Navigating the ESG Intelligence Journey: A Roadmap for Sustainability and Data Leaders (Post 1)

Introduction

After the stark climate warnings of 2023, sustainability leaders are feeling an increasing sense of urgency. They must accelerate progress towards their sustainability goals, such as reducing emissions, enhancing circularity, or closing the gender pay gap. Moreover, mounting regulatory pressure, such as the UK's Transition Plan and Europe's Corporate Sustainability Reporting Directive (CSRD), demands greater transparency, in turn creating more public scrutiny of disclosed targets, plans, and progress against them. Meanwhile, boards are increasingly treating sustainability as a strategic shift in business models, forcing deeper thinking about competitiveness and market opportunities in addition to risk reduction and compliance.

The Need for a Strategic Shift

Facing mounting pressures, Chief Sustainability Officers (CSOs) may be tempted to persist with their current strategies, steadily addressing sustainability issues with the tools at hand. However, I believe it is instead time to take a step back and develop a comprehensive plan that includes a holistic ESG data strategy. This strategy will position organizations to race towards net-zero and other sustainability objectives by 2030 and beyond.

The Role of Data in Sustainability

As a strategist and three-time Chief Data Officer I’ve had the privilege to help iconic media companies respond to disruption through digital transformation. Today, the sustainability revolution similarly requires profound changes, starting with re-redefining companies’ core missions and competitive advantage in line with evolving consumer, employee, and investors’ preferences. And then accelerating change and weaving sustainability in every aspect of what they do.  

To re-set their priorities, meet reporting challenges and achieve ambitious sustainability targets, organizations need trustworthy data, which in turn serves as a conduit for macro-level change via the myriads of decisions it enables (e.g. by investors, consumers and employees). To speed up, they will have to overcome inefficiencies coming from manual data entry, un-governed data sources, target metrics that may not effectively incentivize senior management, and emerging carbon data silos. And the need for higher granularity and frequency of data to fuel action and provide feedback loops will only grow, increasingly requiring automation. Much like our nervous system informs our actions through sensory inputs and commands, data serves as the nervous system for action within organizations. As such, data is central to strategy formation as well as operationalization of change. And those who understand that and develop a robust data approach will have an edge in moving towards ESG leadership.

Navigating the ESG Intelligence Journey

To truly embed sustainability in strategic thinking, organizations must ultimately evolve into ESG intelligent entities. This journey will be transformative, and those who embark on it now will lead the way in sustainability. But it is also a formidable challenge. 

To navigate this terrain effectively and grasp where data can add the most value, we have segmented the journey into three stages of ESG value creation, each offering distinct data opportunities, as depicted in the chart below:

  • ESG performance: Measurement and Reporting
    ESG performance  is where most efforts focus today, driven by new disclosure requirements. Data plays a critical role in measurement and reporting, ensuring compliance, and building trust among consumers, clients, employees and investors.

  • ESG Drivers: Actions and Leading Indicators
    Upstream from ESG performance, ESG drivers encompass actions and leading indicators that improve ESG performance. Examples include diversity in the recruitment pipeline, or the proportion of suppliers who have set emission targets. Data here focuses on understanding impactful actions, measuring progress and helping move the needle via predictive models and algorithms

  • Business impact of ESG performance
    Downstream from ESG performance, this stage ascertains the business benefits of ESG improvements, such as risk reduction, efficiency gains, reputation enhancement, competitiveness improvement, or even lowered cost of capital. Data helps measure the impact of ESG progress and attribute it to specific elements of the strategy. 

While data for reporting and data for action will start to unlock value, ESG intelligence arises when fit-for-purpose data and insights capabilities support value creation across all three stages.

Conclusion

In this blog post series, we will explore those stages, beginning with best practices for ESG reporting data, moving on to how data supports ESG action and performance improvement, and ultimately envisioning ‘ESG intelligent’ organizations. 

If you are interested in those topics please comment, make sure to follow me and Shyftr, and stay tuned for more insights. Feel free to share questions or alternative perspectives. And to learn more about Shyftr, you can visit  our website

ln the meantime, we will leave you to ponder - and hopefully share your thoughts - on a couple of questions. Where do you see your organization on the path to ESG intelligence? What pain points have you encountered and how are you overcoming them?

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Creating Sustainability-Intelligent Companies (Post 2): Data for Reporting part 1

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Why Data and Sustainability?