WHY AND HOW TO LEVERAGE DIGITAL IN YOUR SUSTAINABILITY PRACTISE

Over the recent years I have been building my capabilities in sustainability reporting and various standards like GRI, TCFD, NFRD and the EU Taxonomy. In parallel I have been working with several clients on projects we call "turning data into value". In these projects we extract huge sets of financial and purchasing data, which we cleanse, harmonise, and present back in a way clients have never seen before, using tools such as Power BI. This enables our clients to take educated decisions based on actual data. In my opinion these two topics are interconnected and therefore I want to focus this article on why you should leverage digital in the sustainability practise and how you can make sure you select the best digital solution for your unique situation.

Finding the right digital solution for you and your company's sustainability work will be key to meet your ESG goals because:

• Data management and analytics are critical enablers to address material issues
• Reporting requirements will increase in the next coming years
• The number of providers offering technical sustainability solutions are massive which makes it challenging find your "fit for purpose" solution

WHAT does it mean?

One of the first steps in your sustainability work is to assess what is material to your strategy. That could be anything from climate change and biodiversity to human rights. The key is to figure out how different issues impact stakeholders and your business so you can prioritise what to focus on.

When you have identified what is material to your organisation you have to define your KPIs and set targets. This could be carbon emission, water consumption and waste as example. As 60-80% of your carbon emission is from scope 3, companies do not only have to be able to calculate their direct or indirect emission, but they also have to include emission from their suppliers and customers i.e. through the complete value chain. Data management and analytics are critical enablers to address material issues as doing this without digital support would make the process highly inefficient. Digital solutions that could for example be used for:

• Supply Chain Traceability to help you understand the journey of your products
• Supply Chain & Supplier Transparency solutions to measure performance of overall Supply Chain
• Supply Chain Risks & Risk Monitoring to help you understand, address, and monitor risks across the Supply Chain
• GHG Footprint solutions to facilitate calculation of GHG emission

Reporting requirements will increase in the next coming years. Switzerland and UK for example, are making TCFD mandatory for listed companies and earlier in November the European Parliament adopted the Corporate Sustainability Reporting Directive (CSRD). When CSRD enters into force the number of companies obliged to report in accordance to this standard will increase from 10,000 to 50,000. This obligation will cascade down and indirect impact most companies both in the European Union and outside because:

1. Companies obliged to comply with CSRD will request sustainability information from ALL their suppliers
2. Financial institutions who have to comply with SFRD (sustainability reporting on financial products) will request sustainability information from ALL their portfolio companies.

There are many good solutions on the market that can help companies with sustainability reporting.

There are very advanced End 2 End solutions in which carbon emission calculations are included, and which you can connect via APIs to your utility and financial system. These solutions offers both internal performance tracking with dashboards and external ESG reporting using the standards applicable for your company.

There are also more simplified solutions that guides you through all steps from materiality assessment to final ESG report, with data added manually or via upload sheets.

The number of providers offering technical sustainability solutions are massive, hence it is important to have a strong selection process (see HOW it works).

WHY it is important

Digital technologies deliver gains in efficiency and productivity by speeding up processes and streamlining operations.?IBM showcased?bots that completed tasks 20 times faster than humans, and they generally don't make errors like people do. Business intelligence software and data analytics tools can collect and analyse data at a speed and accuracy unmatched by humans. Workers then use that analysis to help them make decisions faster than they could without advanced technologies.

To remain as efficient as possible, companies must integrate sustainability reporting into their annual year process and by leverage sustainability reporting tools you can ensure efficiency, accuracy, and consistency of data, both financial and non-financial.

Organizations that embrace digital technologies are better able to quickly adapt to shifting market forces and show greater agility.

Digital strategy and sustainability are increasingly important and increasingly intertwined. In a recent study of 400 executives from various industries and regions conducted by Bain & Company and the World Economic Forum, 40% of respondents said they believe digital technologies are already having a positive impact on their sustainability goals.?

HOW it works

The process I will share with you is a process I have used successfully, both to identify partners in the ESG reporting space, and to help clients select other technical solutions to boost their performance.

When you are considering leverage digital in your sustainability practise I therefore, recommend this 5 step process.

The first part is the Assessment Phase in which you collect ALL stakeholder requirements, group the requirements, and give an importance weighting to each of the requirements.

When that is completed, you create a list of all solutions that potentially could meet your needs.

Next step is your market research when match potential solutions in the market which your list of requirements. The output of this phase is a list of 5-10 solutions with whom you what to engage.

In the Engagement Phase you launch your RFP and do Demos to further enrich the scoring against your list of requirements established in the first phase. The output of this phase is a signed contract with your selected solution, and you are ready to implement the solution that is best fit for your organisation.

Key critical success factors in the process are:

• Make sure you take the time to understand and document ALL Stakeholder requirements and do not deviate from these requirements during the process (have a clear and aligned vision of what the solution will deliver).
• Have a small and dedicated project team representing key Stakeholders to stay focused on the vision, and be clear on your time plan (have a feasible plan).
• Make sure you start with the bottom layer in the pyramid instead of jumping directly into a short list. There are so many solutions existing on the market. Some are industry agnostic, others has very specific functionalities for specific needs. You want to make sure you find the solution that Best meet your requirements (build your capabilities).
• Business and IT must work together leverage the strength of each team (utilise your capabilities).

For those of you who have read the article from Federico M. Urso on successful change management will see that the critical success factors are linked to each of the steps in our Change Model.

What is coming next?

I hope you found this article helpful. If you would like to discuss or have any questions, I am happy to continue the discussion with you.