Safe Software: Data’s Role in the Fight Between Good and Evil
Contributed by Matt Turner, Director Industry and Partner Strategy at Alation
Doing good is good for the soul. It’s also great for the bottom line.
That’s not aspirational talk — we’re in the business of data, after all. But there is, in fact, a category of data considered “good data”: ESG data, which stands for environmental, social, and governmental data.
Tracking this information helps businesses "do good" and measure their progress along the way. When an enterprise seeks to reduce its carbon footprint or increase employee diversity, ESG data is the yardstick by which they measure progress.
What may surprise you is how ESG initiatives and business success go hand in hand. A landmark 2019 McKinsey study, found that successful ESG initiatives create business value in five essential ways:
- Top-line growth
- Cost reductions
- Reduced regulatory and legal interventions
- Employee productivity uplift
- Investment and asset optimisation
Likewise, Morgan Stanley found that 85 percent of U.S. individual investors express interest in sustainable investing, noting that “investors want to know what they own and want those holdings to reflect their values.”
But how do you measure the success of your ESG? With data, of course — which is why professional services organisations such as Deloitte have been supporting the World Economic Forum’s International Business Council to develop metrics that matter to enterprise value creation.
A Discussion of “Good” Data
The recent Data for Good Conference brought to light this important aspect of data culture. After all, as we try to understand how to use data and make it available, we must also acknowledge the powerful ways it can shape how you do your work and its impact on the world around you.
In our session at the conference, sponsored by the EDM Council and CDO Magazine, ESG data was discussed by our panel:
- Kate Carruthers, Chief Data and Insights Officer, University of New South Wales
- Gladwin Mendez, Data and Technology Operations Officer, Fisher Funds
- Robert Parr CDO, US Advisory and Global ESG, KPMG
As noted above, ESG data is used by organisations to describe their environmental, social, and governance practices. This data was initially focused on helping organisations track their commitments to, for instance, reduce carbon footprints or ensure a sustainable supply chain.
What we learned is that ESG data can do much more than track green or social initiatives. When incorporated across the organisation, ESG data can deliver new insights on how the company operates. It can even be used to drive innovation to become a competitive advantage.
What Is ESG Data?
Gladwin kicked off the session with some detail on each type of ESG data:
Environmental Data: The data you use to monitor and understand your energy and environmental impact. Examples include carbon emissions, air and water usage, waste management, and energy sources.
Social Data: Data to describe your own efforts to drive diversity and support social good. Employee gender, diversity, and client satisfaction are all examples of social data.
Governance Data: Data that shows how your organization works. Examples include data on how your organization (and organizations you work with) manages executive pay, corruption, and other governance factors.
This is just the start. For every category of ESG, there is an endless possibility of data sources. Environmental data can include satellite images and operating data, for example. And to make sense of this data, there are emerging indexes and ways to combine the data to help organizations use shared processes to make comparisons. These include the ISO Global Reporting Initiative (ISO-GRI) and United Nations Sustainable Development Goals (UN SDG) initiative.
This means that ESG is not just a unique set of data, it’s a diverse and complex set of data. The panel all agreed that ESG wasn’t just big data, it’s big data on steroids!
Globally recognised standards that guide green business practices often motivate the creation of ESG projects. The ISO, GRI, and UN SDG initiatives are all such standards. While ISO 26000 guides on how to integrate sustainability into a business and its supply chain, the GRI offers a framework for public reporting on sustainability issues. Today, many organisations use ESG data to align with these global green initiatives.
But one should also note that various definitions for ESG data exist. According to Gartner, ESG data is:
“[A] collection of corporate performance evaluation criteria that assess the robustness of a company’s governance mechanisms and its ability to effectively manage its environmental and social impacts.”
Organisations face mounting pressure to integrate social and sustainable practices into how they operate. ESG data enables them to track those goals, measure their performance against others, and demonstrate progress.
ESG Is Not an Island
Adding to the complexity, ESG data is not just complex and specific data that exists within your organisation. To put it into action, ESG data needs to be combined with external sources; then that data can be compared and contextualised in helpful ways.
Let’s take supplier governance as an example. This ensures you are not working with organisations that might put your goals at risk. But to properly monitor supplier governance, you need more than just the names of your suppliers; you need to connect that supplier data to external sources that track that information. This grows even more complex and nuanced as you move into social and environmental tracking.
This underscores the second major point we discussed in the panel. To really use ESG data, you need to have all your data in order. Data governance across your own data is the first step. Making sure that data is aligned, shares common definitions, and is visible to everyone working with data is becoming good practice across many organisations. But it’s mission critical when you start to tackle ESG data. To get that full picture of where your organisation is tracking on its green and social goals — and to leverage the external data and indexes — your enterprise data needs to be in very good shape.
Putting ESG into Action
Making sure your ESG work fits within your overall data initiatives is key to delivering on the promise of ESG data. This can be a challenge, as many ESG initiatives started as separate projects. Separate teams were tasked with providing analytics to track specific initiatives. For instance, to show that an organisation was tracking their carbon consumption goals, one team would take all operational data and use external sources to produce ESG data.
But the overall benefits of ESG initiatives are much more far reaching. Remember the McKinsey report we mentioned? ESG practices that support the health of the environment also support the health of the business. In short, good ESG performance can improve nearly every aspect of running a complex organisation!
This was the case for Vattenfall, a Sweden-based energy producer and retailer with 20,000 employees and 6.7 million customers. Their goal — their motto, in fact — is “Fossil-free living within one generation.” Achieving net-zero carbon emissions by 2040 requires knowledge, collaboration with industry partners, and governance, all of which are driven by a data culture fostered by Alation’s data catalog.
Our panel discussed additional impacts, both from within and without. Employee satisfaction (and retention) can be improved by making ESG data visible, as can brand perception. When organisations show a commitment to not only setting targets, but tracking and showing progress toward those goals, everyone benefits. And publicising ESG results also improves the overall brand and image of the organisation, which leads to better returns and performance.
But like any business initiative, ESG is a strategy, not an on/off switch. McKinsey recommends embracing ESG opportunities that are specific, practical, and “real,” meaning they’re:
- Clearly articulated and aligned with your organisation’s competencies
- Focused on value creation rather than “saving the planet” (again, avoiding the aspirational)
- Transparent about short-term risks (though these often lead to long-term gains)
Integrating an ESG strategy into your enterprise’s overall strategy may be challenging – but the benefits make the task worthwhile.
Data for Good, for All
The session on ESG data was eye-opening. For me, it showed the breadth, depth, and power of this new, vital, and complex set of data. It revealed we are just now entering a unique moment in data. We have the experience and data governance maturity to tackle the complex data needed to tell the ESG story within our organisations, there are growing resources and models to guide putting it into context, and we really understand the value making this data visible brings to our customers and employees.