In this guest post, Victoria Thomas, UK and Ireland principal for IBM Sustainability Software, talks about how data quality can affect an enterprise’s ability to make its ESG goals a reality
For some organisations, environmental, social and governance (ESG) has often felt like a chore; reporting frameworks tell organisations what they have to measure and the penalties of not adhering. Executives have been trained to see ESG as a stick, but those that see the carrot have a competitive edge.
When viewed as a vehicle for driving business value rather than a narrow reporting exercise, ESG can become a much more powerful tool for generating insights that create opportunities and boost performance.
However, many leaders lack sufficient data and insights, making it difficult to deliver on their ESG ambitions. A recent IBM survey of 2,500 business leaders across 22 industries saw 42% of executives cite inadequate data and inconsistent standards as their biggest obstacles when it comes to achieving ESG goals.
By implementing an appropriate data framework, businesses can evaluate their current ESG objectives, estimate the return on investment of ESG initiatives with credibility and maintain compliance even when reporting standards change. Having a clear line of sight into core operations is more valuable than simply satisfying compliance requirements, and business leaders should start to embrace data to drive improvements across their business.
Accelerating energy transition through operational insights
Business leaders are under increasing pressure to accelerate their sustainability initiatives, and the energy sector is a good example of where we can see the advantages of these operational insights come to life.
In renewable energy production, solar and wind energy sources can be unpredictable, but operational insights can be used to analyse weather patterns and predict energy production. By using this data to adjust operations, providers can ensure reliable energy sources and prevent energy waste.
Additionally, operational insights can optimise energy storage systems, reduce costs and maximise efficiency by analysing energy usage patterns. Melbourne Water, a government-owned statutory authority that protects and manages major water resources for the City of Melbourne in Australia, upgraded its legacy data system to better consolidate data from its various pump transfer assets, storage reservoirs and treatment plants onto one dashboard.
Since upgrading, it can generate sustainability reports in a few hours and have reduced energy bills by hundreds of thousands of dollars. The new system enables the organisation to dedicate more time than ever to the pursuit of mandated sustainability goals.
Emerging technologies to create more transparency
Another important benefit for organisations comes from implementing new and emerging technologies. The IBM research found that organisations on this are more likely to have made significant headway in enhancing their technology for ESG transparency. These leaders have embraced the opportunities technology provides to scale and accelerate business growth, and they have made notable progress in developing the overall enterprise architecture and incorporating their ESG data into a dashboard.
When asked which technologies are most important for ESG, executives highlighted the role of advanced analytics in delivering ESG insights, and automation for boosting the efficiency, accuracy and scaled impact of ESG efforts.
One instance of this is automating manual data processes, which can speed up and reduce the cost of achieving transparency for companies. Another example is the use of advanced analytics, which can identify areas for improvement and facilitate modelling that leads to more sustainable decisions. These technologies work together to enhance performance, rather than functioning independently.
Executives have also welcomed the chance to expand, hasten and enhance ESG efforts by leveraging powerful digital technologies. As an illustration, leading organisations are 58% more inclined than those falling behind to have established the hybrid cloud capabilities for ESG, 33% more likely to have made considerable advancements with artificial intelligence for ESG and over two times more likely to have achieved significant progress with the utilisation of advanced analytics for ESG.
If executives concentrate only on a single technology instead of considering how they can have the most significant effect, they might miss out on tremendous potential. By combining various technologies with other organisational capabilities, executives can facilitate and encourage the advancements required to make progress on ESG and sustainability.
To drive real improvement, ESG data and metrics must be embedded into core operations, processes, functions and workflows. Such integration is key to weaving sustainability into day-to-day tasks and activities.
To overcome data-related obstacles and implement lasting change, organisations must follow the lead of executives who are: automating performance insights, engaging in forward-looking analysis and scenario development, aligning with ecosystem partners on ESG metric definitions and standards and proactively establishing ESG data governance principles with stakeholders.
By using the appropriate data and being transparent about their progress, businesses can contribute to the resolution of the world’s most pressing issues. Rather than weighing ESG considerations against profitability, executives can find ways to drive sustainable growth.
Data is the lifeblood of ESG. Now is the time for enterprises to put information in the hands of operators who can make informed business decisions that improve their ESG impact daily.