must be accurate, meaningful, and actionable. It’s the last of these requirements that is most important to sustainability. Data can inform a lot – it’s what happens after that makes the difference. It’s also about how this data is shared and in what context.
These are a lot of challenges that companies face, and to move forward into a sustainable future, managing data collection will require robust data collection systems that can be used company-wide, and can be tailored to particular data governance procedures that can be monitored and improved upon.
