Achieving ESG success through data-driven goals
What you’ll find: Why you should treat ESG as a part of the entire business cycle and how such an approach can bring innovation to your business.
You might hear words like — Net Zero or Net Positive turning up in companies’ financial statements. If you think this is only related to financing, then you might be wrong. Given that 75% of young shoppers consider ESG issues while making purchase decisions and investors are considering shunning companies with low ESG ratings, it is a major concern for all the functions of the organization. Today let’s take a step back and dive into the ESG data analysis and how ESG reporting is driving the ESG Goals.
Let’s start with the basics: What is ESG?
ESG stands for Environmental, Social, and Governance.
E — Environmental (Carbon Emissions, Water Stress, Carbon Footprint, Biodiversity, etc.)
S — Social (Labour Management, Supply Chain Labour standards, Privacy, Data Security, Access to communication, etc.)
G — Governance (Accounting, Board, Business Ethics, Tax transparency, Governance, etc.)
These are a few of the metrics that are used for calculating ESG goals and ratings. The information given is used to evaluate a company’s track record, risk exposure, and possible future financial performance.
Impact of ESG Assessments
Why is it important to assess and decrease your carbon footprint or find more sustainable ideas? Why are new age “NFTs” and “blockchains” under scrutiny for their environmental impact? Why are companies from all sectors thinking about the environmental impact of everything right from their data storage to their logistics? The need is three-way.
One — Investors: 80% of investors consider sustainability criteria in their investment decisions. (Source: FTSE Russell, An LSEG Business)
Two — Consumers: 71% of consumers prefer to spend more on a brand that’s committed to climate action (Source: IBM Institute)
Three — Employees: 70% of employees are more inclined to work for a company with a real CSR approach (Source: Deloitte)
💭Think of it this way: POV: You go to a restaurant & find that the employees are humble, the food is nice, and the owners give leftovers to the needy. Would you be highly likely to leave a review for this as compared to a normal restaurant? Comparatively Yes. Would you be more inclined to come back to it again? Most likely Yes. Would people be willing to work there? Probably Yes.
Given that Bursa Malaysia and London Stock Exchange are rolling out a centralized sustainability reporting platform for Malaysia, it can be seen how important organizations and governments are treating sustainability.
Is it just for external benefits?
100% Not! Companies that work on ESG goals see tremendous value both in the form of quality and % savings. According to a report by Capgemini, organizations that pursue sustainable development can see improvement in their revenues by 63%.
How can Polestar improve your organization’s sustainability efforts?
Some of the use cases of such saving can include:
- Energy Efficiency: Cleaner energy sources can be adapted when needed by monitoring wind rates.
- Wastage Reduction: Amazon, with warehouse-level AI implementation, has reduced packing requirements by 33% i.e. saving ~ 915,000 tons of packaging materials. By continuous tracking of emissions at industrial sites, methane leakages, etc. can be controlled.
- Supply Chain Optimization: By effective tracking of logistics, inventory, and supply chain for Scope 3 emissions and unsold stock you can identify bottlenecks to reduce overstock or understock. By optimizing routes — organizations can reduce fuel consumption and increase asset lifecycle.
All of this is in addition to the requirements by banks and credit unions which look for gender representation and diversity as checklists, reduction of carbon emissions, Government looking at the energy efficiency of buildings for value, and tenders needing stricter ESG norms for success.
As such, ESG Governance and goals can be considered a need more than a want for organizations.
Where can you start your ESG or sustainability practice?
The answer is simple: Data.
Not every data that you have. But for starters look at the points where you think there are a lot of resources that are being under or over-utilized. It can be your logistics data if you are a CPG or Manufacturing company. You can take a look at your governance and work practices if you are a service-based company. Anyway, it would be up to you where to start. If you are looking for a direction.
Try this. Here’s a beautiful infographic by Greenly | Certified B Corp about Scope 1, 2, and 3 emissions. Think about what you are able to calculate, what you are not, and how can you, if you aren’t.
The benefits of ESG disclosure, according to a survey by Deloitte include more than half citing talent attraction and retention (52%), increased efficiencies and ROI (52%), and building stronger stakeholder trust (51%)
Why is ESG a data challenge primarily?
Right from identifying the right alternatives for sustainable design to finding recyclable and reusable sources — everything starts with identifying the current flow and bottlenecks. But what most companies face are:
- No Automated data collection and integration capabilities
- No availability of real-time insights
- Limited visibility across the data of the entire organization
- Time-consuming ways to create reports
- Inability to track indirect emissions
- Unable to identify opportunities for sustainable initiatives
This is what one of our clients faced too. We helped them reduce Scope 3 emissions and streamline ESG across 4 regions by establishing a data lake on AWS and visualization on Qlik Sense.
With effective data collection, you can bring control to the data and ensure more reliability to find insights. This is what our client had to say about us:
You can find the detailed case study here: Revolutionizing ESG Analytics
If you want your ESG Analytics maturity assessed or implemented, feel free to drop us a message
The Role that analytics, AI, and ML can play in attaining ESG goals
Though the nucleus of the entire ESG ecosystem is the data, you would need data analytics and the capabilities to transform the data to effectively form an element out of it. As such use of analytics, AI, and ML is the way to go.
For example, let’s take all the aspects of a normal product lifecycle and look at how analyzing data can improve not only their sustainability goals but also their processes and operations as a whole.
Product Innovation: Bringing sensors into some consumer durable goods can increase the performance and the lifecycle duration of the product. Bringing in new technologies can reduce raw material wastage. For example, Nike in 2018 announced leveraging 3D Printing technology to design the synthetic upper portion of the shoe to reduce wastage.
Sourcing: By tracking the entire raw material cycle from source to consumer can, not only bring visibility into the Scope 3 emissions but also gain an upper hand in responsibly sourcing items which is not only an advantage in consumer choice but also international trade restrictions.
Manufacturing: You might have heard the word “Digital Twin” a lot by now. Though this is just one of the key examples, bringing in the visibility of the operations for enhancing quality like lean six sigma practices can decrease the production of defective items, and keeping a digital track of records can help with energy consumption and improve resource utilization.
Distribution: Logistics is still one of the major pain points for companies that are trying to reduce their greenhouse emissions. Some companies like Alibaba use AI-based algorithms to reduce travel distance for their logistics by 30%.
Reverse Logistics: IKEA partnered with Optoro to improve its circular economy and find ways to reduce the waste in the reverse supply chain and find ways to improve customer experience. Organizations can divert over 99% of landfill return products and reduce waste by up to 90%
Sustainable IT: Most people tend to forget Governance and IT waste in their ESG Goals. For example, Research shows that every Google search releases roughly 0.2 grams of CO2 emissions, and with 3.5 billion searches a day, it amounts to ~ 40% of the internet’s carbon footprint. But they have been offsetting their emissions, bringing locally sourced carbon-free energy, and announcing features to help people make more sustainable choices.
You can start at any point in your product lifecycle or supply chain, but start thinking about ESG.
It is never too late.
If you made it here.
