Articles

Getting your ESG data in order

Corporate Citizenship

Governments demand that companies report sustainability aspects. In the European Union, for example, it is mandatory for companies with more than 500 employees to disclose in their non-financial statement information, the way they operate and manage sustainability challenges. However, not only legal requirements but also stakeholder demands are increasing. Following COP26 in Glasgow, being in line with the Paris Agreement and having a clear plan to reach net-zero are the expectations. Presenting ESG data in an appealing way, can help to increase transparency and gain the trust of stakeholders.

However, proper ESG data management can be challenging. First of all, there is the challenge for corporates to identify what data and measures are currently taken for the decision-making process, and whether these match internal and external stakeholder expectations. Bayer experienced that the decision to acquire Monsanto was not made on its stakeholder expectations. It caused internationally bad press, as well as a decrease in its share value since then. one of the worst acquisitions in recent history.

This is followed by the challenge of identifying data gaps, and finding solutions for how these can be closed. The process can be supported by ESG data management tools. There is a wide variety of tools that can help businesses to analyse data and close data gaps. From established ESG data providers such as MSCI, Sustainalytics, RepRisk and S&P’s Global Sustainable1, to the disruptive, free-of-charge ESG Book by Arabesque. Some management platforms even allow real-time collection of data.

Lastly, businesses face the challenge that these ESG data management platforms are not solving all challenges. Correct strategic management decisions have still to be made; reporting and communication of the ESG performance have still to be conducted in a compelling way to key stakeholders. Mismanagement and miscommunication can lead to drastic changes in how stakeholders see corporates. Cargill, for instance, went from being seen as a rather environmentally aware company, to being seen as one of the biggest polluters.

Despite the challenges, companies can also see ESG data management not as a requirement that has to be done, but rather as an opportunity to differentiate from competitors and grant business success. Potential improvements can also be identified through more complex gathering methods, for example through the conduction of Life Cycle Assessments (LCAs). By going beyond industry standards, becoming pioneers in their field and achieving good scores from sustainability ratings, companies can attract new business opportunities. Rügenwalder Mühle, for example, became a pioneer in meat replacement products, by identifying customer demand for these products. Even though the company started in the meat industry, it now generates as much revenue from its meat replacement products.

As mentioned above, to overcome challenges and take advantage of opportunities, ESG data management platforms can be a useful tool. Nonetheless, in order to get the most out of these platforms, further support is needed. Corporate Citizenship, part of SLR, can not only help to identify the best matching ESG data management tool, but also to use these tools in the most efficient way. With leading experts at Corporate Citizenship, we have the experience to help guide companies and other major organisations through their ESG data management, and are also able to conduct more complex data gatherings, such as LCAs. Corporate Citizenship experts can further help to improve ESG rating results from CDP and EcoVadis, for example. Moreover, Corporate Citizenship will interpret the data in the best way, draw the connection to the financial results and, based on that, recommend the right strategic management decisions that ensure future-proof business models.

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Authors: Mark Hoff, Financial Sector Lead, Europe and Joshua Orth, Researcher, Europe

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