Blog - ESG, Grappling with the KPI’s to Drive Ongoing Sustainable Change

ESG, Grappling with the KPI’s to Drive Ongoing Sustainable Change

Corporates have not necessarily fully grasped the influences that they have over driving sustainability, nor the actions that will be required to support their specific ESG initiatives. 

Global warming, decarbonisation, achieving carbon neutrality for building and / or cars are all frequently referenced and associated with sustainability, but it is the specific nature of ESG that will provide the ongoing directional engine to enable corporations to drive their focused visions forwards, on what will have to be a consistent measurable basis.

At the same time, the interactions of various stakeholders with corporations are becoming far more complicated, increasingly proactive or even combative than ever before, regardless of whether they be positioned as individuals, families, businesses or others. 

As one example, consumers today, unlike before, will often take both a corporate’s ethical and environmental approach into account during their ongoing assessment of various brands (for example https://goodonyou.eco/). This influences their ongoing shopping behaviour, particularly amongst younger buyers, which is often a highly sought after demographic.

Digital enablement in parallel is constantly showing itself to be a powerful information conduit within corporates, through the provision of greater levels of operational efficiency, increased levels of data quality and allowing timelier receipt of core enriched information to users. As will be drawn out below, these same benefits can also help you drive your sustainability and ESG initiatives.

However, it is appreciated that any real success in moving the needle forwards to achieve your desired goals over the longer term can be a challenge. All of us especially grapple with “the how to make it happen”, due to the fact that various very different data types have to come together from multiple systems, and be accurately transformed in a controlled manner for management and corporate reporting purposes.

Traditional reporting processes, associated metrics and functional domain structures have in the past been more backward than forward looking, due to the practical operational constraints imposed from inefficient enterprise software recording and reporting systems, but very gradually the time taken to prepare reports has decreased, albeit with some pain points, thereby freeing up time for other initiatives. 

Good news on the one hand,  but being practical there is still a long way to go, particularly as both financial and ESG reporting requirements are actually expanding at a fast enough rate to make resourcing really challenging.

Simply put, the reason for this is that there are still too many transactional friction points remaining within processes The longer term trend, however despite this, is that the depth of reporting capability, both looking backwards or forwards, will be to the same levels of granularity. This will bring not only improved efficiencies to users, but also timelier and better data quality to them for both financial and non-financial information. 

This will be achieved through the partial or full automation of processes where modern process technologies can bring the required data points securely together x-application, and x-ecosystem together with any required simple or comprehensive transformations. In essence these processes become the operational glue between all underlying corporate systems ie Property Management Systems, CRM, HR, Financials, IoT, CRM, Leasing, Energy Management Systems, Facilities Management, Document Management Systems etc.

This connecting of the various informational data dots, both qualitative and quantitative, will make sustainability and ESG more integral to processes and will bring with it both enhanced forward and backward visibility. Importantly, it will also bring multi-year consistency to all ongoing required user tracked KPI’s on a repeatable and auditable basis, to enable more “complete” reporting. It will certainly focus mindsets. 

Many corporates have yet to fully embrace ESG metrics at this point in time, due to there being no sense of urgency, time constraints to focus on it, or there being a lack of knowledge into how to approach it. The last point is of particular relevance as reporting frameworks often push internal reporting ownership in different directions for a non-cohesive reporting approach that can touch multiple domain areas.

Put a different way, IASB and FASB already have in place reporting frameworks for the production of accounts. IIRC, SASB, CDSB take some of these frameworks into consideration even further for a subset of GRI and CDP related topics….too many acronyms here for sure! 

However, the various statutory bodies have recognised this complexity and have moved it forwards to simplify it in terms of overall approach. To achieve this there is now an ongoing “Statement of Intent to Work Together Towards Comprehensive Corporate Reporting” being facilitated by the Impact Management Project, World Economic Forum and Deloitte.

The bottom line is that these data dots will have increased connections and deeper stakeholder interactions between them, bringing together what are often different sets of stakeholders involved in the creation, management, and reporting of these various metrics. This solves a very practical issue that exists today of different stakeholders not being connected in the best way to drive positive results.

At the same time, decentralisation of more tasks to employees has been another continuing parallel trend, and with younger generations typically wanting increased engagement around all aspects of sustainability and ESG, it certainly seems that the two will come together sooner rather than later. 

This is of particular significance today as many employees say that they do not fully understand, nor feel involved, in their company’s initiatives in this area. Increasingly, this divergence is also being seen as an area that will impact staff turnover, as both corporate and personal goals are not fully aligned together. Particularly relevant during these times of what is being described as the “great resignation”.

As positive economic activity becomes increasingly more associated with sustainability and ESG (ie as underlying goal posts continually move and adjust for the various core stakeholders), then corporations will be under pressure to do more in this area. This will move the dial even more towards greater levels of willing proactive engagement to chip away at any remaining inertia.

Timing is everything as they say. The above intersections of activity with ESG sees 1) data flows being at or more “towards” real time 2) an energised impetus to leverage old and new streams of useful data around sustainability and ESG and 3) the recognition that reporting standards need to become more harmonised towards common sustainability and ESG goals. These are in fact all complementary to the end goal to drive actions and metrics in the right direction.

Connecting the dots. It is also probably true to say that many corporates might not have fully connected all the dots together, meaning that although they have tapped into ESG messaging within 2) above, they might not have connected revenue successes or cost reductions including those reduced customer acquisition costs etc  from there being a “connection” made to other like-minded individuals. Vice versa of course.

Today’s technologies enable very varied end to end processes to be created for all types of processes, including sustainability and ESG, as they all share the same structure. From data collection (including RPA if it is required for document onboarding noting that it can be with or without AI), through all required data transformations / enrichments to contextual actionable reporting + workflows @anywhere @anytime + API’s @anywhere to other applications or ecosystems + payments @anywhere + simulations. A bit of a mouthful, but you get the gist! Also note that process steps are not fixed in number, nor in any fixed position within a process. So from this you can envisage how your underlying systems, as identified above, can more seamlessly work together to drive value creation.

Execution of sustainability and ESG initiatives within the enterprise, as well as challenges seen during its execution, actually mirror the exact same ones involved around broader digital enablement projects, as corporates strive to remove transactional friction to increase timeliness of information, as well as improving the underlying data quality. 

Current process technologies will benefit users, but it is important to recognise that success will ultimately depend on three things: i) the ability to design and deploy compliant ultra-granular transformational processes for various qualitative and quantitative data sets and file types, that not only fully leverage your other core systems to protect past investments, but which also facilitate value creation, ii) having the required all round balanced project team representation to ensure that all relevant areas to achieve a successful deployment are considered; and iii) access to relevant systems integration skills.

GaiaPM, a member of the FlexSystem Group, provides lease and property management software designed to help you drive performance up and costs down. As a global solutions provider in over 38 countries GaiaPM, together with proven solutions for financials, human resources, and operations is a business software vendor to 1 in 10 Forbes Global 2000 (May 2020), and 1 in 5 Global Fortune 500 (August 2020), operating at the intersection of new digital process and payment technologies, whether on-premise, hybrid or cloud, to provide you with iterative opportunities for value creation.