Inadequate data hinders ESG progress

Inadequate data and inconsistent standards are the biggest obstacles to progress in reaching ESG targets, according to a new study.

UK executives cite inadequate data as a top barrier holding back ESG progress while under one third of surveyed consumers feel they have enough data to make environmentally sustainable purchasing or employment decisions.

A new global IBM Institute for Business Value (IBV) study, “The ESG ultimatum: Profit or perish,” of executives and consumers reveals that while environmental sustainability remains a top priority for consumers and business executives, inadequate data is a key challenge for both groups when it comes to achieving personal and corporate Environmental, Social and Governance (ESG) goals.

The study reveals that surveyed UK executives point to inadequate data (42 per cent) and inconsistent standards (42 per cent), as the biggest obstacle to their ESG progress, followed by inadequate skills (37 per cent) and regulatory barriers (34 per cent). Without the ability to access, analyse and understand ESG data, companies struggle to deliver greater transparency to the consumer – a key stakeholder – and meet consumer expectations.

Seventy-four percent of globally surveyed executives believe that stakeholders understand their organisations’ ESG objectives and performance, yet only about four in ten surveyed consumers feel they have enough data to make environmentally sustainable purchasing (41 per cent) or employment (37 per cent) decisions. 

“Consumer commitment to environmental sustainability and social responsibility has intensified with consumers voting with their wallets,” said Jonathan Wright, global managing partner sustainability services and global business transformation, IBM Consulting. “As a majority of consumers prefer to buy from and work for ESG leaders, businesses must prioritise transparency and break down barriers to ESG data.”

Other UK study findings include: Companies are investing in ESG and see it as good for business; 67 per cent of surveyed executives say ESG is central to their business strategy; just over three in four surveyed executives view ESG as a revenue enabler rather than a cost centre, suggesting that contrary to popular opinion, ESG and profitability are not at odds.

Almost 80 per cent of executive respondents say that their organisation focuses on achieving sustainability outcomes, not just reporting requirements.  Consumer commitment to sustainability has intensified but consumers don’t feel they have sufficient information to make informed choices 

Over half of the consumers surveyed say environmental sustainability and social responsibility are very or extremely important to them. 67 per cent respondents say the cost-of-living increases have made environmentally sustainable decisions more difficult in the last 12 months. 

Only one in five surveyed consumers say they have sufficient information to make sustainable investing and saving decisions. Executives admit their companies haven’t made significant progress toward sustainability goals, indicating data challenges impact their ability to measure progress and meet consumer demands.

94 per cent of surveyed executives say their organisations have developed sustainability propositions; however, only 42 per cent have made progress against them. Almost three in four surveyed executives say their organisations struggle to manage an overload of manual data, while 80 per cent say they have difficulty consolidating or manipulating data.  

The study highlights leaders, a sub-set of respondents with greater maturity in operationalising ESG, who are seeing higher revenue, improved profitability, deeper customer engagement by approaching ESG as a transparency play that creates strategic business opportunities. These role models provide a roadmap for organisations looking to overcome data-related challenges and create sustainable change that includes: automating processes and reporting capabilities to keep data current; tapping AI for enhanced insights into performance, forward looking analysis, and scenario development; aligning with ecosystem partners on metric definitions and standards; and proactively establishing ESG data governance principles with stakeholders. 

“Data is the lifeblood of ESG. Now is the time for enterprises to put information in the hands of operators who can make informed business decisions that improve their ESG impact daily,” said Wright.