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The Importance of ESG Data


As more and more public companies are starting to focus on environment, social, and governance (ESG) data, it is becoming increasingly important for Chief Financial Officers (CFOs) to understand how to best collect and use this data. After all, ESG data can be incredibly helpful in making informed business decisions that can drive long-term value.

However, while the importance of ESG data is clear, what is less clear is how exactly CFOs should go about collecting and using this data. After all, ESG data is often unstructured, obtained from numerous sources, and challenging to standardize. As a result, organizations confront major obstacles in terms of ESG data governance. In order to overcome these challenges, CFOs need to build processes and systems for gathering, storing, analyzing, and distributing this data to stakeholders in a meaningful manner.

 

Why ESG Data Governance Matters


ESG data governance matters for a number of reasons. First and foremost, it allows organizations to make better decisions. When data is properly gathered and analyzed, it can give CFOs a clearer picture of the risks and opportunities their organization faces. With this information in hand, CFOs can make more informed decisions that drive long-term value.

In addition, proper ESG data governance can help organizations build trust with stakeholders. Nowadays, there is a growing expectation that companies will be transparent about their environmental and social impact. By gathering and sharing ESG data in a responsible manner, companies can show stakeholders that they are committed to being good corporate citizens. This increased transparency can ultimately lead to improved relationships with key stakeholders such as investors, customers, employees, and the general public.

Finally, proper ESG data governance is simply the right thing to do. Schneider Electric’s Group Chief Sustainability Officer Emmanuel Lagarrigue says it best:

“Data has always been at the heart of business success but its true potential as a catalyst for sustainable development has not been fully realized – until now… It’s time we collectively recognize the power of data stewardship as an essential prerequisite for harnessing the enormous potential of technology for good."

By focusing on gathering and using ESG data responsibly, businesses can play a role in creating a sustainable future for us all.


AsSEC's proposed rule suggests, "Public firms must disclosure serious climate risks." Any public firm must report climate change risks that could affect its bottom line. This includes physical and transition risks (such as weather-related property damage or the costs of complying with new regulations). The rule is currently a suggestion; however, its growing significance resulted in an expansion of reporting requirements for companies across industries. While the importance of ESG reporting is clear, what is less clear is how exactly organizations should go about collecting and using this data. In order to overcome these challenges related to ESG reporting, organizations need make sure they have systems in place for gathering accurate, timely, and complete information (such as internal controls). They must also ensure that this information is communicated clearly to stakeholders in order understand how it will affect them. Only then can they make well -informed decisions that create long-term value.


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