A vast majority of CEOs believe that, as confidence and trust in governments decline, the public is looking to businesses to fill the void on societal challenges (79%) and that major ESG challenges, such as income inequality and climate change, are a threat to their company’s long-term growth and value (76%).
But CEOs are also feeling pressure (59%) from stakeholders, be they investors, regulators or customers, who are demanding increased reporting and transparency on ESG issues.
“It’s really important that all stakeholders are making their voices heard about their expectations of what a good organization looks like in terms of ESG,” says Fisher.
Amid deepening awareness of virtue signaling and greenwashing, having the necessary technology to effectively measure and track ESG initiatives is the top challenge in terms of delivering ESG strategy in three years (24%). Measurement is closely tied with technology solutions, and organizations tend to see their ESG strategy and digital investments as inextricably linked (81%).
“Digital transformation is urgently needed to meet the increasing challenges water utilities and users of water face,” says Patrick Decker, CEO of Xylem, a global leader in water technology and sustainability. These challenges include water scarcity, aging water systems and more intense storms.
“The task is to modernize water systems to...ensure communities are optimizing water management by preventing water loss, adding critical functionality to reduce costs and improve performance like remote sensing, and enabling decision intelligence,” says Decker.
Emerging technology is the backbone of ESG strategies across different industries. International Seaways, for example, has very large, dual-fuel crude carriers, which can run on conventional fuel as well as lower-emission liquid natural gas. These vessels are 40% more efficient than a 10-year-old conventional vessel of the same class.
“It’s undeniable that new, sustainable fuel is the future of energy,” Zabrocky says. “But as these new technologies emerge, the demand for oil continues. We see a multi-fuel future, and embracing new technologies allows us to responsibly transition.”
When it comes to ESG, I see technology playing a central role in providing insights, informing action and bolstering measurement.
Taking a more proactive approach to societal issues, such as ensuring human rights and a “just transition” away from fossil fuels, meaning the benefits and costs of climate action are distributed equally, is the top factor (38%) that will accelerate ESG strategies over the next three years, the survey found. The second biggest accelerator is increasing measurement and governance to build a more robust and transparent approach to ESG initiatives (26%).
Part of the difficulty with measuring ESG initiatives is the complexity of the data, which often originates from disparate sources that are different from the traditional sources of financial data. The oil and gas industry, for instance, may use data gathered by sensors in pipelines, or devices embedded in meters, vehicles or machines, says Fisher. Additionally, comprehensive ESG data should cover all tiers of organizations’ value chains and track inter-related social issues, such as ensuring a just transition and human rights.
Workday, which offers enterprise software management systems for finance and human capital, helps its clients better account for their ESG efforts. “We are helping customers with ESG reporting and compliance, allowing them to track progress and identify opportunities for improvement in areas such as workforce composition, organizational health and supplier diversity,” says Chano Fernandez, Co-CEO of Workday. “When it comes to ESG, I see technology playing a central role in providing insights, informing action and bolstering measurement.”
Still, ESG reporting lags reporting that is conducted on other business imperatives. “Investors and standard-setting bodies are increasingly looking for more in-depth and better-quality disclosures. These will require more timely and rigorous reporting of ESG-related data than companies across industries may currently be used to, more in line with existing financial reporting requirements,” says KPMG Audit Vice Chair Scott Flynn. Despite the complexity of ESG data, a number of organizations are moving their sustainability reporting to the finance function to submit their ESG reporting to the rigors and controls of financial reporting, says Flynn.
ESG initiatives benefit when there is a high level of motivation and collaboration around efforts to improve the future of the planet, socially or environmentally. “In a tight labor market, being known as a sustainability leader and an inclusive and purpose-driven company is a huge advantage for recruiting,” says Decker. “Our colleagues have a choice about where to work. They choose to work at Xylem because they want to be involved in solving global water challenges.”
However, the field suffers from a lack of experts ready to tackle sustainability issues; universities are only now minting future professionals who will be able to lead companies to net-zero solutions, observes Fisher.
Xylem faces additional talent hurdles, since roughly one-third of the water sector workforce is eligible to retire in the next 10 years. This shift is one reason the company launched Xylem Ignite, a global program designed to help prepare the next generation of young people to solve water issues, says Decker.
“We want young people to understand firsthand that when they solve water [scarcity], they’re helping solve one of the biggest environmental, sustainability and global social stability challenges of our time,” he says.