Sustainability Data - Transparency goes beyond just data sharing

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Corporate Environmental & Social Data Transparency: The Elephant in the Room

In an era increasingly defined by global warming awareness and its impacts, consumers are compelling companies to disclose their carbon footprints and ESG – Environmental, Social, Governance – metrics. This shift towards ethical purchasing, known as Conscious Consumerism, challenges companies to integrate financial, social, and environmental concerns across various sectors, including innovation, supply chain management, and marketing.

"Data is the new gold, sustainability data is the new platinum," states EY Ernst & Young in their 2021 report on the rising value of sustainability data¹.

While we have more data and research on sustainability than ever before, there is an elephant of the room. This data is often difficult to utilize and unlock for technology driven applications that could solve sustainability challenges at scale.

The Growing Imperative for Corporate Sustainability Reporting (CSR)

According to KPMG's 2022 survey, 96% of the 250 largest companies globally commit to CSR and publish sustainability reports².  With 64% of these companies recognizing climate change as a risk, sustainability data not only defines long-term value creation but also shapes relationships with all stakeholders, including consumers.

Sustainability reporting acts as both a management tool and a benchmark for progress towards ESG or net-zero targets, offering competitive advantages for those who transparently align with sustainable practices.

Evolving Standards in Sustainability Reporting

The field is moving towards greater standardization to manage complexity and enhance comparability. The EU's Corporate Sustainability Reporting Directive (CSRD), effective from 2025, will soon require extensive sustainability reporting from approximately 49,000 companies, heralding a new era of transparency³.  

The CSRD includes the concept of double materiality – assessing a company's impact on the environment and vice versa, enriching our understanding of a company's sustainability performance and potentially highlighting ideological conflicts among various stakeholders.

Only recently, in April 2024, the Corporate Sustainability Due Diligence Directive (CSDDD) was adopted by the EU member states. The aim is to foster sustainable and responsible corporate behavior throughout global value chains. While the CSRD emphasizes transparency and reporting of sustainability information, the CSDDD focuses on active management of risks and impacts related to human rights and the environment within the corporate value chain. Both directives should enable stakeholders to make more informed decisions based on comparable and reliable ‘platinum’ sustainability data.

The Challenge of Accessibility and Comparability

Despite these advancements, stakeholders, particularly consumers, still face significant barriers in accessing and interpreting the volume of sustainability data available. In general, this platinum information is buried in PDFs published on websites, far away from being easily extractable or processed automatically.

Non-harmonized methodologies, non-standardized and non-machine readable formats prevent a unified metric for comparison and informed decision-making. Even companies themselves require this data to establish transparency in supply chains, especially if they are to comply with the guidelines of the CSDDD.

The Role of FAIR Principles in Sustainability Data Management

To increase the practical utilization of published data,  the FAIR principles (Findability, Accessibility, Interoperability, Reusability) can be applied to the management of sustainability data:

- Findable: Sustainability data should be easily discoverable with standardized metadata frameworks.

- Accessible: Sustainability data must be available in open formats and protected where necessary.

- Interoperable: Sustainability data should integrate seamlessly with other data sets.

- Reusable: Sustainability data should be optimized for reuse, with clear licensing and long-term preservation.

These principles of sustainability data management form the basis for the concept of the Internet of Sustainability, which we advocate⁴.

A Milestone on the Path to Sustainability Data Transparency: the ESG Imprint

One component of the Internet of Sustainability is the ESG imprint. This imprint would showcase how companies integrate sustainability and data transparency into their operations, enhancing the visibility of their environmental efforts, such as the use of sustainable materials and reductions in CO2 emissions.

Like a legal imprint on every company website, an ESG imprint could inform people – in a standardized structure – about aspects that matter to them. Examples are the origin of materials, details on production processes or working conditions, environmental impacts, CO2 emissions, water footprint, impacts associated with the manufacture and transport of products, recycling and waste management, CSR initiatives, product lifecycles or future sustainability goals.

Outlook: Data-Driven Consumption

The ESG imprint aims to provide consumers with more information about sustainable products and services, promoting data-driven, Conscious Consumption. However, additional solutions are required to make this information a practical foundation for consumer choices, contributing to a greener future.

In conclusion, his article underscores the importance of sustainability data in consumer decision-making and highlights the ongoing efforts in regulations aligned with data management to improve data accessibility and reliability. As we move forward, the effective use of sustainability data could transform how consumers interact with brands, making sustainability a cornerstone of everyday consumption.

Citations:

¹ https://www.ey.com/de_de/decarbonization/warum-nachhaltigkeitsdaten-das-neue-platin-sind

² https://kpmg.com/xx/en/home/insights/2022/09/survey-of-sustainability-reporting-2022.html

³ https://www.csr-in-deutschland.de/DE/CSR-Allgemein/CSR-Politik/CSR-in-der-EU/Corporate-Sustainability-Reporting-Directive/corporate-sustainability-reporting-directive-art.html

⁴ https://conscious-consumerism.com/internet-of-sustainability/