Leveraging ESG data alongside strategy creates effective ESG programs By Chad Spitler and Joseph Vicari
The demand for sustainability reporting has been on the rise over the last two decades. In 2022, a record 96 percent of the S&P 500 published sustainability reports and more than 18,700 businesses disclosed their climate data with CDP. ESG disclosures are becoming increasingly necessary to operate, with access to capital at risk for those that don’t build rigorous measurement and disclosure practices.
But producing ESG disclosures is not a simple process. Effective ESG programs require both a strong baseline of scientific data and a creative lens to decode the data and craft a successful engagement strategy. The art of ESG is the application of data and standards to a company’s unique business model, and the integration into its corporate strategy.
As ESG regulation ramps up, we believe sustainability programs need quality data and an ongoing lens of analysis. Read on to explore how companies can weave data and strategy into a strong sustainability program that leverages both art and science.
The power of data in ESGDeveloping an efficient process for identifying and updating key data is critical for a successful ESG program.
While much of today’s ESG data is self-reported, companies are increasingly expected to produce ‘investment-grade’ ESG performance data, aligning their information with industry-leading frameworks.
A good set of data can help determine what information is relevant in future disclosures and allow your company to analyze its progress over time. In 2023, there are a number of data-management solutions on the market that address the process of collecting, analyzing and reporting ESG data.
For new entrants to ESG, now is the time to begin leveraging these tools in order to create a reliable, repeatable process to compare your data against competitors’, explore relevant metrics and get into the habit of collecting data, year over year.
Customize your metrics from industry standards that are relevant to your ESG performance.
Use those metrics as a baseline to set goals and improve.
Integrate your metrics into your corporate strategy.
Report out your continuous improvement.
Using data to create goalsWhile scientific data is a powerful tool, data is just a starting point for a field as complex and human-driven as ESG. Translating your data into actionable goals is the first step toward creating an exceptional ESG program.
To truly leverage your company’s ESG data, you must define the problem you want to solve and think critically about how your data will tell a story. Key performance indicators and metrics can speak volumes about your company’s values and mission, and offer an excellent opportunity to create meaningful sustainability goals.
Successful ESG efforts use data to track business outcomes but also to create roadmaps for advancing sustainability strategy and to build internal capabilities.
Taking a step back and synthesizing the data provides a unique opportunity to make your corporate strategy more resilient and create goals that can better inform resource allocation, motivate employees and help your company prepare for risks. While data provides a great baseline of insights, artful ESG programs turn data into action plans, year after year.
Turning data into better action Beyond data and goals, great ESG programs are rooted in the successful communication of a clear story that conveys the good, the challenging and the long-term vision.
A good ESG report will give a summary of disclosures; a great ESG report will tell a compelling story of purpose and impact, helping to reach investors, attract key talent and support customers’ decisions to buy from you rather than a competitor.
By taking the time to analyze and develop stories from the data, companies can get proper credit for their work, highlight burgeoning trends and, ultimately, avoid the risks of shareholder activism.
Here is where the art and the science in ESG truly join together: leveraging the stories surfaced by your company’s high-quality data into opportunities to engage your stakeholders and communicate impact.
Successful ESG programs need a well-rounded, balanced approach, leveraging both scientific data and artful strategy. Without the benefit of human-driven analysis, your data story may become unmoored from its purpose or, worse, become misaligned with your business strategy. As an ESG practitioner, it is essential to recognize that both sides are integral to your company’s success.
Joseph Vicari, managing director and ESG practice lead at Broadridge, and Chad Spitler, founder and CEO of Third Economy, in strategic partnership advise firms across nearly every industry on proactive shareholder engagement, offering practical strategies to navigate trends in corporate governance.
Broadridge, a global fintech leader with more than $5 bn in revenues, provides the critical infrastructure that powers investing, corporate governance and communications to enable better financial lives. We deliver technology-driven solutions that drive digital transformation for our clients and help them get ahead of today’s challenges to capitalize on what’s next.
www.broadridge.com
Third Economy is a sustainable investment research and consulting firm. We work with corporations and institutional investors to understand how sustainability factors impact financial value. Our clients leverage this understanding to enhance and promote their own capabilities, thus building a more sustainable economy: a third economy.
www.thirdeconomy.com
