ESG: Credibility behind the words

In this guest post, Guy Armstrong, senior vice president of applications for UK and Ireland at database software giant Oracle, on the importance of enterprises having accurate data to track progress towards achieving their ESG goals.  

The environmental, social, and governance (ESG) movement is more than just a PR opportunity. Organisations can no longer simply pay lip service to it, with almost half of investors willing to divest from companies that are not taking sufficient action on ESG issues.

From the scandal surrounding Adidas ‘ocean plastic’ trainers, to Innocent smoothies ‘saving the environment’, companies are increasingly being called out for greenwashing. These accusations not only damage brand credibility but affect relationships with investors and have a severe financial impact.

As regulators crack down on ESG standards, with national disclosure frameworks soon coming into play for corporates and financial institutions, companies must be able to demonstrate the actions beneath the words. This is only possible with effective integration of the right tech solutions, to gather and use the data required to spark meaningful change.

Translating environmental and social factors into manageable tangible risks and opportunities is no mean feat. When providing financial metrics, reporting is largely standardised and the data is relatively simple to source. However, when it comes to ESG there is a plethora of different metrics, measurements, and units to contend with across multiple business functions.

The challenge does not stop at sourcing the data, with growing pressure from investors and government to effectively report on ESG credentials. For instance, incoming EU supply chain law will make businesses accountable for sustainability and social responsibility throughout their value chain, adding another layer of complexity to tackling ESG.

Often, ESG reporting feels like something out of our control. From employee volunteering hours to energy consumption, cybersecurity governance to recycling statistics, it can be difficult and time consuming to effectively manage and report on this data.

Change is needed, but companies must not do a rushed job to claim credibility. The only way to implement meaningful targets is to have a clear insight into the current situation and make data-driven predictions of what is possible and achievable.

Accountability must come first

It may sound simple, but you can’t tackle what you can’t measure. Taking accountability is only possible when you have a clear picture of your business’ ESG data, and this is where being able to report accurately against your ESG agenda is critical. What gets measured, recorded, and reported is the basis of organisational change.

Finance leaders must be able to illustrate accountability, showing investors, regulators, and the public that they are making improvements. For instance, if organisations can clearly demonstrate the progress they are making on environmental and social issues, 87% of people would be more willing to pay a premium for their products and services, and 83% would invest in or work for them. It’s a win-win situation for your business, the planet and society.

With new regulations and disclosure reporting coming into play, firms need to future-proof their reporting capabilities. Organisations such as the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), and Taskforce on Climate-Related Financial Disclosures (TCFD) all demand stringent reporting requirements, and these can only be met with the right platform in place.

Support your finance team with the right technology

The finance team’s role is pivotal in progressing ESG initiatives, with their responsibilities now extending beyond the balance sheet. The route to net-zero and achieving social goals depends on proper reporting and accountability, but this must be aided by technology.

Bringing together disparate data sources from different departments into one platform in the cloud makes it easier to report and act on findings. Converging and standardising data from ERP, HR, supply chain and other operational systems facilitates data-driven ESG goals and actions, making targets more attainable and allowing finance teams to track progress.

Going further, incorporating Artificial Intelligence (AI) into ESG reporting can make a monumental difference to finance teams, with automation and predictive analytics reducing lengthy, manual processes and freeing staff up for more detailed analysis and strategy.

You must be able to demonstrate change, not just make the right noises. By harnessing your data and bringing it together to make it work for your ESG needs, your finance team can capture and analyse data effectively, driving real, organisation-wide change.

ESG regulation and statutory compliance is fast becoming a reality, and now is the time to build a strategy around what gets measured, recorded, and reported. Act now, or your reputation, and your balance sheet, will suffer the consequences.

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