How better data is making ESG actionable
The year is 2025. Environmental, social and governance (ESG) data is informing corporate decision-making around the world. The International Sustainability Standards Board (ISSB) has given companies a standardised ESG reporting framework to work to, making their disclosures far more useful and comparable than ever before.
Advances in digital tech have also made ESG data more actionable. Every product is having its greenhouse gas emissions tracked by AI-assisted satellite imagery and smart sensors as it traverses the global supply chain.
Business leaders have become knowledgeable about this field. ESG metrics have been embedded in corporate strategy and are being widely used to set performance targets and executive rewards.
Is such a utopia likely in the next three years? No chance. But will companies and their stakeholders advance towards this state of affairs? Much is happening that offers hope.
At present, companies must wrestle with a chaotic tangle of ESG standards, with some having to file 20 reports a year to keep their investors, regulators and customers happy.
And they’re struggling to obtain the required information. Few firms are collecting actionable data on carbon emissions in the supply chain, for instance, even though it’s responsible for about 80% of all consumer goods companies’ emissions, according to McKinsey.
But technologies that will help firms to achieve this are evolving, as is a standardised reporting system. There are high hopes that the recently created ISSB will come up with a de facto framework that most countries will adopt.
In addition, ESG Book – an open-source digital platform designed to make firms’ data more accessible – started offering its services in December 2021. ESG experts hope that both developments will help the private sector move towards publishing coherent, comparable information.
“They will change the ESG reporting game over the next two years,” predicts Jill Klindt, chief financial officer at Workiva, a provider of compliance software. “The ISSB will align standards and metrics across companies, so that investors and the public can compare apples and apples, which will help them to hold businesses accountable.”
Meanwhile, companies are developing smart sensors and other connected devices to measure the carbon emissions of individual products as they move through the supply chain. Some large brands are already using tech that can track billions of items and put a realistic figure on their total footprint. PepsiCo Europe, for instance, has created a digital model of its supply chain that has helped it to identify where it can work with suppliers to achieve significant emission reductions and efficiency savings.
Firms are also investing in AI fields such as natural language processing to boost efficiency by connecting ESG and financial information.
Charles Sincock, managing principal and ESG lead at consultancy Capco, explains: “AI’s ability to scan vast data records and interpret the results is a key advancement.
