Most companies are increasing their ESG efforts, moving sustainability out from corporate social responsibility and connecting it with their business strategies. Increasingly, the ability to drive net positive impact is becoming a competitive differentiator. But making this change is not straightforward.
Businesses face five key challenges in implementing their ESG agenda:
1. Lack of transparent and accurate data: In order to have reliable, complete, and compliant disclosures and reporting, companies need to capture investor-grade ESG data. This is difficult to do when a company is collecting and reporting data manually and from multiple sources. Disparate, fragmented, and unstructured data also makes it difficult for organizations to gain real-time, actionable insights into their ESG efforts.
2. The need to connect ESG to supply chain and procurement processes: Supply chains carry ESG risks and opportunities, so companies are looking to embed ESG risk mitigation strategies in its supplier management program and obtain ESG-related data – much of which is on scope 3 emissions accounting for nearly 70–80% of total emissions – from suppliers to improve visibility of third-party practices.
3. Lack of standardization in ESG reporting: With proliferating standards to choose from nascent regulatory guidelines, companies run the risk of non- standardized and inconsistent reporting.
4. Limited ESG expertise: Many companies do not have the right skillsets in place to understand sustainability risks, their impact on the business, and established governance and assurance processes. Few companies have the knowledge, capacity, data, or experience to handle the full range of ESG requirements.
5. Limited use of digital technology and analytics: Several organizations still put in significant manual effort to collect, consolidate, and report ESG data and obtain actionable insights, limiting its ability to deliver investor grade ESG information.