The need for rapid digital transformation in the face of ever-evolving market demands is not news. There are ways that businesses can work much smarter however through aligning strategies for ESG alongside plans for digital transformation. Both efforts require effective data capture and sit alongside business development initiatives. The leadership team therefore and particularly those within technology have a huge opportunity to future-proof their organisations.
What is ESG?
ESG or environmental, social, and corporate governance is the term applied to data that reflects any negative external cost caused by a business or organisation to the environment, society, and through its corporate governance. The term ESG first appeared in 2004 in a report commissioned by the UN entitled Who Cares Wins. This desire for businesses with sustainable practices and a conscience around social justice has accelerated in the last few years alongside an increased focus on diversity and inclusivity within our businesses. Essentially it is data that examines how the products or practices of any business have an impact for example any contribution to greenhouse gases, and pollution, how it manages energy efficiency and so on. In terms of social data, it would consider diversity, equity, and inclusion alongside working conditions and employee engagement. In terms of corporate governance, the data would encompass diversity at an executive level, management, cyber security, and privacy.
Aligning goals and progress with your business
The first step in both digital transformation and ESG strategy is to gather the data. Once organisations have the information, they will need to decide what their priorities are and how their leadership team will manage these efforts. This can’t be a box-ticking exercise and businesses must shape their strategies around their goals and ambitions for their company.
Companies need to ask questions such as how these issues impact our business, customers, employees, and stakeholders. What does our working group look like who will develop strategy and implement change? How will we manage this process and ensure we are accountable?
Stages of ESG and drivers
It is easier to think of this process in stages:
- Data collection
- Working group for data interpretation
- Strategies developed with distinct areas
- A high-level team assess progress and measures effectiveness
It’s been suggested that ESG has a twofold mandate, in the first instance driven by investors who want to push finance into ethical organisations that show a commitment to service and produce with minimal social and ecological impact. The other driving force is consumers’ buying habits that show a desire to spend with companies that demonstrate good practices in the way they manufacture and operate.
Any changes and implementation begin with frequent transparent reporting of environmental impact and awareness of diversity and social justice. Inevitably this sits alongside digital transformation as organisations look for solutions to make them more energy efficient and reduce carbon emissions. Evidencing changes and progress in terms of social justice and corporate governance require smart data collection and the tools to interpret the information. Organisations must have visibility of data and joined-up strategies to utilise digital transformation to facilitate improvement in their ESG goals.