The ESG digital divide: Embrace technology or get left behind

Around the world, businesses are in advanced stages of digital transformation, which means they’re embracing new technologies such as SaaS (Software as a service), cloud computing, data analytics, artificial intelligence, hyper-automation, and robotics to improve operations and business performance.

I believe that companies committed to sustainability must also embrace digital transformation in their ESG journeys. Although many leaders view digital transformation as separate from their sustainability efforts, the right digital tools, tech and processes will power and provide momentum to your ESG vehicle and get you to your destination: ESG success.

For example, to do ESG well, most businesses need to track and report on a wide range of indicators that require sourcing and analysing a massive amount of data. It’s an enormous job — full of the type of complex work that can be very error prone. Automation – but one part of the digital equation – is the most effective answer to effectively manage and leverage this data.

What does digital transformation for sustainability look like in practice?

In essence, digital transformation for ESG is led by hyper-automation and platform-based intelligence that uses the latest tech and accurate data to monitor and optimise for energy use, carbon emissions reductions, zero-waste-to-landfill and water use efficiency.

Leveraging these powerful elements, we work closely with some of the largest and more complex companies to design and implement their ESG strategy. From our experience, companies need to complete the following seven digitalisation tasks to set them squarely on the path of ESG success:

Identify all relevant sustainability data needed to inform planning, analyses, monitoring and reporting
Automate all ESG data collection through application programme interfaces (APIs), optical character recognition (OCR), IoT sensors, and smart building systems, to name a few
Store all data in a central repository or lake – in essence, creating a ‘central source of truth’
Develop solutions to consolidate and analyse all this data and the disparate aspects of ESG, carbon and waste
Automate all internal and external stakeholder performance reporting, including scoring and factors (such as greenhouse gas protocols, SDG’s, GRI, environmental compliance requirements, Science Based Target Initiative etc.) required for external standards and reporting frameworks
Provide an interactive and user-friendly online interface/ ESG platform where data can be viewed and analysed easily, and from which insights can be drawn
Deploy artificial intelligence and machine learning to identify anomalies and normalise the data

Why should companies care?

A single source of truth on enterprise sustainability

The availability and accuracy of data to enable rigorous ESG analysis is still a massive challenge for most large organisations. Data is frequently managed with ad hoc processes and the use of spreadsheets to consolidate information and perform analyses.

From our experience sustainability data is usually diverse, disparate and decentralised, needing to be collated from many different sources (internal and external).

It is often not comparable or cannot be consolidated, which means that different approaches are needed to enable performance benchmarking and accurate analysis. Digital tools can handle this complexity and provide companies with a single source of truth where all data is flowing into one place, providing an intelligent, granular, comparable and consolidated view of enterprise sustainability.

Data is essential for reaching ESG milestones and reporting sustainability success

I may sound like a broken record, but the sustainability conundrum for companies is generally first and foremost, a data conundrum, and their sustainability agenda will not advance until rigorous and reliable data powers their ESG vehicle.

Companies are often sustainability laggards precisely because they lack reliable data to enable effective performance management in order to enable them to get to their next milestone. Good data provides good insights that can be acted upon with confidence — whether operationally, financially or strategically.

In South Africa, where many companies are quickly implementing initiatives to reduce costs and the impact of load shedding, data often isn’t correctly captured. With companies focusing on initiatives before getting the data right, they lose out on valuable opportunities to properly record and communicate their sustainability impacts.

Good data reduces the risk of greenwashing

Many companies are exposed to claims of greenwashing or disclosure risk, precisely because their corporate sustainability report is not underpinned by reliable data or even truthful representation of data. Bad data creates a major reputation risk and governments are cracking down on greenwashing. Just this month, it was announced that the European Commission will be publishing new measures to reduce greenwashing in product labels and advertising.

Environmental advocacy groups are keeping a close eye on sustainability claims — for instance, a recent report released by the Changing Markets Foundation, a Dutch environmental advocacy group, revealed that greenwashing in the food sector is ‘rampant’, especially as far as climate impact and emissions reductions claims are concerned.

Successes and challenges: What we’re seeing on the ground

The biggest advantage of digitalisation for clients is the ability to get a view of all their goals and targets, and to then understand what is possible in terms of meeting those goals. We see companies start to perform on sustainability when data is reliable, accurate, and easily interpretable through interactive ESG platforms. From there they use this powerful foundation, supported with technology to set targets and model action plans to meet those targets.

This enables the next advance – the ability to benchmark their performance internally and against that of their peers. It is only until a company has these benchmarks formalised and embedded in their business that they understand what performance means at a group level, and at granular levels. This is when behaviour change starts.

Empowering sustainability teams

Some businesses often spend more time focusing on data collection, gathering and reporting rather than implementing sustainability strategies and initiatives. Having on-demand access to accurate and reliable data will empower a company’s sustainability team to focus on moving the ESG needle and managing ESG risk.

Do you need help with digital transformation and data for sustainability?

To learn more about how our team can help with corporate sustainability reporting and digital transformation through our managed digital service, book a demo or schedule a consultation.