Integrating ESG transformation into the company of the future
In our digital, data-driven world, trust is the foundation for every action, every relationship and every transaction. It is the key to success in sustainable digital transformation.
Digital trust programs have traditionally focused on data privacy and the reliability, security, and integrity of products and services. In the future, however, trusted organizations will need to expand their goals beyond ensuring data privacy and cybersecurity. As society's expectations of responsible business practices related to environmental protection, social justice, and good governance have come to the fore, companies are increasingly expected to embed them in broader value-based objectives. At the same time, they must also meet the requirements of public policy and regulatory authorities.
Finding the right balance requires integrating environmental, social and governance (ESG) factors into the heart of a company - and that requires more than just words. Today, a company's ability to transparently articulate its ESG concerns has become a powerful differentiator and a critical part of the trust conversation with stakeholders. In the future, this will be a critical attribute for survival.
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Beyond compliance: the business value of ESG in trust transformation
ESG issues go beyond climate change. Environmental and biodiversity issues as well as social, health and safety issues such as diversity, inclusion and workers' rights are becoming increasingly important. As a result, ESG issues are being incorporated into corporate activities and becoming a trigger for trust transformation. IDC predicts that by 2024, two-thirds of companies worldwide will track their diversity, equity, and inclusion performance using ESG metrics and indicators.
Forward-thinking companies recognize that promoting ESG criteria and assessing their financial value is becoming a business imperative, not just a compliance exercise. Ultimately, corporate governance and culture are key determinants of a company's performance on ESG matters and its ability to drive positive change. A survey of 305 business leaders found that ESG drivers are increasingly linked to business value. The top four drivers were cost savings (37%), brand and trust (35%), product innovation (34%) and customer demand (33%).
How executives prioritize ESG programs and metrics
Companies are elevating ESG sustainability from "nice to have" projects to key strategic initiatives, often led by the CEO, CFO, COO, or increasingly a dedicated Chief Sustainability Officer (CSO). This includes adherence to ESG reporting standards and frameworks and the use of consistent, comparable metrics to capture, assess, report and benchmark relevant sustainability information.
According to a 2021 IDC global sustainability survey, the most commonly tracked ESG metrics were:
ESG criteria play a major role in the selection of partners and suppliers
Companies also want to surround themselves with trusted partners who share their values and vision of a better world. As a result, procurement teams around the world are incorporating sustainability criteria into their supplier selection process. Seventy-two percent of respondents in IDC's ESG Business Services End-User Survey said ESG and sustainability play a major role in their technology and services purchasing decisions. And in Europe, half of companies already integrate ESG KPIs into their partner selection process.
Why ESG strategies require an integrated approach
The complexity and multi-layered nature of ESG requires an integrated business approach that encompasses people, processes and technology. Companies are best positioned when they are able to be transparent with auditable data and reports and make this information publicly available. Ultimately, ESG requires measurement, managing unique data sources, reporting progress, and taking action to improve performance. While companies see clear benefits in an integrated strategy, they cite a lack of ESG expertise, organizational visibility of the sustainability position, and operational technologies as barriers to achieving their goals.
Driving ESG impact and trust transformation through technology
Integrated ESG platforms can help companies increase the efficiency and productivity of their sustainability initiatives by enabling a shift away from manual, spreadsheet-based data collection to automated processes. Nearly all (99%) of respondents to an IDC global survey want an integrated sustainability solution, with 85% saying it would be very valuable or a game changer. These platforms provide companies with the tools needed to measure environmental and social impact, as well as track and report on internal governance. This helps companies implement policies that reduce risk and ensure compliance, while communicating more effectively with internal and external stakeholders.
Key considerations for implementing an ESG solution
Critical factors for a successful ESG platform include modular deployment capabilities, a comprehensive system for data collection and aggregation, and broad compatibility with reporting and rating frameworks. Alignment with business requirements is paramount when implementing ESG technologies. In practice, this means identifying areas where efficiency improvements (energy, products) meet both business and environmental goals. Implementation will have limited payoff unless the company is committed to incorporating sustainability into its business strategy. Other operational considerations include:
- ESG risk management: risk frameworks, governance, and responsibilities should be aligned to address ESG risks to enable better management and strategic decision making. ESG technology can automate some of the processes for assessing your risk posture. Integrate key initiatives into awareness training, corporate policies, and mission statements to reinforce corporate culture and promote responsible attitudes and actions.
- Internal stakeholder engagement: Stakeholder engagement in sustainability initiatives is key to success. Involving sustainability officers in functional business units can facilitate successful implementation.
- Metrics are important: Without performance indicators, a technology cannot be used to its full potential. KPIs should be developed to continuously track performance and achieve desired results.
Companies cannot simply wait and hope that things will work themselves out. Instead, they must get ahead of future ESG issues and events by designing their business models with purpose and developing a sustainability strategy. Now more than ever, integrated ESG platforms can accelerate performance by providing the visibility and speed needed to drive better governance and collaboration with multiple stakeholders while identifying opportunities for business change.