At the global level, the concept of ESG is fast becoming a key driver for businesses to achieve their goals in a sustainable way. ESG (Environmental, Social, and Governance) is a framework that focuses on the impact organizations make on the environment and society. Technology is the prime enabler for visibility into your ESG efforts and channeling them in the right direction.
The recent research from Accenture concludes that sustainability and technology strategies need to become more tightly aligned to gain competitive advantage, financial value, and a lasting positive impact on society and the environment. How can you secure this alignment? How can you ensure that your ESG goals are on track with the support from your technology initiatives? This blog discusses how high quality data plays a critical role in your organization’s ESG initiatives.
Measuring ESG with data
Every business is unique, and each has its own set of goals and priorities. Though having a clear vision of what your organization stands for is essential for knowing where it fits into the ESG picture. The UN has set 17 sustainable development goals that offer you a direction to set your own ESG goals and timeframes.
ESG goals can be qualitative, along the lines of reducing carbon footprint or avoiding power wastage. They can be broadly defined, too. Such as ethical management or a socially responsible approach to business. But assessing success or progress needs clear, specific, measurable goals. As Peter Drucker puts it, ‘If you can’t measure it, you can’t manage it.’
ESG metrics are an integral part of managing ESG goals. They measure your organization’s impact in the defined areas. They help in creating goals and making the right choices for achieving the goals. It’s never too late to redefine goals, set new goals, and deploy cutting-edge technology solutions.
The current business landscape has started taking this approach in the right way. According to the World Economic Forum report, 137 companies have already included sustainability reports in their mainstream reporting materials. And the number will increase. ESG has been capturing investor attention since 1990, with 2021 becoming the year of ESG investing.
Today, data is at the heart of strategy. Organizations seeking to improve their sustainability performance are increasingly turning to data. You can leverage data to drive your ESG strategies and the choice of technologies to implement them. Choose the metrics aligned with your industry and the values of your organization. Consider what your stakeholders expect in the ESG reporting, which can help them evaluate competitors and make informed decisions.
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How data quality affects ESG
Data is the key that unlocks social outcomes, concludes the Accenture research on using data for good. When we talk about data, accuracy and reliability cannot be far behind. Just as you cannot create your financial report without accurate data on all the transactions, you cannot create your ESG report without accurate data on all the associated factors.
Consider a case where an organization reports inaccurate carbon emissions. It affects the ESG score, strategic planning, investor decisions, and corporate actions. In the same way, unreliable data on labor practices can result in unreliable ESG scores. It can give a wrong picture to the world as well as to the decision-makers. Data quality is critical in these cases to guarantee that the data collected and analyzed is fit to drive your decisions. It ensures that your ESG reporting is precise and your strategies are correctly aligned.
To take the same analogy forward, imagine what happens when poor-quality data is used in financial reporting. It can lead to wrong decisions and non-compliance fines, besides facing stakeholder backlash. In the same vein, poor-quality data used in ESG reporting results in shortsighted business decisions, wasted resources, and regulatory risks.
Focusing on improving ESG data quality can help you avoid these pitfalls. High-quality ESG data can help you deliver
- Ethical reporting
- Higher investor trust
- Better visibility into ESG risks
- Effective planning for ESG risk mitigation
- Optimized investments and asset management
- Continued regulation compliance
- Greater accountability in sustainable practices
Challenges in assuring the quality of ESG data
Assuring the quality of data is always challenging, more so with ESG because it’s complex and evolving. Industries may not have fully grasped the intangible impacts of ESG practices and the way to quantify them. The ESG terminologies change, their definitions differ, formats vary, and comparisons are never easy.
ESG data reporting is voluntary in most cases and there is no single common standard yet. Multiple frameworks and metrics also confuse what to report and how. Organizations struggle to understand what they need to measure, and often they do not have the means for that.
Collecting the necessary data is just the tip of the iceberg. Once collected, your ESG data needs to be aggregated, analyzed, and reported to a range of stakeholders. Data quality can quickly become a hurdle in this process. If your ESG data is not of good quality, it cannot be used effectively for any of your ESG goals.
What factors affect the quality of ESG data? They can be very diverse, ranging from getting the right data to ensuring that it is right.
- The complex nature of ESG data needs extensive resources to collect and validate.
- The need for expertise and specialized resources makes it hard to verify data.
- Missing and obsolete data are common, as the processes are not fully formalized.
- Inconsistent data definitions lead to different interpretations and unreliable comparisons.
- Lack of standards results in varying formats and data inconsistencies.
- Evolving ESG regulations affect collecting data, processing it, and assuring its quality.
Trusted data as the foundation of ESG
Comprehensive research has shown that firms with high ESG scores demonstrate lower volatility and possibly higher quality. According to a Deloitte report, 65 percent of investors declare to use ESG assessments on a regular basis. ESG scores and ESG ratings are routinely used to evaluate how organizations follow sustainability practices. Regulations are evolving, and third-party assessments are becoming the norm. Are you ready for it? Do you have trusted data to drive more accurate reporting and faster compliance?
Trusted data is free from missing, obsolete, erroneous, or incomplete records. Its accuracy, consistency, and security are guaranteed throughout its entire life. With higher quality and integrity, your ESG data can help promote sustainable practices and mitigate risks in the long term.
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Choose a good data quality solution that provides complete visibility into all your data and pipeline health monitoring. Automated data quality checks and adaptive rules help you catch errors before they can hurt. You can also supplement it with unified taxonomy and data governance to ensure that your ESG initiatives are able to meet your ESG goals.
Collibra for trusted ESG data
Climate change claimed its first bankruptcy in 2019. The detailed study is a benchmark in understanding how technology can help gain complete visibility in reporting and data-backed action plans for ESG. Organizations that can report on ESG effectively have a critical market opportunity compared to their competitors, reports Accenture. While driving your efforts towards better ESG scores, it is also essential to acknowledge that it requires a long-term commitment. You are in for a long cycle of setting goals, tweaking them with evolving regulations and standards, measuring your performance against them, and planning for new goals. And your data quality solution needs to be prepared for it, too.
Optimizing your ESG initiatives requires end-to-end visibility and complete trust in your data. Collibra data quality and observability offers:
- Data pipeline monitoring
- Proactive anomaly detection
- ML-generated adaptive rules
- Data discovery and enforcement
- Self-service for faster time to decisions
Perhaps the most important lesson in all of data quality management is to get it right the first time, says Thomas C. Redman. And it is more so in the age of near-real-time analytics driving agile decisions. Collibra data quality and observability helps you catch bad data before it can hurt and get the ESG data right the first time. Use the high-quality, relevant data for your ESG goals, and set your ESG plans in motion. Measure your performance accurately, report it quickly, and speed up regulatory compliance.
In summary
The only way to prepare for ESG is with a clear vision and sustained efforts. Trust high-quality data to support your vision and channel your efforts effectively. You can rely on Collibra to deliver high-quality data for your ESG goals, reporting, and continued compliance.
Request a demo or start a free trial today.
