Environmental, social, and governance (ESG) issues have always been a top concern of corporate management. In today's rapidly changing business climate, awareness about ESG issues is becoming critical for long-term competitive success.
Historically, the tech domain has been all about speed, innovation, and growth. But today, social responsibility is an extremely important aspect. While earlier, the winning firms were those who would rapidly invent and develop new products and services than their competitors, today the scenario has changed. Major institutions that recognize and employ ESG initiatives in their operations are leading and winning the race.
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With the calls for transparency around environmental, social, and governance factors reaching an unprecedented volume, activist investors are no longer demanding environmental, social, and governance reports from large corporations. Today, investors are demanding ESG reporting from a wide range of companies. Results of the investor survey from PwC highlight that 79% of respondents said ESG reporting is a critical factor in their investment decision-making, while 49% said they were willing to divest from companies not taking influential ESG action. The addressing of ESG is no longer exclusively an environmental and social problem; it has grown into an issue that is likely to have repercussions for many companies.
Today, an organization's ability to handle environmental, social and governance matters demonstrates its administration and good governance that is vital to sustainable growth. Due to this reason, enterprises are increasingly integrating these issues into their investment process. The advantages of tackling ESG issues go beyond appeasing the institutional shareholders. It assists in creating a good public relations story.
A robust ESG program not only opens access to a large pool of capital but also assists in building a strong corporate brand and promotes sustainable long-term growth, thereby benefiting both - companies and investors.
The formula for success today in this technology-driven world is changing. Great tech firms are now taking social accountability and justifying their actions.
To be a responsible tech organization is to responsibly manage the organization in a balanced way, with an enhanced focus on good governance and accountability towards the larger community along with socially responsible and environmental practices. There are a plethora of compelling rationales for adopting this approach.
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ESG is becoming a competitive imperative. Several industry leaders are making a serious commitment to corporate responsibility and sustainability. Major firms are publicly engaging on the issues of climate change and economic inequality. Big techs like Microsoft now operate as a carbon-neutral businesses, whereas Google is powering 100 percent of its operations with renewable energy.
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With government scrutiny intensifying, policymakers are examining the issues that are vitally important to innovation, like data privacy and diversity. Regulators are weighing rules to safeguard an individual’s personal data online. They are also employing measures to address diversity.
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Stakeholders' expectations are changing. Customers are voicing their interest in knowing what they are purchasing and the services they are receiving from the organizations. Investors are willing to incorporate ESG data into their decision-making and expect the organizations to present that information.
Today, ESG strategy is high on the list of priorities for businesses, but it is required to be embedded throughout the operations of the organization.
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Key Highlights-
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Delivering a robust ESG strategy implies communicating with every employee to identify their role and delegating them to support the company’s ESG ambitions.
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Failure to communicate the strategy will not only undermine implementation but could also lead to missed opportunities.
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ESG performance is crucial in the war for talent, where today, millennials and Generation Z are dominating the global workforce. These generations are placing greater emphasis on the alignment of their employer’s values.
Along with this rise in impact investing, the funding industry is also acknowledging the necessity for an environmental, social, and governance (ESG) strategy. Tailored to the requirements of funds investors and stakeholders, ESG policies benefit businesses’ auditability and are emerging as a regulatory requirement.
Organizations have recognized that environmental, social, and governance (ESG) reporting is an essential element for their long-term success, and like 85% of S&P 500 companies, they must report their ESG performance annually as a part of corporate best practice.
ESG Reporting is Challenging
It's not that corporations do not want to integrate ESG reporting in their operations; it's just that the reporting is an onerous task.
For many enterprises, ESG reports include hundreds of requests that need to be addressed before the report completion. Further, if the enterprise does not employ an ESG specialist, it may be challenging for them to understand the criteria required to fulfill these standards.
But when it comes to relevant data accumulation, proper ESG reporting mandates pulling this data from multiple departments that often work with siloed technologies. To gather this needed information, organizations issue a questionnaire or data query to their department managers and project leads. This creates a dependency on people to return the data in a timely manner. Then, once the ESG-relevant information is assembled, it is time to turn to spreadsheets to organize and analyze them. All this approach produces is - error-filled data, a lack of tracking, and no auditability.
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Succeeding at ESG
By adopting a tech-savvy digital approach, organizations can make ESG reporting painless. Companies should approach ESG as a digital transformation opportunity. The right solution will help them in removing the friction in ESG data gathering and analysis and communicating that data. This process will assist in driving ESG data gathering, organizing, and reporting.
Assembling the required reports in a single data bank will enable organizations to easily integrate the data with a wider enterprise environment and support sustainable accounting standards. By standardizing their data collection process, organizations can include a central data warehouse to which all relevant ESG data can be submitted. The right digital solution will aid in defining the data categories and specify data measures for non-ESG specialists.
Collaboration in gathering ESG data helps mitigate real-time communication confusion and prevents incorrect information exchange. This assists in leveraging existing enterprise resource planning platforms and procedures related to ESG competency.
The Expected Outcomes
A proactive approach to ESG reporting is expected to empower organizations to achieve several valuable benefits. It can assist them in improving efficiency by reporting and supervising specific targets, thus leading to a reduction in waste and operating costs. It can prove to be a powerful strategic lever and stimulate innovation. Today, employing ESG is a critical business issue in an industry where organizations have a growing need for talent, and sustainable growth cannot be achievable without improvements on multiple fronts.
Finally, organizations perceive ESG reporting as an asset to inform the marketplace about the sustainable measures the business is taking for the environment as well as society. This is helping them to attract and retain much-needed talent along with enhancing the institution's brand image and reputation. But succeeding in ESG reporting requires more than just the right digital solution. It also implies setting parameters to leverage the workable solutions.
Making ESG a part of integral values and goals can enable organizations to dismiss the temptation to consider ESG as an annual or quarterly requirement and instead solidify ESG reporting as a 24/7 commitment. By digitally transforming their ESG processes, organizations can witness an immediate impact on their bottom line along with their day-to-day procedures.
Successful installation of data collection frameworks will help them to fulfill their commitment to ESG with a more systematic approach and operate with greater safety for lower environmental impact. It’s time for companies to respond to social issues with greater sensitivity and associate ESG reporting as an opportunity to distinguish their organization in front of investors and customers.
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A leader in ESG Consulting services, SG Analytics offers bespoke sustainability consulting services and research support for informed decision-making. Contact us today if you are in search of an efficient ESG integration and management solution provider to boost your sustainable performance.
