Sustainability is a hot topic around the water cooler these days, and it’s not hard to see why. As national and international environmental policies evolve, corporate sustainability requirements are becoming more robust and, most importantly, actionable.
On top of that, the public is now more aware than ever of the harm that companies can levy on communities if they don’t take sustainability seriously. This is entirely understandable and a good thing.
Corporate sustainability is the global goal now. However, that doesn’t mean it’s easy to achieve. One of the biggest concerns – and roadblocks – to real, sustainable action is ESG data. More specifically, how to collect and organize it so companies can act. In short, sustainability is a data challenge.
In this article, we’ll outline what ESG data is, why it’s critical for corporate sustainability, including some of the barriers that companies face. We’ll also offer some solutions and actionable items that companies can use to get started with their ESG data collection.
Let’s dig in.
what is ESG data?
ESG data, which is short for environmental, social and governance data, is all the information on a company’s impact on its environmental and social surroundings. This includes operations, import and export, fossil fuel consumption, climate-risk activities and emissions, and any financial data related to climate change, social equity, and sustainability.
It seems like a lot, we know. Let’s break it down even further to get a better understanding.
There are generally three types of ESG data:
- Environmental
- Social
- Governance
Let’s look even deeper.
environmental data
Environmental sustainability, as suggested, is an ongoing effort towards mitigating the effects of climate-risk activities, primarily within the business, industry, and manufacturing sectors.
Companies are required to collect environmental data related to climate-risk activities, usually in relation to carbon emissions. This includes data related to Scopes 1, 2, and 3 emissions.
Environmental data also includes the financial expenditures and impacts of climate-risk activities that a company undertakes. This can often include:
- Energy consumption
- Energy efficiency
- Renewable energy solutions adoption
- Other energy-saving initiatives a company may undertake
Generally, the nature of a company’s activities will inform what data should be collected and what should be included in reports.
social data
As the name might suggest, social data takes a closer look at a business’s workforce and its relationship to the community. Data points include diversity, gender equality, and details about the company’s efforts to create an inclusive workplace.
Other data collected may also include:
- Working conditions
- Wages
- Employee benefits
- And labor union relationships, if applicable.
Social data can also include information about company access to its wider community. Details such as philanthropic initiatives, community investments, and partnerships may be included.
Collection and reporting of social data is usually done by the ESG team in collaboration with human resources.
governance data
Governance data is a little more complex than environmental and social, in that it falls more in a qualifiable sphere. Governance data looks at how a company’s leadership is organized, and how decisions related to sustainability, social and environmental, are incorporated company wide.
When gathering governance data, an ESG team will gather details about diversity, independence, and expertise in leadership. Information on pay structures and bonuses, and how these are aligned with performance, will be collected.
Governance data will also iterate a company’s adherence to ethical and compliance standards.
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.
how to make ESG sustainability data meaningful
Collecting ESG data is one thing, effective management of that data is another.
As your organization grows and moves towards a sustainable future, knowing what to do with that data will help pave the way. To do so, you need data that can promote meaningful insights and ultimately drive your company towards sustainable improvements.
Here are a few steps you can take to achieve this.
establish a centralized data repository
Establish a centralized ESG management system in which all your ESG data can be stored and disseminated. A system – such as cloud-based software – can be the main location point of all raw data, while also allowing you to access and analyze it in a meaningful way.
The software you use needs to be scalable and customizable, particularly given that ESG policies can vary from region to region, and even over time.
create an ESG governance team within the company
As legislation continues to evolve, it’s important to create a governance structure within the company that is solely responsible for overseeing ESG data collection, reporting, and actions. This team should be composed of personnel who are fully trained and versed in all current regulations and requirements, and keep up to date with the latest information. They will also undertake training and accountability, alongside data monitoring for errors and discrepancies.
Having this responsibility framework in place assists with company-wide buy-in, ensuring that ESG data is properly managed and, therefore, helps the entire company work towards a sustainable future.
adopt company-wide ESG reporting software
As we’ve mentioned previously, harnessing the power of ESG reporting software can be a game-changer. ESG software that is cloud-based, customizable and scalable can help your ESG governance team create and implement workflow systems that align with applicable rules and regulations, regionally and globally.
Adopting these methods can help you not only adhere to ESG reporting requirements, but also help pave the way towards corporate sustainability.
back up your ESG sustainability goals with data
Establishing goals around your ESG and sustainability initiatives is one thing but without data to support those goals can lead to concerns around greenwashing. Avoid this possibility by using your ESG sustainability data to come up with realistic and attainable goals and to provide evidence to substantiate your progress on those objectives.
By having easily accessible and auditable ESG data available, your organization can also ensure you can back up your sustainability reporting.
how AMCS helps with corporate sustainability
There are many barriers companies face when it comes to sustainability reporting, and many organizations are looking for solutions that are actionable, efficient, accurate, and scalable.
The AMCS Sustainability Platform is the only sustainability management software you need to tackle today’s environmental, social, and governance challenges. See for yourself how the AMCS Sustainability Platform converts complex ESG data into accurate, audit-ready reports and actionable insights.
Contact an expert on our team together to find out how AMCS Sustainable Platform can help your business thrive, now and in the future.