The No. 1 ESG Challenge Organizations Face - Data - World Economic Forum

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The No. 1 ESG challenge

organizations face: data
Oct 28, 2021
Here's how companies can develop a strong ESG program and reporting underpinned by data.
Image: Andreas Gücklhorn on Unsplash
Matt DiGuiseppe
Vice President of Research & ESG, Diligent Corporation
This article is part of:

Forum COP26 Live
Integration of ongoing, real-time data is key to meeting ESG commitments.
Just 9% of surveyed companies are actively using software that supports data collection,
analysis and reporting on ESG.
Corporations can develop a strong ESG program underpinned by data – here's how.
Reporting on ESG (Environmental, Social, Governance) and adhering to disclosure

requirements is a key sign – to regulators, to investors, to your peers and
competitors – that your business takes its ESG commitments seriously.
But it’s important to remember that reporting is simply one part of a much larger
process.
Have you read?
The foundations of a strong ESG program are built on data. Data-rich

organizations operate more efficiently, more decisively and with greater foresight
than their peers — and this is particularly true in a complex, evolving area like ESG.
An organization that is able to fully integrate ESG into corporate strategy, with a
symbiotic relationship between day-to-day business and ESG goals, will find itself
in a much stronger position than its peers.
Reporting, ultimately, should be a by-product of an ESG program where real-time
data is integrated into decision making on a continuous, ongoing basis. The
alternative – reporting either annually or biannually, attempting to amalgamate
data from a variety of disparate sources in a short time period – is much more
difficult, and much more susceptible to error and risk.
In a recent survey Diligent conducted with OCEG to assess the current state of
ESG planning and activity, fewer than half of respondents had a formal,
documented ESG program in place, and under 10% were “highly confident” that
their organization had mature, well-documented ESG capabilities.
Furthermore, the survey found that just over half of all organizations surveyed do
not publish ESG metrics of any kind, and just 9% of participants are actively using
software that supports data collection, analysis and reporting on ESG.
Just 9% of companies are actively using software for ESG data collection, analysis and reporting. Image:
Diligent/OCEG
These results would suggest that many organizations can’t get over the data
hurdle when it comes to ESG.
Here are some of the biggest roadblocks to overcoming this challenge – and how
organizations can remedy them.
1. Identifying data sources

Data is integral to how an organization collaborates, tracks and reports on ESG.
After outlining ESG goals and identifying which frameworks to adhere to,
organizations need to determine where that data will be sourced. Some of this will
be sourced internally (e.g., wage or diversity data), while other aspects may have to
be sourced externally (e.g., industry benchmarks, third-party vendor compliance
data). Identifying the ESG data your organization will need will be the first
challenge, and you’ll need to quickly determine where you’ll source it.
Ongoing maintenance of ESG data will be another area of focus. Organizations

must ensure their data reflects real-time risks and regulatory developments. ESG
data should remain relevant and timely and, ideally, should update automatically.
Organizations must also ensure that all relevant business units are aligned when it
comes to monitoring and reporting on ESG, and must be confident that any data
they are aggregating is kept secure through internal data systems with the right
protections.
2. Shifting operations and culture where necessary
For many organizations, mapping out their ESG goals is an essential early step on
the journey. However, turning those goals into actions often requires large-scale
operational and cultural shifts. Leadership teams will need to determine how ESG
strategies will trickle down. Department heads and even mid-level managers will
need to feel ownership of the company’s ESG goals and be motivated to
incorporate them into day-to-day processes.
The implementation of ESG technology can go a long way to easing the difficulties
that come with that shift – from peer comparisons and benchmarking, to data pre-
population and regular, auditable reporting. Initiating a coherent and forward-
thinking ESG strategy is the most daunting step for many organizations, but it’s a
challenge made significantly easier by available technological solutions.
28% of respondents are not at all confident there is mature, well-documented ESG capability. Image:
Diligent/OCEG
3. Anticipating future standards and requirements
One of the main points of confusion for organizations approaching ESG is the lack
of a single standardized set of frameworks or reporting requirements. While
governments and regulatory bodies will likely firm up these requirements in the
months ahead, this interim period can be a confusing time for many companies
trying to ensure they don’t place their bets on the wrong horse.
Working from the World Economic Forum and International Business Council
metrics is a good place to start. The metrics, published in September 2020, were
developed as a set of universal and material ESG metrics and reporting
requirements that could be reflected in the mainstream annual reports of
companies.
4. Keeping abreast of stakeholder sentiment
Stakeholder expectations and attitudes around ESG are evolving quickly.

Articulating meaning behind the numbers and percentages is essential when it
comes to getting buy-in from stakeholders and value from a data solution.
Organizations need to be able to keep a close eye on upcoming regulatory
developments and changing stakeholder sentiment to allow them to act in time.
Organizations must consider how they plan on listening to and monitoring the
stakeholder landscape – from their largest investors down to front-line employees
and consumers. Consider predictive modeling capabilities that can tailor insights
and red flags to your jurisdiction, industry and company.
5. Getting your arms around third-party ESG risk
Properly managing (and mitigating) ESG risk across your third-party ecosystem is
imperative in a climate of accelerated change. With heightened investor scrutiny,
third-party risk management strategies need more thought in order to both drive
compliance and mitigate risk. (Scope 3 emissions, for example, account for more
than 70 percent of the carbon footprint of many businesses.) Competent
management of these risks will not only drive long-term value creation, but also
will increase transparency – something particularly important for a number of ESG
stakeholders, from employees to communities to investors.
Ultimately, the ESG data dilemma is one that organizations must resolve in order
to keep pace with the changes that lie ahead. ESG preparedness will continue to
make a real difference when it comes to investor satisfaction, financial
performance and demonstrable progress. In a future defined by the issues of the
world around us, a strong ESG program underpinned by reliable, comprehensive
data is the only way forward.
Russell Reynolds Associates’ Clarke Murphy

Sep 2021 · Meet The Leader
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The No. 1 ESG challenge

This article is part of:

Integration of ongoing, real-time data is key to meeting ESG commitments.

Reporting on ESG (Environmental, Social, Governance) and adhering to disclosure

Have you read?

The foundations of a strong ESG program are built on data. Data-rich

1. Identifying data sources

Ongoing maintenance of ESG data will be another area of focus. Organizations

2. Shifting operations and culture where necessary

3. Anticipating future standards and requirements

Stakeholder expectations and attitudes around ESG are evolving quickly.

5. Getting your arms around third-party ESG risk

Russell Reynolds Associates’ Clarke Murphy

Don't miss any update on this topic

Sign up for free

License and Republishing

SDG 13: Climate Action Corporate Governance ESG

Fourth Industrial Revolution The New Data Economy

Explore and monitor how SDG 13: Climate Action is affecting

Get involved with our crowdsourced digital platform to deliver

More on SDG 13: Climate Action SEE ALL

Humanity is overshooting Earth's planetary boundaries, scientists find

Leadership and Governance

Subscribe to our press releases

MORE FROM THE FORUM

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