This article is sponsored by Benchmark ESG.
A crisis of confidence in ESG is consuming many boardrooms globally. Despite 70 percent of CEOs stating that ESG improves their bottom line, almost 60 percent are considering putting their ESG initiatives on pause. This contradiction may ultimately stem from a data-related issue.
A recent survey of data scientists found that on average, they spend over 40 percent of their time simply collecting and cleaning data for their respective companies. As companies further realize the importance of ESG disclosure requirements, they often tap chief sustainability officers (CSOs) with this data management task. Imagine the time it takes a CSO to do the same data-chasing task data scientists spend almost half their working hours on.
This is the wrong solution to the right problem. CSOs are too often spending hours collecting and collating data while company-wide ESG initiatives lie unfinished.
We need CSOs to spend time finding ways to make real progress identifying opportunities for stakeholder value, competitive advantage, minimizing adverse environmental impacts, ensuring workplace safety and, critically, ensuring the security of company investments. With the proliferation of ESG and subsequent indicator requirements, the CSO role has become even more important. Yet they are not spending their time on the big ticket items.
A recent survey of financial professionals from EY suggests that CSOs are by far the most highly involved in their organization’s efforts to gather data, input numbers to spreadsheets and chase down information across internal departments. Internal ESG data collection has been cited as CSOs’ most time-intensive process, and many executives believe time spent on the task will only increase over the next year.
Additionally, more than half of the companies recently surveyed continue to collect and manage their ESG data with manual, spreadsheet-driven processes. The consequence is that ESG data inputs are prone to human error and delay, risks that may sabotage the financially relevant and mission-critical insights they should be supporting, all while reporting requirements and investor expectations continue to change.
While data is essential to the end goal, tasking CSOs with these mundane duties takes away from their ability to focus on how to drive actual company-wide sustainability, engage with investors and ensure that business strategy can feasibly fulfill those ESG initiatives. CSOs need to be elevated beyond data collection.
Since data is important, why should CSOs be tasked with duties beyond collecting it? A recent survey of over 80 sustainability professionals across various national and international businesses shows what they see as the primary responsibility and goal that a CSO is trying to achieve. Over 70 percent of respondents stated that "reconfiguring the organization’s business model" is a CSO’s main responsibility. Yet, roughly 70 percent of directors surveyed reported a lack of effectiveness in integrating ESG into their company’s long-term strategy. As more organizations understand the importance of both having a CSO and admitting to the difficulty in managing the complexity of ESG disclosure requirements, it’s clear that how CSOs are used is often largely missing the mark.
This misallocation of time is an opportunity cost when considering the impact CSOs could have on the company's bottom line. For example, Schneider Electric’s CSO acts "like the conductor of an orchestra" in securing partnership with a green steel manufacturer to reduce raw material investment as well as Scope 3 emissions one day while discussing improving gender diversity impacts with other companies in the industry on another. Colgate-Palmolive’s CSO worked alongside her company’s chief financial officer on sustainability to align consumer pricing with product promotion.
Seeing that external stakeholders are the largest driver of companies’ ESG data disclosure, CSOs should spend more time engaging with said stakeholders all while understanding the business side of things, instead of collecting the data. Clearing their plate to dive into priority areas, including the broader organizational shift or direction to achieve sustainability, is vital. Relying on a trustworthy software to collect the ESG data is one way to help with that.
The saving grace is that even among increased calls by investors to report better metrics, data collection does not have to be that hard. It is possible to free CSOs. While over 90 percent of senior executives surveyed said they are concerned about not having the right digital technology to facilitate ESG disclosure requirements, third-party ESG disclosure frameworks abound.
Digital technology can free up the CSO to focus on strategic impacts by automating much of ESG data collection and reporting activities. Not only can a robust, cloud-based ESG data management system facilitate collaboration across an organization’s functional teams, but it can inform an organization on progress towards its unique ESG performance goals, streamline responses to outside reporting authorities and stakeholders and ensure third-party validation of ESG claims.
The more a digital technology can make sense of cross-functional data inputs and provide ESG analytics and insights, the more C-suite executives can shift their view of ESG as simply a box-checking exercise. Instead, CSOs can be empowered to play the role of value-driver for their respective businesses. Indeed, for the sake of their companies and the world, they must.