Sustainability starts with data. It is an easy claim to make, however, just how important are sustainable and data-driven practices for businesses? Although the meaning of the word sustainability has evolved over the years, it still remains somewhat of a concept that individuals and companies define differently. In the most basic of terms, discussing sustainability is about taking the lasting impact of our actions on the environment and on society into account. It is about making decisions that will allow us to maintain our current way of life without harming future generations or depleting natural resources. In this blog, we focus on the strategic component of sustainability for companies and why accurate data plays an essential role.
“The Social Responsibility of Business Is To Increase Its Profits" - Milton Freidman.
When Milton Friedman said those words in 1970, today's concept of sustainability did not really apply to businesses. This doctrine has since been used by businesses as their guiding principle, making sustainable business practices appear as something that is not a means for making profits. Businesses see sustainability as spending money on an exercise that doesn’t generate any tangible value, something that cannot be quantified in terms of revenue or profit.
However, with new studies arising, sustainable business practices have been found to create positive effects to the value chain. These practices help in reducing costs by cutting down on waste, creating better work environments, thus increasing productivity, and identifying investment opportunities which are regulatory compliant and hence sustainable in the long run. These benefits add to the competitive advantage of the company and increase revenues. Companies need to look at long term returns as compared to short term profits when it comes to including sustainability into their strategy and in their value chain. Contrary to Friedman's belief, sustainability as a mechanism for positive economic growth has recently been endorsed Larry Fink, CEO of BlackRock: “over the long-term, environmental, social and governance (ESG) issues — ranging from climate change to diversity to board effectiveness — have real and quantifiable financial impacts.”
Sustainability is more than just communication
Sustainability must be more than just communication. It is a mindset and a conviction. When it comes to sustainability, businesses need to reconsider their choices and how these choices will affect the future. Companies need to understand their social responsibility and how they can contribute to driving change. Some companies use it purely from a communication perspective (it is their right if they are doing it well) which has led to doubts about their true intentions behind pursuing sustainability initiatives. The following are typical attributes for an organization that has internalized sustainability beyond just marketing and communication:
Sustainability as a strategy: For an organization to be called truly sustainable, sustainability has to be a business strategy. All its decisions and actions are aligned with its guiding (sustainable) values. It needs to be embedded into the DNA of the company.
Commitments and goals: It is important to look at the sustainability reports of different companies to see if they are credibly committed or if it is just a tool to satisfy the demands of stakeholders and fulfil the bare minimum. Companies need to set ambitious targets which are aligned with science (e.g. SBTi) in order to create real credibility towards their sustainable transformation.
Verified data: Goals once set need to be tracked. Companies should have mechanisms in place not only to collect sustainability data but also to ensure verification. Having a robust and accurate foundation for internal decision-making for operations and initiatives is crucial.
Full spectrum of sustainability: Sustainability and sustainable initiatives should not only focus on the environment but also on social and governance-related issues. Doing the obvious for sustainability might be enough in the short run but in the long run, the action on social and governance dimensions will ensure that a company stays ahead of the curve.
Sustainability: What is the problem?
What is the problem with sustainability? It seems like a simple question but it's actually quite complex. When it comes to sustainability, there are three main areas of concern: credibility in action, intention and outcome. We will take a closer look at each of these areas and discuss why they are such a problem for sustainability and sustainable initiatives.
Credibility in action: This refers to whether or not sustainability initiatives are actually effective in achieving their goals. There are a number of factors which can impact the effectiveness of sustainability initiatives, including but not limited to the type of initiative, its location, its implementation and who is responsible for it. Often, sustainability initiatives are not well planned or executed which can lead to them being ineffective. Companies have to account for a longer time horizon for sustainability initiatives and work towards building credibility over time.
Theintention: This refers to the motivation behind a company's pursuit of sustainability initiatives. What is the underlying intention. With most companies acting out of a sincere intent to achieve their set goals, there are still plenty of companies which do it for reasons ranging from pure profit maximization, stakeholder pressure or marketing reasons.
The outcome: The third and final area of concern refers to the results of sustainability initiatives. In many cases, the outcomes are not as intended. For example, a sustainable development project may unintentionally displace local people or a renewable energy project may actually result in more greenhouse gas emissions.
These are just a few of the problems with sustainability. Credibility, intention and outcome are all major areas of concern that need to be addressed if companies want their sustainability initiatives to be successful. Without addressing these issues, sustainability will continue to be a problem for the companies to tackle. One way to solve this problem is by increasing transparency and accountability. To do so, sustainability-related data plays a crucial role.
The connection of sustainability and data
Sustainability and data must go hand-in-hand if companies want to do their part for the conservation of the planet, the society and its resources. Data is the foundation for robust analysis, targeted action and tracking progress in terms of sustainability in a company. Therefore, it needs to be collected, quality-assured and shared in ways that allow for effective decision-making by businesses, governments and other organizations. Collecting and analyzing sustainability data can yield key insights which can help companies bring credibility to their actions, prove their intent against their set goals and targets, and display the strong outcomes in sustainability reports and performance to all the stakeholders.
When we speak about data inthe context of sustainability, it is at the core of sustainable development and the achievement of the Sustainable Development Goals. Data can help monitor and track progress, identify areas where the action is needed, set priorities, evaluate results, support decision-making and communication. It can also be used to raise awareness, engage customers and build capacity. In the following we consider a few concrete examples:
Environmental sustainability — data and emissions: There are a number of benefits that come with collecting and analyzing emission data. Perhaps most importantly, it can help organizations to identify areas where they are emitting the most and thus pinpoint opportunities for improvement. Additionally, the emission data can be used to evaluate the effectiveness of sustainability initiatives over time. By understanding their own emission trends, organizations can better adapt their practices to reduce their overall environmental impact. Emission data can also help to create transparency around an organization's sustainability efforts. This is valuable not only for communicating with the public but also for engaging employees and other stakeholders with the common goal towards net-zero.
Social sustainability — data and occupational safety: Occupational safety and employee training data help to maintain positive employee impact in organizations. By analyzing this data, safety professionals can predict future events and take proactive measures to prevent them from happening. Analyzing employee training data helps to improve the effectiveness of safety training programs. It can also help to identify employees who need additional training or support. Additionally, analyzing data can help safety professionals identify when changes in training methods or materials are needed, while meeting overall health and safety goals of the organization.
Governance-related sustainability — data and ethics: Ethical practices in business play an important role in maintaining the integrity and the brand value of a company. In most cases, companies operate under a Corporate Code of Conduct which acts as an ethics compass, making sure that the company stays on its course. A very critical area, covered by the Corporate Code of Conduct, is the prevention of corruption within the organization. On all levels, companies are under scrutiny and face increased pressure to monitor and prevent activities of corruption throughout their supply chain. It is important to have transparency and accountability in order to discourage corruption. The management must define the ethical values of the organization and implement policies that will ensure compliance. Training and sensitization of employees on the organizational values will help to grow the desired culture. Monitoring and evaluation mechanisms should be put in place to track progress and take corrective measures where necessary. Organizations can work towards the prevention of corruption by implementing effective anti-corruption policies and procedures. A lack of compliance and good governance typically correlates with a lack of sustainability.
Use-cases for sustainability and data
Credibility in sustainability comes from high-quality, robust data which can be used for a multitude of use cases. Sustainability data can support strategic decision making, effective reporting and help organizations benchmark their performance. The benefits of deploying a comprehensive sustainability strategy are many, however, one the key benefits is the understanding on how to best capture, steer and utilize valuable data. The need for accurate, reliable data is growing and it is likely to increase. A comprehensive sustainability strategy must be built on the basis of a strong organization-wide awareness campaign, detailed materiality analysis, a clear set of goals, targets and monitoring mechanisms. Data acts as a connection between the development of the sustainability strategy and the monitoring its result. High-quality data collected during the monitoring can help to optimize and iterate the strategy, make informed decisions and help organizations benchmark their performance. Credible data can be used in the following use cases:
Non-financial steering and reporting: Organizations want to track their progress on sustainability goals and report this information to key stakeholders. This process starts with setting clear targets and then collecting data that can be used to measure progress against set targets. This data can come from a variety of sources, including internal operations, supply chain, customer surveys, and public data sources. Once collected, this data needs to be organized and analyzed so it can be used for non-financial steering practices and to report on progress.
Public disclosure: Many organizations are now required to publicly disclose their sustainability performance, often in the form of an annual report. This reporting process starts with collecting data on a variety of sustainability indicators, such as greenhouse gas emissions, water use and waste generated. Once collected, this data needs to be organized, analyzed and reported in a way that meets the requirements of the disclosure regulations. This reporting process can be a complex and time-consuming exercise, but it is essential for organizations to meet their disclosure obligations.
Risk mitigation: Sustainability data can also be used to identify and mitigate risks. For example, data on greenhouse gas emissions can be used to assess an organization's exposure to climate-related risks. This data can then be mapped to develop mitigation strategies, such as reducing emissions or investing in carbon offsets. In addition, data on water use can be utilized to assess an organization's exposure to water-related risks. This information is relevant for the development of mitigation strategies, such as investing in water-efficiency technologies or sourcing water from alternative sources.
Communication and Engagement: Sustainability data can also be used to communicate an organization's performance to key stakeholders. This communication can take many forms, including annual reports, infographics, branding material and social media posts. Moreover, this data can be used to engage with stakeholders on specific issues or challenges. For example, data on employee training can be used to engage with employees, and such internal stakeholders, on the need to expand training opportunities. It is also helpful for the acquisition of new talent.
Process Optimization: Data can also be used to optimize processes and operations. For example, data on water use can be used to identify opportunities for water efficiency. This data can then be used to develop and implement process changes that result in reduced water use and cost savings. Similarly, data on generated waste can be used to identify opportunities for waste reduction. Overall, data of any category holds opportunities for the development and implementation of process changes which result in a lower environmental impact, better governance or enhanced social performance.
And this is where we as Codio Impact find our roots: We are at the intersection of sustainability and industry-specific data in order to drive a credible, lasting and successful transformation. Our software makes sustainability management intuitive while enabling organizations to collect, track, analyze and report verifiable sustainability metrics. Let's take action together! By thinking and acting collaboratively, we can drive your successful company transformation while creating a better tomorrow. We are happy to support you on your sustainability journey - book a demo with us.