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The ESG landscape is changing — it’s time to evolve

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The necessary ESG change! Image courtesy of Unsplash.com.

This article is sponsored by ESGeo.

Information about environmental, social and governance metrics are no longer a "nice to have" issue in corporate management, they are an indispensable input for leaders to consider across every business decision being made.

Typically, gathering this data has been the purview of tireless corporate sustainability or CSR teams, who have been responsible for measuring and analyzing ESG metrics, and building initiatives to minimize externalities and to create positive impacts for company stakeholders — particularly when it comes to the environment. 

It’s increasingly clear, however, that responsibility for ESG practices — and the management of related data — must become embedded across every level of the organization. That doesn’t mean that the CSR team goes away, far from it. It means that this team’s remit is aligned to core business operations. There is growing evidence that ESG policies and initiatives positively affect corporate financial performance and long-term business strategy — regardless of whether a company is public or private.

Organizations that have embedded sustainability principles into their strategy ahead of potential industry regulations benefit from better financing, reputation and talent retention. This is reflected in market performance with investors seeing gains with these companies. According to an analysis by CEM Benchmarking, asset owner signatories to the Principles for Responsible Investment demonstrated higher returns and lower costs than non-PRI signatories over five years. 

That analysis underscores the importance of establishing companywide ESG key performance indicators — not just to satisfy investor interest in more detailed reporting but to help organizations strive toward better performance and shift towards sustainable operations. The right mix of insights and metrics can accelerate every employee to take personal responsibility in this shift.

But it’s challenging to take action or get attention on this issue, something sustainability professionals know well. Often, the data is locked away in siloed systems that require many teams working in concert to tease out the right metrics that could sway stakeholder opinion and translate to meaningful change. This manual exercise can lead to lost productivity and lack of visibility. Companies must develop robust data management and reporting capabilities to provide stakeholders with the transparency they need to get excited about owning a piece of this journey in their job. 

ESGeo's Sustainability Intelligence platform, which runs on Microsoft Azure, is one software application that enables companies to collect quantitative and qualitative data and track performance across ESG indicators. The technology goes beyond traditional sustainability reporting, allowing organizations to measure and compare the business impacts of ESG initiatives.

The process that Prysmian Group, an Italian maker of cabling for the telecommunications and energy sectors, is using to manage its new social and climate action provides a good illustration of what is possible. They want to pursue the efficient and sustainable use of energy and natural resources by reducing consumption and greenhouse gas emissions, while minimizing the generation of waste and promoting the recycling and reuse of materials. Both initiatives, wholly aligned to United Nations Sustainable Development Goals, are based on quantitative goals and targets and the actions that achieve those targets.

"A solid ESG Identity is based on high quality, reliable and traceable data. Accordingly, we have invested in an ambitious project to digitize our ESG information and ensure its digital governance. This represents a crucial step in managing the ever-greater complexity of sustainability and creating new value to share with our stakeholders," says Lorenzo Caruso, vice president, communications and public affairs at The Prysmian Group.

Prysmian Group aims to align its reporting frequency on these initiatives with its monthly financial review cycle to measure the ESG program's effectiveness. This visibility will empower the teams with robust monitoring and analysis of the ESG goals to ensure the correct allocation of resources. One expected benefit is a greater understanding of double materiality across the business and within every project. The company anticipates that this integrated view will help it better prioritize and optimize the allocation of capital accordingly.

Simple reporting alone doesn't work when it comes to more-informed decisions. In 2019, 90 percent of companies in the S&P 500 index published sustainability reports, according to Governance & Accountability Institute. However, not all of those organizations are setting targets for how they will reduce their negative impacts. Matching data to action is becoming increasingly important to show improvements, reduce risk and uncover new opportunities. The ability to secure funding for this work requires a combined understanding of the risks and opportunities that exist.

Prysmian Group is an example of how opening up access to the right information can validate and improve strategy across the business. Integrated reporting drives visibility across both financial and metrics typically associated with sustainability teams, unlocking the power of leaders and employees in a strategic and future-oriented way.

Although financial reporting focuses on quarterly results, sustainable long-term growth necessitates a focus on ESG issues. As companies continue on their sustainability journeys, integrated reporting platforms such as ESGeo will be a critical step in understanding risks and opportunities. As ESG becomes embedded into the core business and not operating outside of it employees will be inspired to act, but only if that visibility exists. With new insights that break the short-term view of the quarterly reporting cycle, sustainability will be as fundamental as technology in shaping a business’s success.

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