ESG Data Management: How To Navigate It Successfully in 2022

Kezia Farnham

ESG (Environmental, Social, Governance) is firmly moving front and center. Companies are keen to align with consumer habits as buyers prioritze sustainability, provenance and ethics. Evolving to adapt to this new world sees organizations appointing Chief ESG Officers, prioritizing ESG strategies and recognizing the need for robust ESG data management.

Historically, ESG compliance has been lightly regulated, if at all. Companies have been free to report on their successes with little in the way of benchmarks.

However, as our recent blog exploring the shift to ESG noted, there is a move toward more transparency and rigor in ESG reporting. In tandem, investors and asset managers use ESG data to evaluate companies’ attractiveness. All of which makes a clear framework for building and managing ESG initiatives a necessity, not a nice-to-have.

Underpinning this clear framework is a need for meticulous ESG data management. Here we look at what the term “ESG data” encompasses, why data is crucial to your ESG strategy and how you can deliver best practice ESG data management.

 

What Do We Mean by ESG Data & Management?

ESG data can describe any data relating to an organization’s impact on its environment, community and surroundings.

It’s this very breadth of ESG data that can make ESG data management challenging. Examples of what you have to assess include:

It’s a big ask!

The data points are varied, the routes you take to capture this data are diverse, and how they are reported differs widely. Little wonder ESG data management is a daunting topic for many organizations.

 

Why Is Data Crucial To Your ESG Strategy?

What gets measured gets managed; it’s a well-worn phrase but no less true. ESG, as with any other business strategy, depends on regular monitoring and accurate data to track progress, identify performance outliers and prioritize action.

Research shows that investors are increasingly using non-finance data to inform investment decisions. ESG data is preeminent here, forming a growing element of disclosures, regulatory reporting and investor sentiment. Your ESG data management strategy underpins your ability to provide accurate data that will set you apart as a potential investment, supplier or employer.

ESG Data Challenges

We’ve touched on the diverse nature of ESG data. But this isn’t the only challenge when striving for best practice ESG data and analytics management.

ESG data tend to be non-traditional. Therefore, businesses generally have no precedent for collecting it. New processes and data capture need to be established.

This also means that comparisons and benchmarks can be hard to come by — or misleading. Comparing a tech company to an energy firm on equal pay, for instance, is valid, but making the same comparison on your carbon footprint might be meaningless.

And, because ESG data and analytics management is a fairly new science, there are few agreed approaches or best practices. These challenges make it difficult for organizations to start their ESG data management program.

 

How the Best Businesses Are Evolving ESG Data Management

Despite the challenges, organizations across sectors are perfecting their ESG data management strategies, evolving from spreadsheet-based processes that rely heavily on manual inputs toward structured ESG data capture and visualization that enables board-level insight.

By capitalizing on digital capabilities, businesses can move the dial on ESG data management, bringing a degree of automation and precision.

 

What Does Cutting-Edge ESG Data Management Look Like? Here Are 5 Best Practices

When defining best practice ESG data management, several factors make the difference.

1) Flexibility

ESG regulatory and reporting requirements have evolved rapidly in recent years and will continue to do so. Your organization’s operations, priorities and disclosures may change too. Therefore, your approach to ESG data management needs to be flexible to develop with your needs.

It needs to be scalable to adapt to new inputs, additional stakeholders and a growing list of external and internal obligations. It must be able to pivot to accommodate evolving priorities; who knows what ESG data your board will rely on in the future? It has to grow to align with changing stakeholder and investor expectations.

Importantly, it has to meet your needs now to allow you to jump right in and make a start on ESG data management and have the potential to advance with you.

2) You Have a Single Source of Truth

The complexity and breadth of ESG data points can be a barrier to efficient data collection. But with data-rich organizations stealing a march on their less insightful competitors, optimizing your ESG data collection is crucial. And ensuring your ESG platform can house and sort this big data is a must.

Your teams should be able to harness the data needed with minimal impact on their day-to-day work. The right people need access to this data in a central location, while best-in-class security practices and security-conscious software keeps threat actors firmly out.

3) Accurate Monitoring

How does your ESG data translate into effective risk management? There’s no point gathering information if it doesn’t inform action, swiftly identifying red flags and enabling remedial steps.

Tip: Incorporating machine learning into your auditing processes can fuel the effective management of your ESG controls. When considering new ESG tools, it’s good to ask how automation is used in their software and how to utilize it for your ESG programs. In our article, you can read more about several ways automation and ESG go hand-in-hand. Even if your company isn’t ready to invest in machine learning or advanced automation right away, the functionality is available to implement as your ESG maturity develops.

Whatever ESG data management solution you choose, it needs to deliver clear visibility of your KPIs, metrics and commitments. The mountains of data generated by ESG reporting can be time-consuming to sift through and spot issues; automated monitoring can speed this process by giving users clear snapshots of key metrics.

4) Insightful Reporting

This monitoring also needs to translate into meaningful reporting. Boards and directors are short on time; when acting rapidly on ESG findings, you need user-friendly dashboards that instantly picture the most critical ESG data.

5) Makes it Easy to Track the Key Issues

Whether it’s net-zero commitments, the ethics of your supply chain, or your executive compensation strategy, your ESG data management process and solution need to capture and present the core information you need.

The software should quickly surface new regulations relevant to your organization, empowering you to adjust your strategy and ensure compliance.

Clarity and prominence are vital; whether you use more manual intervention or market-leading ESG data management software, your approach needs to make it easy to spot issues you need to prioritize for action.

 

ESG Data Management Software: Optimize Your ESG Data

As businesses value the role of robust ESG data management, more and more rely on ESG data management software to underpin their efforts.

Tapping into the ability of ESG data management solutions to map metrics to current and evolving regulations, companies take assurance that their approach to ESG data is aligned with stakeholder and legislative priorities and is meeting their obligations. Automated monitoring and reporting remove legwork and inconsistency, while the best software makes data presentation easy with intuitive dashboards.

But not all ESG solutions are created equal. Any organization looking to harness the benefits of investing in ESG data management software needs to ensure their chosen solution meets their requirements.

  • Does it enable you to deliver on the five best practices outlined above with a flexible, robust approach to managing ESG data?
  • Will it evolve with your needs, and can it provide the reporting and insights you need to bring ESG metrics to the board’s attention?
  • Does it have specialized functionality in vital areas like climate to ensure you’re capturing the most critical data?
  • And does it provide the levels of service and support that enable you to make the most of your investment?

If you are researching ESG data management software, Diligent’s Buyer’s Guide to ESG Data Management Software is a must-read. It further explores the challenges of ESG data management and sets out the essential criteria you need to consider. You can download a free copy here.

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Kezia Farnham Diligent
Content Strategy Manager
Kezia Farnham

Kezia Farnham is the Content Strategy Manager at Diligent. She's a University of the Arts London graduate who has enjoyed over seven years working across journalism, public relations and digital marketing, with a special focus on SEO and CRO in the B2B SaaS sector.

Kezia is passionate about helping governance professionals find the right information at the right time.