With organisations clamping down on their ESG efforts, there is increasing scrutiny on the information businesses are disclosing due to the urgency of the climate crisis and the frequently changing regulatory landscape. Tom Lawton, associate director at Longevity Partners, dissects why data is playing an imperative role.
- Demand for and scrutiny of ESG data continues to be an upward trend.
- Digitalisation will play a critical role in reducing the burden on operational teams and ensuring a consistent and timely approach to data gathering.
- Corporates must consider whether current systems and processes can provide the data needed to meet future reporting requirements.
Despite progress being made amongst corporates with their sustainability efforts, data-related issues persist across the industry, with one survey revealing half of UK-based business leaders admit that ‘no significant work’ has been carried out to collect data on the delivery of their ESG commitments.
Although seemingly on every corporation’s agenda, ESG is still a relatively new discipline for many businesses, whereby even those making positive changes do not have access to the information which evidences the action. Like all industries, however, data is imperative for businesses to understand how they’re tracking progress – whether with carbon management, energy efficiency, or water consumption – providing the ability to predict the trajectory of ESG performance and contribution towards climate change action.
Availability and quality of data
Arguably the greatest challenge relating to data availability within the industry is a reliance on third parties, such as tenants and management partners. There is a real need to automate data flows and provide timely data insights to drive change and encourage participation.
The availability of ESG data, however, is not the only stumbling block: access to reliable, complete, and comparable data remains a stubborn challenge across the industry, despite a growing number of technological solutions and regulatory frameworks such as the International Sustainability Standards Board which aims to unify corporate disclosures.
Where sustainability has moved away from being a siloed school of thought to a core part of business models, ESG must be considered in all verticals of an organisation’s operations – from financial planning to risk management.
The age of digitalisation
Conversations around automation and its role in the climate crisis have ramped up in light of the wider access businesses now have to new technologies. Even for businesses that have ESG data at their fingertips, automation can help make sense of trends and inform new targets when used correctly.
To cope with the increased demand for ESG data, digitalisation will also play a critical role in reducing the burden on operational teams and ensuring a consistent and timely approach to data gathering. Moreover, it can offer real-time insights into utility data, enabling a more proactive approach, monitoring fluctuations, taking action to remedy issues and capitalising on efficiency gains.
Planning ahead: an evolving landscape
Demand for and scrutiny of ESG data continues to be an upward trend. In response to the urgency of the climate crisis, reporting standards and regulations have undergone significant changes over the past few years, such as the mandating of the Task Force on Climate-related Disclosures for certain large UK businesses which now requires corporates to include climate risks in their annual reporting.
Even in the face of stricter guidelines, three-quarters of companies globally are not ready to have their ESG data audited externally months before new regulations kick in, according to a new report. Ultimately, failure to keep pace with new reporting requirements – or lack of access to quality ESG data – will cause significant issues for businesses in the coming years.
Failure to comply with regulations means businesses will face sanctions, but investors are also increasingly factoring ESG performance into decision-making to ensure the longevity of their businesses. This growing pressure from investors is evident, with approximately 89% considering ESG as part of their approaches last year.
Looking ahead
If not already, corporates must consider whether their current systems and processes can provide the data needed to meet future reporting requirements. Failure to take action now to future-proof your data management strategy will create challenges in the future.
It is hoped that more stringent, mandatory reporting rules will accelerate the rate of change, which will have an industry-wide impact: the better data organisations can provide will improve the overall industry standard.
The opinions of guest authors are their own and do not necessarily represent those of SG Voice.
