Organisations across the globe are currently in hot pursuit of ESG and sustainability compliance. Around 90 percent of the S&P 500 companies have submitted their corporate sustainability reports in 2019. To put this into perspective, only about 20 percent of these companies had filed such reports in 2011. The period in-between these two dates has witnessed the transition of ESG and sustainability from being voluntary corporate actions, to becoming mandatory ones. Today, the ESG ecosystem comprises multiple stakeholders: companies, governing bodies, industry regulators, investors, asset owners, and – the largely unheralded – advisors.
Despite a relatively underplayed status within the ESG space, advisors have had considerable involvement in organisations’ compliance pursuits. Sustainability advisory has been pivotal in helping organisations understand their ESG scope, associated risks, and potential benefits. Lately, technology-led advisors are leveraging ESG-related innovations, to catalyse a sustainable transformation. And in doing so, they have essentially emerged as important stakeholders in a space characterised by many interdependent variables, a fractured data landscape, and an ever-evolving legislative environment.
Qualitative strategies translate to quantitative benefits
At MAST Consulting, we see ESG and sustainability through a multi-dimensional lens. The first order of business is answering the “why”. From an organisation’s perspective, it is the rationale behind aligning with ESG and sustainability goals. In addition, every organisation carries unique ESG-related opportunities and challenges, which necessitate consensus across the board. Advisors shoulder the responsibility of driving the consensus, and walking the organisation through regulatory requirements, policies, and relevant frameworks like GRI, the UN’s SDGs, etc.
In effect, advisors correlate these frameworks to in-house performance, feasibility, budget, and business strategies. And the approach they suggest varies, depending on where the organisation is in its ESG journey. Early adopters may be inclined towards leveraging ESG tech to optimise their strategies, while organisations that are relatively new to the transition would need greater hand-holding.
The next important step is the implementation of strategies — where the experience and expertise of advisors come into play. A seasoned advisor, with extensive knowledge accrued through several successful ESG campaigns, can ensure that qualitative strategies translate to quantitative benefits — which can be anything from improved financials to gaining access to VC funding. The ESG imperative has now become a defining factor in the investment strategies of big-money investors. For example, as part of its climate commitments, Goldman Sachs has earmarked a whopping $750 billion, for investments in assets complying with sustainability and ESG goals. This begs the question: How do such investors decide which one to back from a pool of companies claiming “ESG compliance”?
Short answer: Credibility. At MAST Consulting, we believe that credibility is not given; it is earned. Associating with reputable sustainability advisory is therefore of great consequence, to organisations. A seasoned advisor specialising in ESG compliance, reporting, and stakeholder management, can enhance credibility in a much quicker, and more streamlined, manner. But it doesn’t end there; advisory is a life-cycle commitment to monitoring the ESG performance, course correcting the strategies, adapting to changing regulatory environment, and constantly building on past success. Conventionally, these functions were largely performed through spreadsheets and outdated technology. The emergence of cutting-edge ESG tech is now ushering in an era of unprecedented efficiency, in such advisory services.
ESG tech is leveling the playing field
Reporting or quantifying the ESG efforts, and substantiating their impact, are the prerequisites to compliance. This demands the collation of enterprise-level data, and its ESG-based analysis. The lack of performance visibility and the siloed data can be counterproductive. Lately, with the emergence of ESG tech, and the integration that it offers, organisations are able to comb through a vast number of data points; achieve performance visualisation on a single platform; and identify lagging areas. This enables course corrections, data auditability, and proactive ESG compliance. Also, cloud-based solutions are empowering both advisors and organisations to report to multiple ESG frameworks, in a timely manner.
That said, technology’s impact has been profound, in leveling the ESG playing field. Increased dynamism in the ESG space means that associated technologies will, under the influence of market forces, become more affordable and accessible for organisations. Currently, fit-for-purpose communication platforms are inducing transparency and accountability in ESG compliance – safeguarding the interests of all stakeholders. At MAST Consulting, we are actively exploring the applications of AI and automation in the ESG space. From target tracking, to aberration flagging, to timely alerts; automation can save both time and money, while eliminating human-related errors, and ensuring utmost efficiency. This is why advisors with robust technological backing can be truly invaluable, in a domain as dynamic as ESG and sustainability.
The strengths of tech adoption go beyond just ESG and sustainability compliance; it will unearth performance gaps across the value chain, in critical domains like logistics and vendor management. Organisations empowered by technology can take proactive actions, mitigate risks, and improve financial performance. That aside, in a broad sense, ESG tech and tech-based advisors are helping create an ecosystem of companies, whose combined actions will address some of our world’s most pressing challenges. Cumulatively, such actions could lead to macro positive outcomes, with lasting and transformative global impact.
About S Kumar Subramania is the senior vice president at MAST Consulting, part of the MAST Consulting Group.
