Highlights
- An enterprise can benefit substantially from its sustainability efforts by focusing specifically on its reporting strategy—the manner, speed, and transparency.
- Sustainability efforts are often viewed as compliance exercises, but these programs can tap into potential markets, optimize existing ones, and win you exceptional levels of customer engagement.
- New tools, frameworks, and standards are available that can help organizations jump-start the conversations on ESG compliance and optimize their programs.
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A surprising game changer for sustainability
Most companies make the mistake of looking at their sustainability initiatives as compliance exercises.
Often, sustainability programs that have been developed, implemented, and inevitably retired, do nothing for the company but just meet corporate mandates.
It is time to rethink this. The top-performing companies with vibrant environmental, social, and governance (ESG) programs understand that sustainability initiatives can tap into potential markets, optimize existing ones, and win unparalleled levels of customer and employee engagement and advocacy.
But how are these companies turning a compliance exercise into a powerhouse for performance and growth? The surprising answer is that enterprises’ reporting strategy—the manner, speed, and transparency they bring to reporting—is a game changer for companies looking to benefit from their ESG efforts.
Radical reporting transparency
Global investors, customers, and regulators are looking for radical transparency from companies about their sustainability initiatives and performance.
Programs must demonstrate how they create value and offer fresh growth opportunities. A key challenge to reliable reporting is data lineage or the ability to track data back to the source. With ESG data, tracing lineage is even more challenging since there are diverse data sources. Building a transparent reporting model will enable key stakeholders and authorities to legitimize ESG initiatives within a company. Reporting on ESG key performance indicators (KPIs) can eventually drive companies to develop responsible products, sustainable supply chains, and respectable employment.
A balanced focus on the ESG pillars
Balancing all three ESG pillars is essential for holistic and sustainable business practices.
Environment is most often the focus of ESG discussions. But there is more value to be mined if your program considers the social and governance areas equally important. A company that has a well-established environmental record, but poor social and governance practices is not truly sustainable. Consider a company with excellent recycling programs but poor labor practices and weak board oversight. While it may reduce waste, exploiting workers and lacking accountability can lead to strikes, legal issues, and mismanagement. This imbalance ultimately threatens the company's long-term success and sustainability initiatives.
Social and governance factors contribute significantly to a company’s performance by analyzing the company’s financial standing, impact on society, and compliance of internal operations. Social and governance factors also affect a company's risk profile. Companies with poor processes and practices in this area are more likely to be exposed to risks such as lawsuits and fines arising from non-compliance. This might have an adverse impact on the company, making it lose customers and investors.
Improved employee satisfaction and brand value
Employees are increasingly looking for companies that have strong ESG sustainability practices.
Employees are brand ambassadors for companies high on social standards, indirectly influencing brand equity and market standing. Employees who are engaged with ESG initiatives may feel like they are part of something bigger than themselves, and that their work has special meaning. This can lead to increased trust in leaders, making it easier to attract and retain talent. For example, companies with strong ESG standards often have better workplace safety protocols, which can reduce accidents and improve worker health. This can lead to increased job satisfaction and morale.
Automated frameworks and off-the-shelf tools
Several frameworks and standards as well as AI/ML and analytics-powered solutions can propel companies’ ESG compliance journey.
There are several frameworks and standards that can help organizations jump-start their ESG compliance journey. Some of the most common frameworks include the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the European Sustainability Reporting Standards (ESRS) to name a few.
Developing KPIs adhering to these standards has traditionally been a manual effort for maintaining and transforming ESG data. Over the last few years, however, a host of tools and solutions that optimize operational sustainability, resilience, and efficiency have become available, such as SAP Sustainability Control Tower and Oracle Fusion Cloud Sustainability, to name a few. These tools provide artificial intelligence/machine learning (AI/ML) and analytics-powered capabilities and command center consoles for climate action, enterprise resilience, reporting on water and energy consumption, and transportation emissions.
Companies are also focusing on eco-friendlier practices as consumers drive the sustainability movement with lifestyle and behavioral changes. As countries set up compliance norms to align with their global sustainability commitments, the ESG activities of enterprises play a key role in meeting these objectives and elevating sustainability initiatives on a global scale.
Enterprise solution software providers have embedded sustainability into their core business processes. Solutions such as SAP Environment, Health, and Safety Management and SAP Sustainability Footprint Management can monitor ESG performance, identify risks, and, in turn, help enterprises make sustainable decisions. System integrators play a key role in delivering KPIs aligned with relevant frameworks built on enterprise solutions.
The win-win proposition with ESG reporting
ESG reporting is essential for meeting your enterprise sustainability goals.
Companies often perceive that ESG reporting is complex and time consuming. Effective ESG practices along with rigorous data collection practices that generate results are changing this perception. Organizations looking to fulfill their social sustainability commitments of people, planet, purpose, and improved growth stand to gain immensely when they implement ESG practices. A key challenge to meeting sustainability goals is reliable data. A data framework with transparent reporting practices will enable organizations to measure progress against targets while continuing to meet compliance requirements.
Organizations should relook at their existing data strategies to incorporate the right ESG data within their data architecture. This will ensure not just transparency in reporting but also enable the organization to transition to truly sustainable products and solutions.
