Ben Rouncefield-Swales, Executive Vice President, UK & Europe at Optima Technology, discusses how data and its use is key to speeding up the net zero journey.
While all organisations are at different points along their path to net zero, there’s no doubt that action on climate change benefits everyone. Creating and nurturing a more sustainable business helps save energy costs and streamline operations, which is even more critical during periods of energy and wider economic uncertainty.
The quicker we reach net zero, the better it will be for everyone. The key to accelerating this push to net zero? Data, and using it the right way.
A seismic shift in business focus
Environmental data is already playing a crucial role in sustainability action from businesses, as well as the ability for those businesses to report that action to investors, who are showing increasing interest in the environmental credentials of the businesses they invest in.
Take, for example, Blackrock, the world’s largest asset management company. In 2021, CEO Larry Fink asked[1] companies to disclose how their business models would change to make them compatible with a net zero world by 2050. This represents a massive shift in expectations from investors, who now want to see real commitment to net zero via tangible data.
Fink and Blackrock aren’t alone. According to a survey of investors by PriceWaterhouseCoopers[2], nearly 80% of investors said environmental and social governance (ESG) was an important factor in their investment decision-making, and about 50% expressed willingness to divest from companies that didn’t take sufficient action.
The same survey also highlighted how rapid the increase in focus on ESG from investors has been. In 2016 just 39% of asset and wealth management CEOs were concerned about the threats posed by climate change. Five years later, almost 70% expressed concern about the climate and action being taken by companies.
The quest for data integrity
Long gone are the days when enquiries about a company’s dedication to ESG and the environment could be waved away with buzzwords and spiel; more and more investors want to see real action being taken, and they want to see the data to back it up.
More importantly, current estimates show that the UK is set to miss its net zero by 2050 target unless we change course[3] and soon. This year, the High Court ruled that the Government’s net zero strategy did not meet the obligations laid out in the Climate Change Act, and failed to show how legally-binding carbon budgets would be met.[6]
Failing to meet these obligations would have a devastating impact not just on the bottom line, but on every aspect of life.
Historically, the lack of standardised data requirements has made data integrity less important – and enabled businesses to be bold with their claims despite weak data. Today, governments, regulators and action groups are all pushing for stricter regulation and authenticity, meaning comprehensive and contextual data is fast becoming essential.
Data is fundamental in creating an environmental strategy sufficient to meet the demands of the path to net zero by 2050. We need urgent action if we’re to avoid a climate disaster, and tangible, accurate data is key to facilitating real action beyond promises and reassurances, no matter how well-intentioned.
Unfortunately, many companies are falling behind in their environmental responsibilities.
According to the Carbon Disclosure Project, nearly half (49%) of the world’s 500 biggest companies have yet to conduct any sort of analysis of how their portfolio impacts the climate[4].
Creating clarity from data complexity
The availability of quality data is the single greatest test firms expect to face over the next five years in order to address climate risk, according to Willis Towers Watson[5].
Many firms simply lack the right systems to collect, analyse, and make use of their environmental data in any meaningful way. In fact, research by the Boston Consulting Group[7] (BCG) showed that just 9% of businesses are confident in their emissions measuring, and many respondents estimated an average error rate of 30% to 40% in their emissions measurements.
Data complexity, too, can be a challenge in and of itself. With so many reporting standards, and a multitude of data sources and types to be mindful of, even businesses that are making an effort to invest in environmental data insight can struggle to get any real use out of it.
This brings us to another issue that organisations should be aware of in this new, data-centric world – the importance of data integrity.
Reams and reams of emissions data, supply chain data, and other types of information can look good at first glance, but if it’s not accurate, or missing crucial context, then it’s usefulness can be significantly diminished. Data integrity is absolutely crucial because it’s the context and quality of data that makes it truly useful and empowers action.
For example, a business might have been recording data on the cost and usage of raw materials from its supply chain. However, if this data lacks context – such as provider and seller information – then its usefulness is limited. One might be able to make determinations regarding cost savings, but not on the environmental impact of the supply chain, rendering that data of limited use for sustainability purposes.
Furthermore, reporting or acting on inaccurate data can land you in hot water. Greenwashing, or the misrepresentation of sustainability data and ESG efforts, is more in the spotlight than ever. Numerous fast-fashion brands – along with some big household names – have seen first-hand the damage inaccurate data can cause to reputations, no matter the intent.
Taking action
So, we understand the challenge facing companies when it comes to collecting and making use of environmental data in the modern world, and why it’s so crucial. But what’s the solution?
We rely on software to take care of many vital processes in the modern world. So why are more businesses not doing the same for their environmental data?
Software that simplifies data collection will empower businesses to achieve true sustainability with accurate and precise data. It’s a vital part of actually baselining carbon emissions, enabling businesses to understand their starting point and set meaningful decarbonisation targets, as well as measuring their progress. And of course, gaining a clear picture, as close as real-time as possible, also enables those companies to confidently take action to reduce their emissions in a targeted manner.
There’s no need for companies to patch together multiple data sets from disparate sources and unmatched formats in 2022. Today’s technology allows for the easy collation of data from myriad sources into one system, ensuring one version of the truth.
When informed by dependable data from a single source, businesses can take real, tangible steps towards true sustainability. Supplied with in-depth and contextual data, business leaders can build a sustainability strategy that works, and report the results of that strategy to investors and stakeholders in an accurate way. Relative to manual methods of data collection this represents a cost-effective and reliable way for companies to operate – there should be no need to choose between the planet and profit.
There’s no avoiding the importance of environmental data. With the demands of regulatory bodies and investors becoming increasingly complex, companies must prioritise both collecting data and the integrity of that data if they hope to survive.
Sources
[1] https://www.blackrock.com/corporate/investor-relations/2021-blackrock-client-letter
[2] https://www.pwc.com/gx/en/services/audit-assurance/corporate-reporting/esg-investor-survey.html
[6]
[7]
https://www.bcg.com/publications/2021/measuring-emissions-accurately
