By Damien Smith, CEO, Ecodesk
The environmental, social and governance (ESG) capabilities of a business are increasingly becoming a boardroom concern, and for good reason. Committing to measuring and making ESG metrics available externally helps garner trust and goodwill among staff, investors, and customers alike.
Historically it has been easier said than done. ESG factors are often complex, multi-dimensional and continuously evolving. They are, therefore, very difficult to track effectively, and because of this, businesses have found it challenging to fully understand where they stand on their pathway towards ESG nirvana.
Opening up business opportunities
The importance of ESG is not going to go away anytime soon, so committing to measuring ESG data and making it available makes perfect business sense. Not least because it can help increase revenue and open up brand new business opportunities.
Regulators, for one, are increasingly requiring the move from voluntary to mandatory disclosure of ESG credentials. Plus, they are getting more specific and stricter in their expectations. Then there are investors, who are looking more than ever at a company’s environmental, social and governance qualities before deciding whether to proceed with funding. Much of this is down to a known shift in consumer expectations worldwide that is affecting market potential. Almost six-in-ten (57%) consumers now admit to being willing to change their purchasing habits if it means they can reduce their own net environmental impact. Because of the above, organisations seen as ESG leaders are now 43% more likely to outperform their competitors in terms of profitability.
Finding common ground
Unfortunately, even when a business rightly commits to wanting to increase their ESG transparency so that they can establish trust and accountability, the battle is rarely won. A business can’t track what they can’t see, and often ESG data is embedded within several disparate data silos within the organisation. Because of this, it is imperative that a business can break down this data effectively.
Luckily there is further incentive to do so. Good ESG data can reduce operational costs, as it becomes far easier to promote environmentally friendly habits by promoting the use of less waste and more renewable energy sources.
Unfortunately, even for the most forward-thinking businesses, the amount of data produced related to ESG can often feel unmanageable, especially as each generally comes with its own units and definitions, making it difficult to find common ground. Thankfully, there is technology available that can help a business monitor its ESG from top to bottom. This makes it simpler and more cost-effective for business to learn, evaluate, and disclose ESG performance. Plus, it can provide valuable insight and actionable steps on how to improve in the future.
Using technology such as our very own ESG Lead can help businesses track metrics in a more meaningful way. This can not only help strengthen ESG performance but help reduce the margin of error, helping businesses make strategic decisions accurately and with more confidence.
The time is now
The time to deal responsibly and effectively with ESG risk is now. Stakeholders want more transparency from businesses on their sustainability credentials, so it is important that businesses do all they can to promote the steps they are taking to be better. However, remember that while external pressure from regulators, investors and other stakeholders are key drivers, the creation of better sustainability metrics can also help the business better manage risks and progress their sustainability plans in the months and years to come.
Even for the most progressive organisation, ESG can be a minefield of confusing jargon, ambitious regulatory targets, false truths, and an unmanageable amount of data. It is, therefore, important to use the latest technology to break down ESG data into manageable bites.
A powerful competitive advantage
With the world waking up to the environmental and social impact of business, and ESG requirements and legislation increasingly growing, proving a strong ESG performance is now a business imperative for organisations large and small.
Strong ESG performance is no longer just a nice to have. Consumers are looking for brands to have an ethos that aligns with their own, employees want to work for companies that they are proud of, investors are no longer willing to invest in environmentally blinkered enterprises, and regulators are tightening their requirements year on year.
ESG metrics have become a powerful competitive advantage. Make sure your business does all it can to unlock them so that it is better armed to understand its current ESG situation so that it can drive the business forward and create long-term value.
For more information contact: Damien at damien.smith@ecodesk.com
