Blog
There's a new G in town: Why the governance of ESG matters
Monday 24th July 2023
The rapidly evolving landscape of global and European sustainability-focused regulatory requirements will have far-reaching governance implications across firms of all sizes as they seek to get a grip on fulfilling accurate ESG disclosures. Rather than viewing ESG as just more annoying compliance, so best to do the minimum, businesses will benefit from seeing the new regulations as an opportunity to leverage the benefits of using digital technology to improve their ESG governance, sustainability performance and productivity generally.
Firms that see ESG as another level of interference face the risk of missing the biggest opportunity of the decade simply because all ESG disclosures are dependent on data accessibility. So, the only long-term strategy is to leverage those new digital technologies that manage ESG data within their core architecture, to transform and streamline their wider businesses systems, processes, and operations.
The future is about Governance data automation
Given that new regulatory requirements will increasingly demand proof and evidence their data is accurate, firms will need to be able to easily access and process enormous amounts of data from across their internal operations and supply chains. External auditors will require robust evidence and audit trails to provide independent assurances. And directors will need total confidence to sign off on an ever-increasing portfolio of material disclosures about their company's impacts and outcomes. The burden of proof extends well beyond data collection, consolidation, and analysis to incorporate evidence of good governance across the entirety of a business's ESG activities.
Companies looking at new technologies should therefore specify ESG platforms which additionally offer governance management via advanced automation, as well as data architecture at its core, which means instant reports are available with proof and evidence of good governance as well as ESG impact management.
The burden of proof
Within these platforms, users can simply set up scheduled RACI tasks such as signing off reviews aligned to a person's role (whether they are Responsible, have an Action, need to be Consulted or simply be Informed. This approach enables a wide range of reviews to be automated during workflow gateway closures and other critical Governance activities, meaning digital records are automatically date stamped with the time and by whom. If companies do not use such automation, they run the risk of the recurring high costs of manual data collection and/ or data importing from an array of existing systems and tools. These time-consuming activities typically need significant external support, or burdening internal teams with the additional work, in recording proof of when data was collated and where and whom it came from and that it is confirmed as being accurate.
Given the reputational damage and potential associated fines, directors of firms will be wary of signing off any disclosure where the ESG team cannot back up impact performance with a full audit trail of proof. So, choosing an ESG platform that delivers sustainability data performance with integrated, instantly available, and accessible governance reports, is not only efficient, but it will also avoid the potential high costs incurred by ESG teams to address the increasing burden of proof and evidence of forthcoming regulatory demands to avoid incorrect disclosures.
ESG to drive strategy and operations
ESG presents an opportunity to firms to get the advantages of a single digital transformation initiative, using an end-to-end ESG data architecture platform that connects their organisational ESG vision & strategy with their entire wider operations and processes. This makes data is easier and simpler to manage and monitor as ESG is now within one single streamlined digital workplace.
The question to ask is, are your existing systems fit for Purpose ?
Many firms will no doubt start their ESG journey utilising their existing systems, tools, and applications, to capture and manage "E-Environmental" and "S-Social" data but if their corporate governance - the "G" - is not best in class, they should also undertake a cost benefit analysis, given there will be an increased demand for proof of governance to support future ESG disclosures.
It is probably far better to mitigate the significant "G" risk immediately at the very start of your ESG journey and leverage the benefits of using end-to-end ESG platforms such as myConsole. You will not only have the ability to drive strategy and operations but have the added capability to streamline your businesses processes and operational ESG environments to deliver real time ESG data analytics and be able to provide a complete audit trail and complete governance across the entire organisation.