There is an increasing and urgent need for greater transparency, reliability and comparability of ESG (environmental, social and governance) performance data reported by companies. ESG data has become an important factor in determining a company’s valuation and a vital medium to access financing and capital. As a result we are seeing a significant increase in Sustainability reporting, which has grown significantly with 86% of S&P companies having published a report in 2018, compared to 20% in 2010.
The challenge is that current corporate ESG disclosures lack consistency and standardization. To add to the confusion, there are more than 600 ESG ratings agencies globally, according to the Global Initiative for Sustainability Ratings.
There is a lot of ESG data available for investors but which cannot necessarily be relied upon by investors to make informed decisions.
The frustration for many companies is the general lack of transparency as to how they are being scored in their sustainability performance. Currently firms which provide ESG benchmarking services are gathering data from multiple sources, ranging from “best of” lists to ratings agencies, but the scores don’t contain enough information and context for most investors. Investors need to complement these ESG data with additional feeds from news reports, social media posts, and employment sites.
Going forward, it is widely expected that automation and artificial intelligence (AI) will be leveraged to both generate and evaluate ESG data. However for these machine systems to work effectively a larger volume of data will need to be produced. AI functions best on billions of data points rather than millions.
In response, investor relations and sustainability teams are looking for new innovative ways to increase dependable data collection to detect and highlight strategic ESG information. Technology innovations are creating new opportunities, for example, companies are now testing new sustainability applications on their customers focusing primarily on measuring and tracking energy consumption, climate emissions, waste generation and environmental data.
We expect the increase in automation and AI data collection to significantly change how sustainability reporting is both undertaken and strategically perceived.
The Sustainability Academy offers the Online Diploma on Corporate Sustainability and a series of specialized programs on Sustainability Reporting, Carbon Reduction Strategy and ESG Performance for Investors. There are also special In-house Programs for organizations, who recognize that investing in their human capital through education is the most important determinant for growth and excellence in Sustainability. To confirm this claim, recent research has demonstrated that organizations with a strong learning culture can outperform their peers. The Academy aspires to reach 100,000 professionals by 2025!