For the business of today, sustainability is no longer on the margins of enterprise strategy. The accelerating climate emergency has brought it to the center of organizations’ attention.
Not only consumers, but regulators and investors too, expect businesses to have a positive impact, underscoring the need for sustainability to be a key feature of risk management. The result is a demand-led push driving businesses to issue sustainability reports and set targets that specifically focus on the environmental impact of their operations.
Indeed, there has been significant efforts to go beyond traditional corporate responsibility initiatives, with enterprises prioritizing environmental, social, and governance (ESG) initiatives. Unfortunately, this does not translate directly into action. A key reason for this is due to the fact that Asia Pacific businesses are grappling with an information gap, which threatens to hinder decarbonization efforts. According to EY, 41 percent of finance leaders said their current ESG reporting would not stand up to the scrutiny of basic assurance standards. So how can business leaders and companies overcome this and move from barely making a dent in the climate fight to bolder, systemic approaches that create a net positive global impact?
Dispelling the ‘Green is Unprofitable’ Myth
Because of the important trade links that connect the Asia Pacific, businesses across the region require a broad and deep understanding of key international trends and local specificities. Managing complex regulations across multiple jurisdictions and differing public sentiment across national borders is certainly quite the balancing act. Unsurprisingly, these factors perpetuate the myth that sustainability and profitability are diametrically opposed.
That said, it is true that keeping ahead of evolving ESG trends and the broader business landscape has been a challenge for many. A recent KPMG report on CEO sentiment in 11 markets – six of which were in Asia – found that almost 60 percent were reconsidering ESG efforts due to cost cutting amid recession fears. However, this sentiment highlights short-term thinking that is ultimately misled. IDC, for one, finds that proactively integrating sustainability into business strategies and operations has cut waste and costs. The market intelligence firm notes that businesses doing this have raised operational efficiency, unlocked new revenue streams, improved talent retention and accelerated innovation.
Meanwhile, S&P Global Market Intelligence found through analysis of 26 ESG exchange-traded funds and mutual funds during the height of the COVID-19 pandemic that an ESG-focused portfolio mitigates risk. This emphatically shows that being stewards of the environment actually facilitates, instead of hinders, business growth. The key to this, however, lies in leveraging data to drive profitability, and simultaneously making a positive impact.
Data-Driven Decision-Making Holds The Key
Often those that dismiss ESG as a means of driving growth tend to skew the fact that business-centric ESG hinges on identifying hidden opportunities and risks that might not be immediately apparent. To do that, you need high-quality, actionable data. However, because ESG information rests solely on the ability of businesses to accurately self-report, there can be an apparent disparity between focusing on ESG and achieving business objectives.
Larger companies may have more available resources, but smaller players can leverage solutions that offer an intelligent and comprehensive view of the data to provide more informed decisions. And since customers in the region are increasingly focused on sustainability, this positions organizations to identify trends, formulate new services or products, accurately forecast, and establish the most effective channels for growth.
Through data-driven decisions, businesses can directly identify the ESG sources that will have the most impact on profitability. As a consequence, organizations will be equipped with relevant insights to identify sustainability trends and patterns that are most significant to the business, which can then delight customers and drive sales.
Meanwhile, with this data at their fingertips, businesses can drive efficiency and reduce wastage to decrease losses. Furthermore, this will raise the businesses profile, which will spur customers to spread the word and advocate for its brand.
Maximizing Sustainability Opportunities
Today, organizations of all sizes can become data-centric champions of sustainability by implementing a culture of data-driven decision-making across the business. For starters, organizations must clearly and precisely set goals that align with business objectives. Decision-makers must identify the data sources that will help the business to achieve those goals, and select the right tools to analyze and interpret that data.
Investing in analytics tools is also crucial and must go hand in hand with employee training. At the end of the day, this is what effectively communicates the importance of data-driven decision-making to all employees, encouraging them to use data in their decision-making, and ensuring everyone has access to the data they need.
Therein lies the answer for companies as they strive to grow sustainably. In essence, this enables organizations to be proactive and make decisions with greater confidence so that they can better connect with customers, differentiate and thrive.
By Uri Snyder, Senior Vice President, APAC, Similarweb