Marie-Josée Privyk, CFA and Anne Shiraishi – Novisto
Five key ways in which corporate ESG management will be digitally transformed
Big changes are inevitably coming to corporate sustainability (more popularly labeled with the ESG moniker) and are driving new technologies, tools, and market dynamics. The shift from general Corporate Social Responsibility (CSR) communications toward more formal, verified ESG disclosure will create demand for solutions that bring a more holistic approach to sustainability management, from data collection to integrated reporting. Sustainability managers need comprehensive digital tools and real-time, AI-driven insights to gain control of their ability to keep up with the latest ESG disclosure requirements, trends, and stakeholder requests for information.
On top of this, internal stakeholders often do not fully understand their roles or responsibilities within an ESG strategy where they often don’t speak the same “language” when it comes to data or its importance to strategic objectives. Sustainability is inherently a cross-functional exercise, but communication structures remain siloed and collaboration stymied. Too many management teams struggle with being able to clearly articulate how their efforts in ESG contribute directly to long-term business value creation.
Better disclosure starts with better data
With data and analytics at the heart of business decision-making, the perceived and actual value of sustainability practices and related investments is inevitably linked to the quality and consistency of data. With the dizzying growth of interest in ESG and the speed of change in capital markets and regulatory environments, companies should be focused on assuring the quality of their ESG data. Yet, unlike other business processes, there are very few digital solutions available to companies to collect, analyze, and report comprehensive, reliable sets of data that can be used for different purposes and stakeholders.
As investor demands for better, more comparable ESG information grow, so do their expectations that this information be consistent, accurate, and reliable, all of which can be ascertained through the process of external assurance or auditing. Poor data management internally may prevent companies from having their non-financial information externally audited, which in turn discourages them from including this information (albeit material) in regulatory filings. Without more mature quality assurance and control environments for ESG data, companies won’t be able to understand the changes in processes that are required to collect and report more decision-useful, investment-grade information.
As we explain in Novisto’s recent white paper, we believe there are five key ways in which corporate ESG and sustainability management is being (or will be) digitally transformed.
Centralized Systems of Record
A system of record (SOR), simply put, is the single source of truth for a department or company. Customer relationship management (CRM) and enterprise resource planning (ERP) software are the most common examples of SORs.They are incredibly powerful tools that, when widely adopted across an organization, become important platforms for core business data and reporting.
A centralized, horizontal SOR will bring many benefits to sustainability and management teams, such as: one controlled place for all assets; more automated data collection; better classification of internal ESG metrics; and better quality control and auditability. By implementing an SOR for ESG data, companies will not only recognize ESG data as core to business strategy, but they will also approach these issues with the same sophisticated reporting and analytics mindset as they do with other business functions.
Dynamic Materiality And Guidance
Many companies currently perform a materiality assessment–an exercise which helps organizations identify their most “material” sustainability issues through stakeholder engagement–every two or three years. This cadence is simply not sufficient to keep up with rapidly evolving investor expectations, emerging trends and issues, or shifts in reporting frameworks.
The ability to identify important data gaps and areas for disclosure improvement while referencing best-in-class examples will enable more companies to keep pace with–and ideally surpass–the expectations and information needs of markets and stakeholders.
Efficient Collaboration and Workflows
Corporate sustainability is an inherently cross-functional, organization-wide, and long-term effort. However, collaborating with several teams and individuals at different levels can often be a very manual exercise and prone to error. The workflows behind data gathering, data verification, and securing approvals are often the biggest bottleneck to efficient ESG reporting. From recent interviews we conducted, the majority of corporate sustainability managers say they still rely on tools like email and Excel to gather and monitor important ESG data. If there are pre-existing silos between teams, functional or psychological, then rallying these groups around a common ESG strategy and implementation plan can be even more challenging.
Collaborating on projects and consolidating data within a centralized SaaS platform will enable sustainability managers and relevant internal teams to “speak the same language” regarding the company’s ESG issues, metrics and performance.
We believe the most significant area of digital transformation for ESG-minded companies will be reporting and disclosure. The plethora of sustainability reporting standards, frameworks, and questionnaires are creating confusion and real survey fatigue for companies trying to keep up with investor expectations. Many sustainability teams admit they often spend too much of their time responding to third-party data requests and assembling their annual reports versus using their time to advance the strategic and programmatic improvements to their ESG profiles.
Optimized and automated reporting capabilities could benefit companies in several areas, including standards and metrics mapping, gap analysis, responding to external data requests/surveys, and optimizing disclosures for AI agents.
Integrated, Data-Driven Decision-Making
Real buy-in from executive teams and boards comes from making the case that your company’s ESG priorities do link to value creation by showing them how, with sophisticated metrics that feed into the business model. This “how” has historically been challenging to quantify and measure. However, with emerging platforms and dashboards that help the data “speak”, there has never been a better time to demonstrate the ROI of sustainability investments. New technologies and media platforms are providing companies more sources and quantities of data than ever before. Integrated, digital platforms can pull these different data sources together and visualize actionable context for ESG practitioners.
Regardless of which software or tools you use, the outcomes of bringing your ESG data and management to a digital platform must enable you to:
- Own your ESG narrative by accurately communicating the company’s performance to different stakeholders.
- Better explain the connection between sustainability and operational/financial performance.
- Avoid perceptions of greenwashing by demonstrating a commitment to accountability and credibility through coherent commitments, actions, and performance.
- Support the process of continuous improvement (define, measure, manage, report)
- Demonstrate your company’s leadership in accounting for and managing the ESG issues most material to your business.
At the end of the day, the best technology and tools in the world can’t help an organization that does not have (or desire) a reporting-driven culture or ESG mindset in the first place. The convergence between the financial and “non-financial” realms of business value and performance is accelerating and maturing. Companies should be ready to define and invest in their ESG data management and reporting cultures–and the technologies that support them–accordingly.
About the authors:
Marie-Josée Privyk, CFA is the Head of ESG Innovation and Client Success at Novisto. She has nearly 30 years of experience in capital markets, namely as a financial analyst of small and mid cap companies (Marleau, Lemire Inc., National Bank Financial Inc.), as Director of Investor Relations (Innergex Inc.), and most recently as an ESG advisor to companies and investors (FinComm Services, Millani).
Anne Shiraishi leads Novisto’s communications, brand, and marketing. She has more than ten years of experience in strategic communications, sustainability/ESG, project management, and marketing, including roles at Measurabl, PwC US, various ESG consultancies and, more recently, Aequo Shareholder Engagement Services. She is based out of New York City.