The challenges of an ESG-strategy

Henrica Westhoeve
July 6, 2022 - Reading time 9 minutes

Het is onmogelijk geworden om de uitdagingen op het gebied van milieu, maatschappij en goed bestuur (Environmental, Social and Governance – ESG) te negeren. Hoewel veel ESG-regelgeving zich nog in de kinderschoenen bevindt, staan bedrijven nu al onder druk om hun ESG-beleid te formuleren en de bijbehorende doelstellingen te halen. Daar bovenop proberen ze ook nog zo snel mogelijk operationele en financiële risico’s te identificeren.

vier windmolens in landschap

But these same companies also face a number of problems when it comes to ESG data. Think lack of availability, quality and credibility to name a few. As companies face new ESG-related reporting requirements and transparency rules, as well as pressure from customers, suppliers and employees, high-quality ESG data is becoming an increasingly important asset.

Dun & Bradstreet commissioned Forrester Consulting to evaluate the current state of ESG in the first quarter of 2022. Forrester looked at ESG data and analytical strategies and examined how a company's ESG maturity affects performance. Findings show that the benefits of investing in ESG strategy go far beyond simply wanting to avoid penalties. In fact, ESG appears to be a growing force that generates profits through innovation and improved risk management.

ESG Challenges

Toch worstelen veel bedrijven met de vraag hoe ESG in hun bedrijfsstrategie past. Zo zijn veel bedrijven bezig met het achterhalen of zij wel over de juiste gegevens beschikken om over ESG te rapporteren. Weer anderen proberen te begrijpen wat ESG inhoudt, waar ze moeten beginnen en wat ze moeten doen om hun achterstand in te halen. Uit het onderzoek bleek dat 74% van de respondenten behoefte heeft aan een oplossing die hen in staat stelt zichzelf beter te begrijpen en te bepalen waar ze kunnen verbeteren. 72% heeft behoefte aan gestandaardiseerde maatstaven en benchmarks en 71% aangeeft hulp nodig te hebben bij het automatiseren van ESG-data om de rapportage te stroomlijnen. Deze statistieken laten zien dat betrouwbare ESG-data bedrijven kan helpen duidelijkheid te krijgen over hoe ze kunnen verbeteren zowel nu als in de toekomst.

One in five respondents told us that ESG data was "very important" to their company three years ago. That number doubled for companies who think it is "very important" today and jumps even to 90% of respondents who say ESG will be "very important" three years from now.

According to the findings, these are some of the challenges that many companies face. In addition, it also identifies ways in which ESG strategies have proven effective and which can help build the business case for investing in a strong ESG Data Driven Strategy.

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Effective ESG strategy boosts profits and reduces costs

Despite many challenges, companies are seeing benefits from implementing ESG strategies leading to a wide range of positive business outcomes across the organization. 75% of respondents indicated that ESG-related cost reduction was positive, 72% indicated that it improved the performance of their investment portfolio, and 79% indicated that ESG-related insights allow their company to identify new growth opportunities earlier.

Insufficient ESG data is the biggest challenge to meet ESG goals

Volgens de antwoorden die Forrester Consulting via de ESG-enquête ontving, verklaarde bijna de helft (46%) van de respondenten dat ESG-gerelateerde data management een kritische pijler van succes is. Ook meldde ze een andere uitdaging: bedrijven willen zich wel graag aanpassen aan het veranderende ESG-landschap, maar hebben vaak niet de juiste inzichten in gegevens om dit te bewerkstelligen.

Inadequate internal ESG data holds most companies back

Furthermore, ESG-related problems are often caused by the inadequate technology that many companies use to manage, analyze and report ESG data. Seven out of 10 respondents said their companies rely on classic office technology, such as spreadsheets and email. Inadequate data collection, management and analysis practices limit a company's ability to gain full insight. As a result, ESG analytics cannot be widely applied, limiting the progress and speed at which ESG maturity can be achieved.

Het vinden van een betrouwbare bron van ESG-data die automatisch kan worden geïntegreerd met de eigen gegevens kan het inzicht in het ESG-risicobeheer enorm vergroten. Bedrijven die investeren in geautomatiseerde, geavanceerde ESG-gegevens en -analyses plukken daar de vruchten van.

If companies fail to meet ESG goals, they face greater risks

De meest voorkomende consequentie die bedrijven ondervinden van het niet halen van hun ESG-doelstellingen zijn verhoogde niveaus van operationele en financiële risico’s. Hoe meer bedrijven en hun toeleveringsketens worstelen om de ESG-doelstellingen te halen, hoe meer risico’s ze lopen.

79% of respondents told us that their companies use ESG data to create more resilient supply chains and mitigate ESG-related business strategy risks, and three-quarters of respondents indicated that ESG data is an important tool used to mitigate both ESG-related investment risks (76%) and operational risks (75%).

reflectie van bomen in ramen

Investing in ESG yields major benefits

Many companies in the industry still think they need to rely on "how" they have always made or delivered their products to remain profitable and may find it difficult to justify the move to a new ESG-friendly business framework if it is not clear whether this is just a consumer-aware "trend" or whether ESG is indeed a multi-faceted method of identifying and managing risk.

Yet, 97% of respondents from companies with high ESG maturity levels report that the implementation of their ESG strategy has led to a significant reduction in costs. Moreover, 77% of companies with high maturity levels are more likely to report a significant increase in customer acquisition as a result of their ESG strategy. Conscious consumers who are more interested in where their food comes from, how products are made, where their money goes, and how people are treated undoubtedly want to support environmentally friendly companies.

In short, attention to ESG performance leads to efficiency improvements, product and service innovation, attractive financing opportunities and new partnerships.

Download the full report to learn more about the benefits of investing in an ESG strategy, the pitfalls you can avoid by having the right data, and the predictions that show how important ESG compliance has become.

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