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Environmental, social and governance (ESG) performance plays a critical role in how consumers, employees and investors are making business decisions. In fact, When Edelman released its 22nd annual Trust Barometer this year, they found that 60% of employees and 80% of investors prefer organizations that align with their beliefs and values.
For manufacturers, ESG awareness must go beyond internal and self-reported data. You need a global perspective that spans the entire enterprise and supply chain, including third-party vendors. But, without access to a third party’s records, it can be difficult to ensure that your partners are aligned with your ESG commitments.
That’s why it’s imperative that you do research on the companies you partner with before—and during—your partnership. By using a third-party data API, you can help you capture a more complete understanding of ESG risks and opportunities.
In this article, we’ll outline why the current ESG measurement landscape makes standardization difficult, how regulations have pressured companies to maintain ESG data and how use a third-party data API to make your research more complete.
Even as ESG initiatives become more commonplace, the absence of a single framework for disclosing ESG data—and what those metrics should entail—makes it nearly impossible to measure and verify progress.
This creates room for discrepancies as companies can set their own benchmarks—that may or may not meet their goals. It also lends to the risk of organizations being accused of “greenwashing”, which causes a rise in public and investor skepticism, putting both your reputation and long-term growth on the line.
To account for this, an EY survey shows that 89% of investors would prefer a mandatory reporting requirement that measures ESG performance against consistent global standards. Given the risk of reputational damage that turns off consumers and investor reporting preferences, manufacturers may want to consider data analytics to support their ESG agenda.
Having more comprehensive data will be even more critical moving forward because ESG is influencing the regulatory landscape as well. Global legal advisory Cooley explains, “New environmental, social and governance (ESG) reporting requirements in the European Union and the US are set to fundamentally change the nonfinancial reporting landscape.”
Take the European Union, for example. On top of climate benchmarks and other ESG-related regulations already in place, pending EU legislation includes a Corporate Sustainability Reporting Directive (CSRD) and a Corporate Sustainability Due Diligence Directive (CSDDD).
Remarking on the upcoming EU reporting directive, Cooley notes that, “The new EU rules will require ESG reporting on a level never seen before and will capture a whole host of companies that previously were not subject to mandatory nonfinancial reporting requirements, including public and private non-EU companies that meet certain EU-presence thresholds.” And the EU isn’t alone. At least 29 countries have some form of mandatory ESG disclosure requirement in place—so there’s no time like the present to start monitoring both your company and your partners ESG insights.
MORE: Why ESG Risk Should be Top of Your Due Diligence Agenda
Absent a universal standard, data and artificial intelligence platforms can help you better evaluate ESG performance across your organization and its third-party networks. Gartner suggests several tips for gathering meaningful insights.
What should you look for when sourcing third-party data? First and foremost, global supply chains demand global data. If you rely on local, native language sources only, expect gaps in your awareness. Here’s what else to consider:
Organizations also recognize that the pressure to effectively manage ESG data internally and along supply chains is only going to grow in the coming years. PWC’s Digital Trends in Supply Chain Survey 2022 found that 58% of respondents point to homing in on ESG supplier risks (pollution, forced labor, corruption) is a major challenge, second only to keeping pace with ESG-related regulations at 66%.
Having the right data and technologies in place can shift some of the burden, which is exactly what Nexis® Data+ aims to do. Work with our experts to get the datasets you need, so you can protect your reputation and achieve your ESG performance goals at the same time. Want to know more? Contact our experts today.