Publicly traded companies are filing ESG or sustainability reports alongside their financial reports, thanks to the mindshift of investors, consumers and employees towards the new culture of “stakeholder capitalism”. The CEO of Blackrock, Larry Fink who coined the term, wrote in his annual letter that “capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper. This is the power of capitalism” and further added that “In today’s globally interconnected world, a company must create value for and be valued by its full range of stakeholders in order to deliver long-term value for its shareholders”
Enterprises understand that there is a change of consumer and employee culture and the topic has to be addressed. This is not a ‘nice to have’ any longer. It is a must have. The change has to start with top management, as the organization has to consider the different tactical changes and action items as well as building a real strategy around the full array of all ESG components that would correlate with, and lead to true business impact. New processes and KPI’s need to be implemented including developing some new language and firm culture that supports the change. From an organizational perspective, new roles should be created, with a dedicated new member or members with roles and responsibilities that will be to lead the ESG transformation, even if in baby steps, but still, there should be an owner and leader that will implement the new important changes.
The implementation of digital processes and the emergence of new digital tools in the ESG data space will help organizations successfully implement the ESG transformation and become more efficient and could help them become the ESG pioneer in their respective domains.
I have personally led one of the largest digital transformation processes in the IDF (Israeli Defense Forces) which was extremely complex in terms of strategy but also tactically highly challenging. Nevertheless, the transformation process, however tedious, was highly inspiring. The different levels of reporting, from the frontline teams all the way to the headquarters, the flow of information in real time were highly important and it was truly meaningful to segregate in some cases or in other cases to combine the right pieces of information to the right teams or executive levels, to be able to eventually support good decision making, often times in real time and in a collaborative manner.
Along the process, the organization had become more efficient, not having to spend the resources and energy in the data collection and make all processes more efficient.
The transformation of ESG data in large organizations will most likely be no different. Today the ESG executive teams are mostly busy with the complex and tedious data collection process. Hundreds of parameters of the E, S and G need to be collected, transformed, standardized and checked in order to compile the ESG/Sustainability report. The information flow and collection process inside the organization is tedious and often unclear. Frontline teams input data that needs back and forth standardization, checking and rechecking, data is missing and analysis is not serving the right teams in an efficient manner. With the ESG data transformation, teams will have more time to invest in decision making rather than just the pure process of data collection, hence becoming more efficient and supporting the ESG transformation that will lead to true business impact.