The shift from the triple bottom line has evolved to ESG. Loosely translated, ESG (Environmental, Social, and Governance) is a holistic measure of how an organization positively or negatively impacts the environment in which it operates. The amount of waste it creates, the types of resources it uses, and the emissions it sets off. It is about how it treats its employees, safeguards its customer’s well-being, and how it respects communities. It is also about how accountable a business is to its stakeholders in how it sets, measures, and manages its policies on corruption, fiscal transparency, and shareholder rights. All of which serve as proxies for the long-term sustainability and viability of the business in the eyes of investors, consumers, governments, activists, and lest we forget, keyboard warriors.
The discipline of defining and measuring ESG is multi-faceted, complicated, and hotly debated. There is work to do for governing authorities and businesses championing the cause to align stakeholders and set a credible, pragmatic standard and measuring stick. Organizations are struggling to get these facets right; Elon Musk, a champion for a greener planet is finding himself on the wrong side of the ESG equation for questionable treatment of staff, organizations are getting penalized for ‘greenwashing,’ and popular events are retracting sponsorships due to the negative connotations of its sponsors and benefactors.
The PwC Consumer Intelligence Series states that 76 percent of consumers will stop buying from companies that poorly treat the environment, employees, or the community in which they operate. The report states that the biggest challenges executives face is balancing ESG with growth targets (40 percent), coupled with the lack of clear reporting standards and complexity (37 percent). In short, one can assume that managing business as usual coupled with driving ESG goals is a tough juggling act.
An Agenda Point
ESG is now a recurring C-Suite imperative. A Navex Global Survey on ESG spending finds that 71 percent of CEOs believe it is their responsibility to ensure their organization’s ESG policies reflect the values of their customers. With more conscious and connected customers coupled with more strenuous local and global policy measures kicking in, it is safe to say ESG compliance and the move to Net Zero is not only a critical agenda point but also table stakes.
If You Cannot Measure Your ESG, You Cannot Manage Your ESG
Given the criticality for multi-national enterprises and the impact ESG targets have on share price, the need to set goals, improvements, and initiatives persists. The advent of ubiquitous high-speed connectivity and cloud and edge computing means that the tons of data generated from the machines, assets, operators, and sensors that monitor a building, factory, mine, farm, or office can be harvested, aggregated, analyzed, and reported on.
This presents the science and art of ESG. The science – setting the relevant KPIs that guide an organization towards achieving its targets through clear measures on carbon emissions, health and safety standards, waste, input materials, utility usage, accidents, worked hours, sanitation, ambiance, data governance, cybersecurity, and accounting standards, to name some. The art – creating a culture for measurement, healthy and thriving work settings, meaningful compensation, employee well-being, and retention propositions. Essentially walking the walk of creating a better world through all things E, S, and G.
The good news is technology trends have evolved to a point whereby collecting these millions of data points, combining them into reports that make sense for a layperson, socializing them, and putting proactive steps in place to tackle problems and report fairly and transparently, exists.
IoT and ESG – Six Letters That Work Hand in Hand
The internet of things offers a compelling proposition to the C-Suite agenda to definitively tackle ESG. It gives the ability to provide a real-time pulse check on ESG. By accumulating multitudes of data on the vital signs of each organ contributing to the ESG body or scorecard, such a solution has moved from a nice-to-have cost saver to an indispensable enabler. The vitality of a modern-day business now increasingly depends on indicators mostly left to manual and cursory checks, dated and batch feedback loops, and unverifiable reports – this same data, left to the eye of auditors leaves the enterprise in a position of uncertainty. Not being able to measure impact now presents a high risk, not only from inefficient management protocols, but being on the lagging end of ESG responsibility.
Real-Time Data Collection
IoT – particularly the ability to sense, collect, measure, and detect anomalies for decision makers to act, operators to respond, and auditors to report in real-time and retrospectively now becomes an asset to shift a business from an annual reporter of ESG and corporate responsibility focus and wins, to a real-time custodian of ESG as a daily mission, mantra, and critical objective for the wellbeing of the entire enterprise and its societal influence.
IoT and edge computing can serve as the golden thread across the three pillars of ESG. The ability for high-power edge computing gives the means to see, hear and touch every part of a business’s operations through:
- Environmental: Gathering key measures on energy consumption, water leakage, waste, environmental impact, and biodiversity with a detailed overview of carbon credits and overall footprint.
- Social: Monitoring working conditions, manufacturing environment quality, ambiance, labor and fair practice measures, safety alerts and controls, data security, and breaches.
- Governance: Where technology becomes a means to control and enforce the various measures associated with achieving ESG goals through proactive measured and dashboards for executives and operators to enforce ESG protocols proactively.
Your ESG Digital Twin
A digital twin is a powerful phenomenon and implementing it poses significant benefits for 21st-century enterprises. A real-time, digital rendition of an organization serving as a virtual ‘carbon’ copy gives an easy-to-interpret, insight-packed rendition of wellbeing. Giving on-the-ground and C-Suite employees the ability to understand impacts on the environment in real-time through active insight and geospatial models, gives rise to multiple benefits:
- Providing accurate, real-time reports from the data generated by systems, assets, and actors of an organization – curated to serve ESG scorecards and benchmarks
- Operational scenario planning by toggling production asset configurations, risk events, and capacity schedules at scale, across all operational sites and places of work
- Testing new production configurations to determine the environmental impact, efficiency, or offset of new ideas in a time, space, and physically simulated environment
- Driving new ways of work, whereby workers are connected to data, tasks are prioritized by ESG and operational imperatives are driven by ‘next best action’ tasks and workflows
- Creating sustainable working conditions by better managing the conditions staff operate under by combining environmental and asset telemetry data to improve health and safety
There is still a way to go before there is consensus on how ESG is to be tackled. What is not debatable is that businesses wear the responsibility of a healthier planet.