October 10, 2022
Embedding ESG transformation into the future enterprise
6 Min Read
Trust is fundamental to every action, every relationship, and every transaction in our digital, data-driven world. It’s the glue that binds sustainable digital transformation efforts.
Digital trust programs have traditionally focused on data protection and the reliability, security, and integrity of products and services. Going forward, however, trusted organizations will need to extend their goals beyond ensuring privacy and cybersecurity.
As societal expectations around responsible business practices toward environmental stewardship, social justice, and good governance have gone mainstream, businesses are increasingly expected to embed these into broader value-based goals. At the same time, they must still comply with public policy and regulatory demands.
Achieving the right balance means integrating Environmental, Social, and Governance (ESG) factors into the heart of an organization – and that requires more than just words. Today, an organization’s ability to demonstrate its ESG credentials, transparently, has become a strong business differentiator and critical part of trust conversations with stakeholders. Tomorrow it will be an essential quality to survive.
Looking for insight into embedding sustainable business practices into your organization’s operations? Download the IDC Topline Report: Trust for Sustainable Business
Beyond compliance: The business value of ESG in trust transformation
ESG issues go beyond just climate change. Broader concerns around the environment and biodiversity are gaining attention, as are social, health, and safety issues such as diversity, inclusion, and workers’ rights. Consequently, ESG topics are being incorporated into organizations’ activities and becoming a trigger for trust transformation. IDC predicts that by 2024, two-thirds of organizations worldwide will be tracking their diversity, equity, and inclusion performance using ESG metrics and KPIs.
Forward looking organizations realize that advancing ESG criteria and assessing their financial value is becoming a business imperative rather than just an exercise in regulatory compliance. Ultimately, an organization’s governance and culture will be critical drivers of its performance on ESG matters and its ability to drive positive change. An IDC survey of 305 business leaders found that ESG drivers have become more linked to business value. The top four drivers were cost savings (37%), brand and trust (35%), product innovation (34%), and customer demand (33%).
How business leaders are prioritizing ESG programs and metrics
Organizations are elevating ESG sustainability from ‘nice to have’ projects to major strategic initiatives, often led by the CEO, CFO, COO, or increasingly a dedicated Chief Sustainability Officer. This includes adhering to ESG reporting standards and frameworks and using consistent, comparable metrics to capture, assess, report and benchmark relevant sustainability information. According to a 2021 IDC global sustainability survey, the most commonly tracked ESG metrics were:
ESG criteria factor strongly in partner and supplier selection
Organizations are also looking to surround themselves with trusted partners that share their values and vision of a better world. As a result, procurement teams across the globe are incorporating sustainability criteria into their supplier selection process. Seventy-two percent of respondents in IDC’s ESG Business Services End-User Survey stated that ESG and sustainability factor highly into their technology and services buying decisions. And in Europe, half of organizations already integrate ESG KPIs into their partner selection process.
Why ESG programs require an integrated approach
The complexity and multi-faceted character of ESG requires an integrated business approach spanning people, processes, and technology. Organizations are best positioned if they’re able to be transparent with auditable data and reports; and make this information publicly available. Ultimately, ESG requires measurement, management of unique data sources, progress reporting, and taking action to improve performance. While companies see clear value in having an integrated strategy, they cite a lack of ESG expertise, organizational visibility on sustainability posture and lack of operational technologies as barriers to reaching their goals.
IDC ESG Survey, 2021
Driving ESG impact and trust transformation through technology
By enabling a move away from manual, spreadsheet-based data collection to automated processes, integrated ESG platforms can help organizations increase the efficiency and productivity of their sustainability initiatives. Almost all (99%) of respondents in a global IDC survey would like an integrated sustainability solution with 85% saying it would be highly valuable or a game changer. These platforms provide organizations with the tools required to measure environmental and social impact, as well as track and report on internal governance. This helps businesses implement policies that reduce risk and uphold compliance, while also communicating more effectively with internal and external stakeholders.
Key considerations for an ESG solution implementation
Defining factors for a successful ESG platform include modular deployment capabilities, a comprehensive data collection and aggregation system, and broad compatibility with reporting and rating frameworks. Alignment with business needs is of paramount importance in ESG technology deployments. In practice that means identifying areas where efficiency improvements (energy, product) meet both economic and environmental objectives. Implementation will have diminishing returns if the organization has not committed to embedding sustainability into its business strategy. Further operational considerations include:
- ESG risk management. Risk frameworks, governance, and accountabilities should be aligned to consider ESG risks, enabling better management and strategic decision making. ESG technology can automate some of the processes involved in assessing your risk posture. Integrate key initiatives into awareness training, company policies, and mission statements to boost company culture, and drive responsible attitudes and actions.
- Internal stakeholder buy-in: Stakeholder commitment to sustainability initiatives is key for success. Embedding sustainability champions within functional business areas can facilitate successful deployment.
- Metrics matter: Without performance indicators, any technology deployment cannot be used to its fullest potential. KPIs should be developed to continually track performance and drive desired outcomes.
Organizations cannot just wait and hope that things will all work out. Instead, they need to get ahead of future ESG issues and events by building purpose into their business models. Now more than ever integrated ESG platforms can accelerate performance by delivering the visibility and velocity required to inform and drive better governance and multi-stakeholder collaboration, while recognizing opportunities for business transformation.
Ready to build organizational trust, lead the market, and grow your competitive advantage? Download the IDC Topline Report: Trust for Sustainable Business
About the Author
Vladimir Kroa is an Associate Vice President based in Prague, Czech Republic, and leads the European Sustainable Strategies & Technologies practice. In this role he created various analytical frameworks, such as the sustainability readiness framework mapping European organizations’ journeys to incorporate sustainability principles into business operations. He also developed an assessment to evaluate technology vendors’ achievements, efforts, and strategies in areas of corporate and social responsibility as well as environmental sustainability.