How sustainability software can improve performance
How sustainability software can improve performance
Investor, consumer, government, employee, and stakeholder demands for corporations to demonstrate sustainable business practices are increasing at an exponential rate. Between 2018 and 2020, total U.S.-domiciled sustainably invested assets under management, both institutional and retail, grew 42%, to $17.1 trillion, up from $12 trillion, according to the Forum for Sustainable and Responsible Investment’s 2020 trends report.
As investors become focused on understanding and evaluating sustainability performance and consumer spending shifts toward sustainability-focused enterprises, businesses are seeking out solutions to gather and report on metrics that show solid management of ESG (Environmental, Social, Governance) efforts and outcomes. However, evaluating sustainability programs and ESG performance can be a complex challenge which requires accurate, relevant, current data that must be collected, analyzed, and disclosed.
To do this, many companies are turning to sustainability management platforms that help businesses monitor non-renewable energy sources, minimize harmful emissions and waste, reduce operational costs, and support regulatory compliance.
Why ESG data is important
The search for a relation between ESG criteria and corporate financial performance can be traced back to the 1970s. More than 2,000 studies and reviews have been published on the topic, and results show that the business case for ESG investing is strong. Roughly 90% of studies found a positive relationship between ESG investing (i.e., emerging markets, corporate bonds, and green real estate) and financial performance.
Moving forward, investors such as Larry Fink expect this trend to continue. Fink’s 2021 letter to investors cites that from January through November 2020, investors in mutual funds and ETFs invested $288 billion globally in sustainable assets, a 96% increase from 2019. The letter also states that during 2020, 81% of a globally representative selection of sustainable indexes outperformed their parent benchmarks. And, according to a forecast published by Deutsche Bank, ESG investments are expected to grow further and exceed the $100 trillion mark by 2030.
While impressive, this demand for sustainability puts companies under pressure. Businesses that don’t take sustainability seriously could lose investors, customers, or financial support and ultimately risk falling behind. As the demand for sustainability transparency increases, governments and investors will require more complicated disclosures and many small to medium-sized businesses may find it challenging to keep up.
Building a strong ESG framework can help transform organizations of all sizes looking to improve their sustainability program efforts. To do this, however, companies need data and reporting capabilities. ESG and sustainability management platforms are helping bridge the data gaps and guide organizations into reporting methodologies that ensure they can meet requirements and satisfy investor demand.
The benefits of tracking sustainability progress
Comprehensive sustainability management platforms can support the entire investment life cycle, from due diligence to exit. ESG software can measure environmental impact, support energy and waste reduction efforts, track and report on internal governance, operational best practices, and policies to reduce risk and uphold compliance, and gather information and report on social issues such as employee safety.
Using sustainability reporting software, companies are also able to:
- Decrease environmental impact by tracking emissions, greenhouse gases, and waste
- Manage and save on energy and consumptions costs through energy audits, bill importing and tracking, and energy price analysis
- Manage supply chain vendors through assessments that help reduce reputational risks
- Mitigate employee health and safety incidents through trainings
- Monitor KPIs and performance metrics in real time
- Utilize data for budgeting and forecasting
When companies measure sustainability performance, they can align their economic goals with the reduction of environmental harm and improved social programs. Some of the benefits from these efforts include:
- Real-time tracking of sustainability measures that show what progress has been made and where more effort is needed
- The ability to use data to identify ESG impact, information that is a growing demand from many business investors
- Greater resilience during high-risk events such as pandemics, weather-related disasters, or social upheaval
- Improved stakeholder engagement with those interested in the economic, social, and environmental issues
Lastly, centralizing all of your company’s sustainability metrics within a single, digital platform increases productivity by saving your management teams valuable time compiling data and sustainability reports.
In fact, when it comes to reporting, the G&A Institute’s research team determined that 65% of the companies included in the Russell 1000 published sustainability reports in 2019, an increase from 60% in 2018. And 90% of the largest 500 companies by market cap in the index published sustainability reports in 2019, after 86% in 2018.
A sustainability reporting software system supports reporting by providing a central online repository that covers a range of frameworks, including CDP, GRI, SASB, DJSI, and UN Global Compact.
Sustainability is good for business
Companies no longer have to choose between the environment and the economy. Sustainability has moved beyond a “nice to have” strategy and is becoming a part of core business operations, as well as a driver of customer, employer, and investor stability.
Ultimately, sustainability software helps companies apply effective ESG and sustainability management strategies. Embedding ESG into your management strategies will lower operating costs, help your company quality for tax incentives, attract customers and investors, increase employee satisfaction, and improve profits.
ESG materiality assessments
With investors inquiring more and more frequently about what your company is doing in regard to responsible investment, how you treat employees and vendors, your dedication to sustainability initiatives, and other activities that fall under the ESG umbrella, it’s important to have answers to these questions.
An ESG materiality assessment empowers you to easily report on your current state and outline future initiatives while taking into consideration your business goals and risks. Download our guide to creating and extracting the maximum strategic value from an ESG materiality assessment.