How to unlock real business value from ESG initiatives with trusted data

By Pat McCarthy, CRO at Precisely.

Environmental, social, and governance (ESG) initiatives have gradually risen to the top of the strategic agenda for many organisations over the last few years. Global public concern is already driving the development of increasingly stringent and demanding ESG data collection and reporting regulations that will compel serious corporate attention and response.

Indeed, shareholders, insurers, and other stakeholders have long required disclosure of risks and activities that could materially impact a company’s financial performance. But now, there is a growing realisation that an organisation’s ESG-related harms and impacts are material issues of equal importance. Far from being a simple question of managing corporate brand image, how an organisation addresses ESG concerns can directly impact its hiring practices, profitability, legal liabilities, and even its fundamental ability to do business. Below I explore the key challenges of ESG reporting and how organisations can start to unlock the true value of their ESG initiatives in 2023.

ESG reporting challenges and the risks of ‘greenwashing’

For companies to create and achieve ESG targets and report on them, they need to identify where they currently stand on their ESG journey. And to do that, they need to have accurate, consistent, and contextual data – in other words, data that has integrity. Data is one of the most important factors for gaining insight, tracking metrics, making strategic decisions regarding ESG practices and assessing how any new measures will impact the company’s bottom line.

Without trustworthy ESG data, companies are at risk of ‘greenwashing’ whereby they convey false or misleading information about the company’s environmental values, products or services. According to PwC’s 2022 Global Investor Survey, 87 percent of investors believe corporate reporting contains at least some greenwashing. It also found that investors’ concerns about greenwashing erode trust in what companies say and how they address sustainability risks and opportunities.

While companies may feel pressure to report on ESG initiatives and meet deadlines concerning new regulations, they must ensure they are reporting accurately. Many business leaders attempt to derive ESG insight and reporting via their current data infrastructure. However, one of the key challenges they face is having data that lives in silos, is incomplete, unstandardised, or lacks the detail required to make it fit for purpose. This will not be sufficient for the deep level of reporting required by their company this year and beyond. Organisations can only create and achieve meaningful ESG-related goals with accurate, consistent, and contextual data.

Data integrity is the foundation for ESG success

To drive actionable decisions and unlock business value from ESG initiatives, enterprises need to invest in people, processes, and technology that combines data integration, data quality and governance, location intelligence, and data enrichment capabilities. This enables organisations to establish a base of high-integrity data to form the basis for confident decision-making. By doing so, they will also have the insights to ensure future ESG initiatives are successful and sustainable.

Increasingly, we’ll see companies implementing a board-level mandate on data and business-led use case arguments for tools that automate processes. This will provide real-time analytics to support confident decision-making – something particularly important as businesses pivot to align with changing ESG initiatives and regulations.

Historically, ESG initiatives have been ‘nice to haves’, but there has undeniably been a seismic shift in how companies approach them. Now, more than ever, organisations need trusted data to make confident decisions, set targets, and measure the progress of new initiatives. Suppose companies don’t already invest in the integrity of their data. In that case, the reality is that they are already behind the curve - and new ESG regulations introduced in 2023 will only widen that gap.

Corporations and their top executives are under increasingly heavy pressure from important and influential stakeholders to address their ESG impacts. While each stakeholder class may have specific reasons for their concern, the total of their demands for answers and actions leaves no option but to respond. By building a meaningful data integrity strategy, organisations can be sure they are making important decisions based on data they can trust, which will benefit the wider business and, ultimately, help improve the bottom line.

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