The nearly two years of pandemic turmoil have given us plenty of time to think about how we live and work. As the world informs of pandemic restrictions, attention shifts to climate change action.
Corporate responsibility is now one of the major issues in our age. From the Business Roundtable to redefine the goal of corporations to benefit all stakeholders, to the growing number of consumers demanding change, the environmental, social and governance (ESG) efforts of companies are now faced with intense investigation.
At a minimum, investors, employees, customers, and partners expect transparency and action. Responding organizations reap many benefits:
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Improved attraction and talent retention
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Increased shareholder value
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Reduced operating costs
That is before considering increasing regulations. By 2020, 206 new ESG rules will be introduced worldwide. Government and industry bodies are both making ambitious targets with new implications for executive teams and boardrooms across Australia.
The call to measure ESG
The clock hits common standards for measuring sustainability. The rules of double materiality have already come into force in Europe, requiring public companies and investors to disclose the risk their operations pose to people and the planet, along with profitability.
At the same time, the International Business Council of the World Economic Forum identified 21 key metrics of “stakeholder capitalism” to guide executive teams and boards as they embrace these changes.
ESG disclosure developments like this are rapidly reverberating across corporate Australia. Stakeholder pressure for organizations to do what is correct and reliably report progress affects every industry.
Challenges and opportunities
When organizations get ESG right, more transparency builds trust. When regulators, government, and investors trust you, you’re more likely to attract capital investment, win business, and grow loyalty, according to McKinsey.
Consumers are five times more likely to trust companies with strong retention credentials, Edelman added. With the lack of skills affecting Australian workplaces, ESG is also a talent attraction needed. But for many companies, it’s hard to keep up.
Research at Refinitiv shows that businesses establish environmental policies without delivering on targets, resulting in an “intention gap” —a disconnect between policy and targets.
In a 2020 review of ESG initiatives, PwC found that 42% of ASX 200 companies ’reporting was insufficient to be included in its study. According to the report, the challenge is clear for leaders: ESG reporting needs to change — and fast.
Ethical decision making
Many companies in Australia are moving towards regulators and government. Diversified brands such as Canva, Woolworths, Insurance Australia Group (IAG), and National Australia Bank (NAB) are pursuing their ESG ambitions as a competitive distinction.
Australia’s Modern Slavery Act of 2015 was not a conversation for the C-suite five years ago. But now, it is embedded in the governance frameworks of all major corporations in Australia. Meanwhile, cross-sectoral forums such as the Climate Leaders Coalition are setting the bar on public decarbonization targets.
Although holistic ESG reporting is not yet mandatory in Australia, it is best practice on the global stage. As a result, it quickly became common locally. In the meantime, the gap between robust measurement and reporting is widening.
Organizations may already be monitoring many metrics — from enhancing diversity and inclusion to reducing carbon emissions and engaging with First Nations communities. Often, however, the data does not tell the whole story.
Future-ready leaders need better ways to convert big-picture intentions into concrete strategies and processes they can measure and report on.
Leading from above
The measurement is made challenging by the nature of many teams reporting on slightly different indicators, with different departments responsible for different parts of the ESG puzzle.
This makes information difficult to collect, and more difficult to verify and verify. Getting the right data is time consuming, largely manual, and often unreliable. The endless tools and products available to help companies manage individual aspects of their ESG programs have compounded the issue of fragmented measurement.
Despite a trend toward appointing chief maintenance officers, CxOs are ultimately responsible for operational maintenance and management issues. As a result, CxOs carry the hardest — along with the board of directors — when they make a mistake.
As organizations strive to strengthen the relationship between their goal and sustainability actions amid rising disclosure requirements, the reporting requirement for the C-suite is set to intensify. Well-defined performance indicators along with comparable and reliable information will quickly become undisputed as an important foundation for taking measurable action.
Gaining visibility to keep up
In this rapid movement, organizations without cross-functional visibility are lagging behind. An OCEG study found that 28% of executives lack confidence in their organizations with “mature, well-documented” ESG capabilities.
The good news is that best practice management models are evolving as ESG becomes a major issue and the need for investor-level reporting grows. Leaders have now turned to enterprise -wide digital platforms to integrate all of their activity.
Implementing a truly unified approach helps make sense of diverse data to enhance transparency. It also keeps everyone on the same page.
ServiceNow® ESG solutions provide businesses with operational control towers that use specialized workflows to connect and integrate disconnected metrics.
Using the Now Platform® transforms risk reporting into a smooth operating system with a single source of truth. It helps organizations plan, manage, manage, and report on ESG programs and initiatives to drive greater environmental, social, and business impact — and reap the benefits of improved profitability, passion for talent, and shareholder value.
It’s time for businesses to move from manual, ad hoc collection where ESG-related activities are siled across the enterprise, to integrated, digitally transformed operations where ESG activities is embedded in the day-to-day routine throughout the organization.
Learn how ServiceNow ESG solutions can help your organization enhance your ESG strategy and achieve results.
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