An environmental, social, and governance (ESG) initiative is fundamentally a data gathering and reporting exercise that often requires the integration of many new and different data types both inside and outside the organization.
For CIOs, ESG success requires working with internal and external stakeholders to align around strong metrics and standardized frameworks, identify the data needed to track those metrics, and determine the right tools and platforms to capture, integrate, analyze, and deliver insights from the data to achieve ESG goals. To break down data silos, secure buy-in on additional IT investments, and overcome any organizational resistance to change, CIOs need to keep stakeholders focused on ESG-related compliance and business objectives – not to mention simply doing the right thing.
Few rules
The ESG technology landscape is still evolving and there are few hard-and-fast rules in place. Choosing metrics, frameworks, and platforms may seem overwhelming, given the many available choices. The Global Reporting Initiative, for example, lists more than 30 types of standard reports, including training, security, customer safety, and privacy. The Sustainability Accounting Standards Board defines standards across 77 industries. And the International Organization for Standardization covers such areas as energy management, information security, and occupational health and safety. Other frameworks include the U.N. Sustainable Development Goals and the U.N. Guiding Principles on Business and Human Rights.
No organization is expected to meet all of these standards, or to do so immediately. ESG isn’t a “one and done” proposition. Initiatives will play out over time, with IT and business leaders working together to define metrics that demonstrate continuing progress. In some cases, reporting standards may be defined by regulatory bodies, simplifying the CIO’s task. More commonly, however, organizations self-select their preferred metrics in consultation with stakeholders.
Look on the bright side
It’s important to approach ESG initiatives with a positive attitude rather than viewing them as a regulatory chore. Bjoern Stengel, global sustainability research lead at IDC, notes that less sustainably mature organizations tend to invest in ESG technology to hedge against business downside, manage risks, or because “it feels like the right thing to do.”
In contrast, “more mature organizations can differentiate themselves and their value proposition from their competitors by using sustainability enabling technologies,” he said. “The change in corporate culture and brand leadership that they achieve can help them sustain their competitive advantage.”
IDC’s 2022 Global Sustainable Strategies and Technologies Buyer Value Survey found that companies with mature ESG practices are more profitable, enjoy higher customer loyalty, and have an easier time hiring young talent.
Nevertheless, building and sustaining momentum can be a challenge even for the most mature organizations. Skills and technologies are still evolving. The IDC survey found that lack of expertise is the top operational challenge organizations face when attempting to become more sustainable. That’s followed closely by a lack of predictive and operational technologies needed to forecast and measure progress. In fact, six of the nine top challenges respondents identified relate to data, tools, and expertise.
Demonstrating return on investment can be tricky for several reasons. One is that progress often takes years to become apparent. Turnover, new business initiatives, and changes in the market and economy can easily disrupt the long-term focus that’s needed to stick with the program. Returns aren’t always easy to measure, since improved brand reputation and customer loyalty are not as easily quantified as revenue growth. Companies may struggle to tie sustainability progress to individual incentives. And investors have a predilection for short-term thinking.
Alignment is crucial
Rallying the organization around an ESG initiative is “about aligning everyone around the goals and investments,” said Ernesto Boada, Interim CIO at Workday. That includes getting people on board with the technology investments that may need to be made.
Legacy technologies that can’t easily adapt to the new data types and required reports can stop an ESG initiative in its tracks. “Rigid applications that don’t talk to each other aren’t going to work compared to a modern cloud-native system that can operationalize sustainability data,” said Boada. “Tacking on another tool may not solve the problem. CIOs need to show why a platform approach will help meet those goals in the long term.”
Cloud-native platforms are inherently more scalable, adaptable, and customizable than monolithic legacy software. New functionality can be continuously delivered and configured to meet new requirements.
For example, Workday’s forthcoming supplier sustainability solution extends the company’s existing platforms to help customers improve the sustainability of their supply chains and collect and report on direct emissions and those of employees and suppliers. The combination of Workday Financial Management, Workday Strategic Sourcing, Workday Prism Analytics, and Workday Extend enable customers to collect key data from suppliers, identify areas for improvement, and calculate and report on Scope 3 emissions, which are those for which it is indirectly responsible through its value chain.
The company’s social reporting for ESG solution consolidates information around workforce composition, organizational health, diversity, and workforce investment from Workday Human Capital Management. This lets customers quickly track performance against the most common metrics required for ESG disclosure.
Management consultancy Deloitte used Workday’s extensible platform to develop an integrated carbon emissions planning model that enables companies to set time-bound targets for carbon neutrality and to model pathways to achieve them. Accelerate2zero was built on top of the Workday Adaptive Planning platform to quantify the emissions impact of a company’s decisions and plan their emissions reductions.
Pending regulations and ESG best practices also mandate that organizations collect relevant data from their value chain. That means asking questions of technology vendors and pressing them for data that supports their responses.
“For many industries, IT has a significant impact on emissions, so that needs to be a major factor in any new technology vendors they take on,” said Erik Hansen, Senior Director, Environmental Sustainability at Workday. “What are their vendors’ goals for ESG? For example, do they commit to powering data centers with renewable energy? To be effective, IT leaders need to be able to partner with vendors that align with their own objectives.”
While gathering and reporting ESG data is a complex task, modern cloud platforms allow businesses to gain the greatest value from the information they already have on hand and simplify integration with data gathered from others.
Learn more about how to help your organization achieve its sustainability and ESG goals.