Disclosure of and transparency around corporates’ Environmental Social and Governance (ESG) metrics is fast becoming central to managing risk and meeting the expectations of customers, investors and employees. There are two main drivers behind this trend.
First is the increase in regulatory oversight around ESG disclosures. For instance, the Chancellor has announced that the UK will become the first country to enforce disclosures aligned with the Task Force on Climate related Financial Disclosures, a measure that goes beyond the EU’s “comply or explain” approach, as adopted in its Sustainable Finance Disclosure Regulation. The direction of travel is clear: enterprises increasingly need to be open about their ESG metrics and ready to report on them.
The second driver is stakeholder capitalism. Consumers, employees and investors alike are demanding more sustainable business practices and greater transparency. Increasingly, the ability of a business to attract the best talent, grow the customer base and secure financing are linked to ESG performance.
The data imperative
At heart, ESG reporting is a data management issue. Each stakeholder brings their own set of challenges to the table. For corporates, the key issue is how best to manage disintermediated data across their business and supply chains. Regulators are looking for ways to ensure corporates are compliant with their ESG data. Investors are thinking about how they can bring ESG data together for analysis. And all stakeholders, including customers, are demanding new levels of data visibility.
These interlinked challenges lie under what is a highly complex value chain and data flow:
- Identify data requirements from regulations or reporting demands.
- Consolidate data from disparate source systems into a structured, accessible and manageable location.
- Synthesise/cleanse the data.
- Analyse and visualise the data for value.
What makes this data flow so difficult to achieve is that ESG data is often siloed across business functions. Integrating and analysing these data sets using only corporate systems is resource intensive and demands access to highly skilled technicians and data scientists – skills that are in great demand and therefore hard to come by. Firms need access to timely, high quality and rich data – all too often they are hampered by inflexible systems and poor visibility into their data estate.
The case for the cloud
The specific set of requirements around ESG data management make cloud the platform of choice. This is because the cloud enables organisations to unify all relevant ESG data in a single source of truth that can then be distributed and analysed to meet various use case requirements, at speed and at scale. In this model, cloud service providers enable a positive feedback loop that dynamically alters the visualisation/data and reporting requirements of the ESG data demand. There are four key benefits to managing ESG data in the cloud:
- Assurance. Cloud-based tools can enable companies to source and synthesise data straight from the source systems. The approach delivers a complete set of quality assured data to provide the best possible foundation for downstream use cases.
- Integration. A modernised data architecture in the cloud inclusive of data lakes breaks down ESG siloes across the supply chain, creating a single source of truth to meet all end user requirements.
- Standardised and reportable data management. The cloud can enable easy and timely access to reportable data so corporates can improve transparency and meet their requirements to stakeholders and regulators.
- Scalable analytics. Hyperscalers and their data marketplace enables seamless access to advanced AI analytics tooling, helping organisations turn ESG data into meaningful information and actionable insights, at improved speed.
The requirement for sustainable business means that organisations must find a way to tame complex ESG data and turn it into an effective platform for compliance, analytics and reporting. The key to success lies in breaking down data silos and accelerating the flow of high-quality data to where it’s needed by modernising your ESG data foundation in the cloud. Those that get the cloud data journey started first will be well-positioned to not only win the trust of their stakeholders, but to ensure the organisation is ready ahead of any future rule changes.