Investors have a growing interest in ESG reporting because it provides transparency on environmental, social and governance concerns of a company. Sustainability is the broader issue that has become important, particularly to millennial investors. Here’s a look at the solutions available to prove sustainability is a good investment.
Aiming for Sustainable Solutions Lowers Risks
One of the most important reasons for sustainability reporting is to manage risks. Setting benchmarks for adopting eco-friendly solutions such as tapping into renewable energy, recycling and waste reduction will help your organization move forward on a greener path. Getting a high ESG score can open many doors such as securing funds from venture capitalists and receiving positive press coverage.
Many of last century’s industrial giants face harsh criticism today from journalists for the environmental damage they caused over several decades. The damage took on many forms including use of toxic chemicals linked to cancer, costing the lives of many workers in coal mines and factories where rules and regulations were loose compared with today’s environmental protection laws. Environmental risks are reduced through legislation and companies taking a proactive approach to adopting more eco-friendly solutions.
At the moment there are global standards for ESG reporting but many third party research firms use their own methodologies to arrive at ESG scores. These scores typically are driven by algorithms that bundle an assortment of factors. The data comes from Internet of Things (IoT) technology, in which sensors are placed throughout an internal operation to measure machine performance, production quality and many other relevant metrics.
The data is then sent to a database and machine learning software that can analyze a vast amount of data in seconds. The AI software then provides recommendations based on historical information and programming that sets certain priorities. A factory can now measure the amount of pollutants in areas of its complex and alert supervisors when conditions are unsafe for work activity. The number of alerts can then be tracked to analyze as annual data.
How Sustainability Drives Innovation
Using sustainability reporting will help an enterprise become greener on multiple levels. The key is to use the right modern monitoring software that provides easy management tools. You should be able to look at a portal screen and see a summary of ESG data you want to monitor. Once you have a report full of data on your operation you can conduct your own analysis to develop sustainable solutions.
The more you commit to learning from accurate ESG reporting, the more you can gain the trust of investors who have become skeptical of companies that contribute to environmental destruction. You need to show them your company is on the side of saving the planet instead of the profits-over=people theory of economic exploitation. Working and planning within the parameters of sustainability will open your mind to new ways of creating better business efficiency.
In order to maximize sustainability reporting make sure you have access to software that lets you create interesting graphs and charts based on the data your company collects. Using colorful visuals is the best way to present ESG data, which is very new to many professionals across all industries. Visuals are effective for showing how a company has evolved over time, such as a graph that shows a waste reduction timeline.
A company goal toward sustainability is important to investors for both economic and environmental reasons. On the financial side sustainability is all about cutting waste and energy costs, which helps boost profit margins. Investors also care about a company’s environmental impact on a community because negative impacts can lead to huge class action lawsuits. Last century’s industrial polluters paid billions of dollars to reverse environmental damage their factories caused to local waterways.
There are also many investors who simply want to see companies take stronger initiatives on workplace issues such as a healthy working environment, how well the company insures its people and how well it rewards talent. ESG scores point to corporate social responsibility, which carries strong weight in the business community and beyond. Analyzing ESG data is the key to streamlining a business so that it’s in tune with modern business ethics and standards.
The future of investing favors companies that take ESG scores seriously. Investing in smart technology that delivers real-time data on multiple production processes will help a company gain a competitive edge in the emerging IoT-centric landscape. Machine learning software is playing a critical role in businesses transforming into more sustainable operations.