Businesses seeking to accelerate sustainability initiatives must take an integrated approach that brings together all business and technology functions. Sustainability is no longer the responsibility of only the chief sustainability officer (CSO). It is not managed by a single department in a silo. Driving true sustainable impact, at scale, takes place when an enterprise is fully aligned to that transformation. To scale progress in combating climate change, this alignment and collaboration must happen across value chain partners, ecosystems, and industries.
Sustainability and ESG: An opportunity for synergy
Sustainability and ESG are not synonymous. While ESG seeks to provide standard methods and approaches to measuring across environmental, social and governance KPIs, and holds organizations accountable for that performance, sustainability is far broader. ESG can serve as a vehicle to progress sustainability but it can also distract from the urgent need of combating climate change and working toward the 17 UN SDGs.
As we have seen with any sort of external reporting liabilities, this type of accountability does drive action. It’s our responsibility to ensure we don’t just do ESG reporting for the sake of reporting, and that it doesn’t impede actual progress in sustainability. We must ensure ESG progress and sustainability are driving towards a common goal. The reality is companies might be ready to fund ESG initiatives, but not as ready to fund ‘sustainability’ initiatives.
If designed intentionally, these do not have to be separate initiatives. When something is ‘regulatory,’ ‘mandatory,’ or ‘involuntary,’ companies have no choice but to find a way. A pre-existing sustainability office may find resources or funds shifted to ESG, or a reprioritization of targets based on ESG measurements. However, to capture both the business value behind ESG compliance as well as its ability to drive impact, it requires a holistic approach that strategically captures these synergies.
We are helping our clients maximize those investments, leveraging the requirements of ESG to drive compliance as well as sustainability. Our clients are improving their ability to measure and track progress against ESG metrics, while concurrently operationalizing sustainability transformation.
Maximizing value with a holistic strategy
The first step in maximizing that dual value is upfront due diligence. It is necessary to assess the current state of reporting readiness, the alignment between ESG requirements and voluntary sustainability initiatives, and any consideration on how to drive acceleration with future-proofed solutions. Questions might include:
- Where is the organization relative to its required and voluntary sustainability goals?
- Have the sustainability goals evolved in response to recent regulation or market shifts?
- How aligned is the sustainability strategy to the business strategy?
- Is ownership of delivering sustainability goals distributed throughout the organization or is every leader aware of how they are expected to contribute?
- How is sustainability managed—as an annual measuring exercise or an ongoing effort that supports business transformation?
- What regulations are owned by specific functional areas that may contribute to a broader ESG roadmap if viewed holistically?
- Are there in flight business or technology initiatives where I can embed these requirements?
Up until recently, sustainability was most likely handled by one central team. Now, functional areas across the organization are recognizing their role in measuring ESG progress as well as their opportunities to help make their company more sustainable.
Similar to a company executing any corporate strategy, progress is made when the organization understands it, and employees are aware of how they play a role in bringing it to life. All leaders must enable teams and departments to understand how sustainability is part of the corporate strategy. They must provide the enablement and tools so these teams can integrate the overarching sustainability purpose and objectives within the corporate strategy into their respective roles in accelerating sustainable outcomes.
I see a clear shift in companies becoming more aware that they must work across departments to drive sustainability. A company cannot report on scope 3 category 7 of employee commute without employee data from HR or facilities management data, or without the technology platform and data governance to have an auditable view of that data. Businesses cannot prove there is no forced labor in their supply chain without working with procurement to understand their supplier base, where they are located, and what might be high risk, and then solution to embed proactive risk management in vendor onboarding.
Embedding sustainability in practice
Accountability is where an enterprise can ensure that sustainability is embedded and activated. The idea of embedding is integrating it into the day-to-day role. It’s enabling employees to make informed decisions and understanding the climate impact based on that decision. Any business or investment decision has a profit lever, a cost lever, and sometimes a performance lever, such as an Service Level Agreement (SLA). Now, sustainability can be a lever to truly embed impact into everyday operations. Employees can make more sustainable decisions knowing the tradeoff and impact.
A recent study from the IBM Institute for Business Value surveyed 5,000 global C-suite executives across 22 industries to find out why sustainability isn’t generating more impact for organizations. The study found companies were just “doing sustainability,” or approaching sustainability as a compliance task or accounting exercise rather than a business transformation accelerator.
Executives recognize the importance of data to achieve sustainability objectives; 82% of the study’s respondents agree that high-quality data and transparency are necessary to succeed. However, a consistent challenge they encounter in driving both ESG reporting and sustainable transformation is the shared reality is that companies cannot manage what they cannot measure.
Data not only provides the quantitative requirements for ESG metrics, it also provides the visibility to manage the performance of those metrics. If the employees of a company don’t have the data, they cannot publish financial grade reporting, identify opportunities for decarbonization, or validate progress towards becoming a more sustainable company.
One point addressed in our study surrounds the data specific challenges that can come with sustainability. Findings revealed that “despite recognizing the link between data and sustainability success, only 4 in 10 organizations can automatically source sustainability data from core systems such as ERP, enterprise asset management, CRM, energy management, and facilities management.”
When clients embed the right processes and organizational accountability across ESG reporting and sustainability, they can make sure they are getting the right information and data into the hands of the right people, often system owners. Those ‘right people’ can now make more informed decisions in their respective roles and scale transformation from one team to the entire organization while also incorporating these needs of ESG data capture, collection, and ingestion for the sake of both reporting and operationalizing.
The study found organizations that successfully embedded sustainability approached the data usability challenge through a firmer data foundation and better data governance. The criticality of a clear data strategy and foundation brings us to our final topic: how generative AI can further accelerate sustainability.
Utilizing generative AI to embed sustainability
There are many different applications for generative AI when it comes to embedding sustainability, especially when it comes to filling in data gaps. The data needed for ESG and sustainability reporting is immense and complex. Oftentimes, companies don’t have it available or have the correct protocols to align their data and sustainability strategies.
Most clients, regardless of the size of the company, have sustainability teams that are stretched, trying to manually chase data instead of focusing on what the data is saying. Generative AI can unlock productivity potential, accelerating data collection and ingestion reconciliation. As an example, instead of sustainability teams manually collecting and reviewing paper fuel receipts, technology can help translate receipt images into the necessary data elements for fuel-related metrics. This allows these teams to spend more time on how to optimize fuel use for decarbonization, using time for data insights instead of time chasing the data.
By spending all your time on reconciling invoices or collecting physical fuel receipts, how are you or others in your organization going to have the time to understand the data and in turn make changes to drive sustainability? If time is spent collecting data and then pulling together reports, there is little time left to garner actionable insights from that data and enact change. Systems and processes must be in place so that an organization can drive sustainability performance, while meeting ESG reporting requirements, and not use all of its resources and funding on data management that provides eventual visibility without the capacity to use it for impact.
As mentioned in the study, generative AI can be a “game changer for data-driven sustainability, enabling organizations to turn trade-offs into win-wins, identify improvement opportunities, and drive innovation at speed and scale.” It is little wonder why 73% of surveyed executives say they plan to increase their investment in generative AI for sustainability.
To truly leverage the power of generative AI tomorrow, companies must first understand their data readiness today. Then, we can prioritize how generative AI can improve existing data for visibility and use that data for performance insights.
Companies can identify immediate opportunities for generative AI to help them move faster, while concurrently ensuring that the core data collection and management is established to support current and future reporting needs. We want our clients to focus on leveraging ESG reporting to have a return on investment (ROI) financially, as well as in driving sustainable impact. While external mandatory requirements will be a driver for where an organization’s budget is allocated, organizations can intentionally embed sustainability as a part of those initiatives to capture the full value of their transformation efforts.
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