How Successful Environmental, Social, and Governance Strategies Leverage Data and Analytics to Add Value
It’s become near impossible to ignore the pressing Environmental, Social and Governance (ESG) challenges that companies are facing today. While many ESG regulations have yet to be solidified, companies are under pressure to articulate their ESG policies and meet the associated goals while at the same time finding themselves racing to identify operational and financial risks.
Except these same companies are also facing a variety of ESG data challenges, including a lack of availability, quality, and credibility, to name a few. As companies face new ESG-related reporting and disclosure rules coupled with growing pressures from investors, employees, customers, and partners, high-quality ESG data is an increasingly important asset.
Dun & Bradstreet commissioned Forrester Consulting during the first quarter of 2022 to evaluate the current state of ESG data and analytics strategies and how a company’s ESG maturity affects its performance. Findings demonstrate that the benefits of investing in ESG strategy go well beyond avoiding fines for not complying with regulations. Further, ESG is a growing force—driving profits through innovation and improved risk management.
Still, many businesses grapple with trying to first assess how ESG fits into their business strategies. Prioritizing ESG Isn’t Optional Anymore, whether they even have the right data to report on it. Still, others are trying to understand ESG in general, where to begin, and what to do to catch up. In fact, 74% of respondents need a solution that allows them to better understand themselves and where they might be able to improve, 72% need standardized metrics and benchmarks, while 71% stated they need help automating ESG data to streamline reporting. These responses indicate that having reliable ESG data can help companies gain clarity into how they can improve, guide them toward regulatory compliance, and influence more conscientious decisions in the future.
And while one in five respondents told us that three years ago ESG data was “very important” to their company, that number doubled for companies that think it’s “very important” today and jumps to 90% surveyed stating that ESG will become “very important” in 3 years.
According to the findings, here are some of the challenges that many companies are facing, as well as some of the ways ESG strategies have been effective and might help build the business case for investing in your ESG Data Driven Strategy.
Effective ESG Strategies Drive Profit and Cost Reductions
Despite many challenges, firms have still seen transformational benefits from implementing ESG strategies leading to a vast array of positive business outcomes across the organization, with 75% of respondents sharing that ESG-related reduction in costs was transformational, 72% stating it improved the performance of their investment portfolio, and 79% stating that ESG-related insights allow their companies to identify new growth opportunities earlier.
Insufficient ESG Data Is the Biggest Challenge Preventing Firms from Meeting Their ESG Goals
According to the responses received through the Forrester Consulting ESG Survey, nearly half (46%) of respondents stated that ESG-related data management is a mission-critical pillar of success, and a top-five challenge; demonstrating an eagerness to adhere to the evolving ESG landscape while understanding their own data in its current state is not sufficient.
Immature Internal ESG Data Management Holds Back Most Firms
Further, ESG-related problems are largely driven by the inadequate technology that many firms use to manage, analyze, and report ESG data. Seven out of 10 respondents said their companies rely on generic office technology such as spreadsheets and email (see Figure q4). Immature data collection, management, and analysis practices severely limit a company’s ability to draw insight and apply ESG analytics at scale, which limits progress and the speed at which ESG maturity can be achieved.
Finding a reliable ESG data resource that can be automatically integrated with your proprietary data can vastly help increase visibility into ESG risk management. Firms that invest in automated, advanced ESG data and analytics reap well-earned rewards.
Failing to Meet ESG Goals Exposes Firms to Increased Risks
The most common consequence companies face from challenges meeting their ESG goals are increased levels of operational and financial risks. The more companies and their supply chains struggle to meet ESG goals, the more risk they are exposed to.
In fact, 79% of respondents told us their companies use ESG data to create more resilient value chains and mitigate ESG-related corporate strategy risk and three-fourths of respondents reported that ESG data is an important tool being used to mitigate both ESG-related investment risk (76%) and operational risk (75%).
Investing in ESG Yields Transformational Benefits
Many businesses and industry leaders still believe they must rely on “how” they have always created or delivered their products in order to remain profitable and may be finding it difficult to justify shifting to a new ESG-friendly operating framework when it’s not clear if this is just a consumer-conscious “fad” or if, indeed, ESG is a multi-faceted method to detect and manage risk.
Yet, 97% of respondents from firms with a high ESG maturity level report that a significant or transformational reduction in costs resulted from implementing their ESG strategy. Further, 77% of high maturity firms are more likely to report significant or transformational increases in customer acquisition due to their ESG strategies.
Undoubtedly, conscious consumers who are more interested in where their food comes from, how products are made, where their dollars go, and how people are treated want to support environmentally friendly companies.
Not only does attention to ESG performance lead to reductions in supply chain, operational and reputational risks, it also leads to efficiencies, product and service innovation, attractive financing opportunities and new partnerships.
Download the full report to learn more about the benefits of investing in your company’s ESG strategy, the pitfalls you can avoid by having the right data, and the predictions that demonstrate just how important ESG compliance has become.
How Mature Is Your ESG Data Analytics Practice?
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There are three possible maturity results: Emerging, Progressing or Mature.
A business’s ESG performance depends on multiple core ESG data capabilities.
Our assessment evaluates participants across four key areas of competency:
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