Key Insights to developing an actionable ESG strategy – Insight #2 - Establish and execute on a digital strategy

Incorporate digital technologies to accurate and efficiently track progress toward ESG commitments

Welcome to the third article in the series on developing and activating a successful sustainability program. The?first article?included an overview of the three insights, which are based on recommendations from sustainability leaders at Fortune 500 organizations and other leaders in industry. Then, in the second article, we examined ways to develop a Bias for Action to propel sustainability programs. Today, we discuss the second key insight for developing an actionable ESG strategy: establish and execute on a digital strategy.

Three core components of a digital ESG strategy: data, analytics, and visualization

David Allen , the VP and CSO of PepsiCo Foods North America, highlighted the importance of digital technologies in successful ESG programs during his recent presentation at the recent North American Sustainability and Responsibility Summit (NASRS) when he emphatically stated:

“Digitization enables improved sustainability decision making throughout organizations.”

Digital technologies play a fundamental role in successful ESG program development. Why? "If you can’t measure it, you can’t change it." as management guru Peter Drucker once said. ESG professionals that leverage digital technologies are able to more accurately characterize, monitor, and socialize the impacts of their ESG programs. The three core components of a robust digital ESG strategy include:

• a comprehensive set of data sources consistently tracked via a cloud-based data platform
• analytics to monitor KPIs, characterize ESG impacts and prioritize initiatives
• visualization tools to easily track progress

Core building block of an ESG strategy: populate a cloud-based data platform with key ESG data sources

A fundamental step in developing an actionable ESG strategy is to identify the data sources required to calculate key metrics used to track ESG progress. This is done via a materiality assessment and data collection exercise. Briefly, a materiality assessment identifies the greenhouse gas categories that apply to your business. The data collection exercise (aka digital Easter egg hunt) identifies the available data sources that will help in calculating important sustainability KPIs. For further details on these important steps in ESG program development have a look steps 2 and 3 of my prior article on Insight 1: Develop a bias for action.

Once the key data sources that are fundamental to ESG metric monitoring have been identified, it is fundamental to track those metrics in a cloud-based data platform, such as Microsoft Azure, AWS, or Google Cloud Platform. Four key reasons to do this include:

1. facilitate the collection of key data sources
2. provide a system of record for compliance purposes
3. provide an easily accessible, single source of truth for sustainability related data throughout organization
4. provide an important data set for ESG analytics and visualization tools to reference

Leverage ESG software solutions for analytics and visualization

Actionable ESG programs are focused on achieving targets for specific KPIs, such as reducing carbon emissions footprint, water consumption footprint, and percentage of recyclability of products. Calculating these metrics is simplified once a robust data platform with key data metrics are in place, as described above. Organizations should then leverage ESG software solutions to calculate and monitor progress of these KPIs.

The final two components of a robust digital strategy are to leverage a set of analytics and visualization tools that enable ESG leaders to: characterize performance across key ESG metrics, monitor progress toward ESG targets, and prioritize initiatives based on expected impact. Frequently organizations select a single ESG software solution that tries to provide all of the above benefits, such as Persefoni, Sphera, or IBM Environmental Intelligence Suite. While there has been strong progress in the ESG software market over the past year, each of these solutions have their strengths and weaknesses. Examples of strengths and weaknesses of industry leading ESG software solutions include:

• Persefoni - industry leading carbon emissions tracking solution that simplifies regulatory compliance reporting but limited ability to track water or social KPIs.
• Sphera – integrates compliance, reporting and performance management into a single solution but limited scenario planning to characterize potential impacts on KPIs
• IBM Environmental Intelligence Suite – strong analytics and weather forecasting capabilities but limited cost-benefit analysis

Given the evolving nature of ESG software market, organizations that are considering investing in an ESG software solution will frequently find it helpful to engage a vendor agnostic, trusted consulting partner to help navigate this complex landscape and to select an ESG software tool that best meets their needs.

Conclusion – Establish and execute on a digital strategy to accelerate sustainability programs

At NASRS, Rose Shaver, LEED AP Associate Director of Sustainability at Schneider Electric, highlighted the importance of digital technologies in an actionable ESG strategy when she said:

“It all starts with data [and digitization]…You’ve got to get your data accurate.”

A digital strategy is fundamental to a successful ESG program. By taking a data-focused approach, ESG leaders are able to accurately monitor progress toward their ESG goals and propel ESG initiatives. Organizations that incorporate the three core components of a digital strategy, including data, analytics, and visualization, will be able to efficiently and accurately monitor their organization’s progress towards its ESG targets.

Next up - A detailed look at Insight 3 – Secure collective engagement and personal ownership for sustainability programs

In our next article we will take a deeper look at the third and final insight to help organizations develop and activate a sustainability program, namely Secure collective engagement and personal ownership for sustainability programs. Until then, take care and keep the rubber side down…??????

Ryan Schmidt is a leader in?Cognizant's?North America Sustainability practice. He helps clients to create and implement actionable sustainability programs that leverage digital technologies to accelerate their initiatives. Ryan has an extensive background leveraging data and analytics to unlock new business outcomes especially in the high tech, retail, manufacturing, and public utility sectors. In his spare time he enjoys riding his bicycle, coaching youth basketball, and spending time with his wife and two children.?Last weekend, after coaching his son's YMCA basketball team to a league win, he captured 2nd place at the third of eight races in the Texas State Mountain Bike Championship Series, this time in Abilene, TX.