Near-term optimism in the U.S. economy has plunged in recent days to its lowest point in more than a decade, with the appetite for enterprise projects following a similar trajectory. Caught in the middle are the discretionary line-items on corporate budgets. And with retention and recruitment, pricing and revenue, and other bread-and-butter business issues weighing top of mind, companies’ voluntary, self-determined Environmental, Social, and Governance (ESG) programs may soon find themselves backburnered.
Indeed, despite the promising uptick in the number of companies investing in ESG performance excellence and disclosing evidence of their progress toward it, the preeminent incentives for doing so — i.e., the investment opportunity — are, at least for now, waning under the same pressures shaping the priorities of would-be sustainability champions. With increases in Environment, Health & Safety (EHS) and other regulatory compliance costs, sustainability pursuits would appear to be in jeopardy.
But abandonment of ESG performance measurement, management, and reporting aspirations would be short-sighted. In fact, the answer to these pressures and the much-needed operational efficiencies, risk insulation, and value creation can be found in the very ESG-focused investments in question. To weather the coming storm, business leaders will be right to stick to the fundamentals while maximizing the utility of their existing resources and harnessing the opportunities for operational efficiency improvements and value creation found in their ESG objectives and initiatives.
First, executives will need to incorporate their EHS compliance management competencies into the foundation of their ESG data management and reporting processes. Second, CxOs need to consult with their EHS teams to shape, fill the gaps, and otherwise refine their enterprise ESG performance goals and corresponding management strategies. Finally, to ensure that these processes continuously deliver desirable sustainability and bottom-line outcomes, they will need to undergird them with a cloud-supported data management and reporting platform integrated with AI-powered analytics.
Realizing the full value-add potential of an enterprise ESG program necessitates a methodical, strategic, and otherwise cost-efficient approach. To achieve this, companies will need to funnel the performance data used to satisfy their existing federal, state, local, and voluntary (i.e., ISO) EHS compliance obligations into ESG performance frameworks. An involved process, this entails distilling, taxonomizing, and digitally tagging EHS compliance KPIs — from hazardous waste disposal and fugitive greenhouse gas (GHG) emissions to workplace injury and incident records — into their ESG KPI equivalents.
However, determining which metrics and methods to use in measuring and disclosing enterprise ESG performance has long been an obstacle for executives. And it’s here that the company’s EHS compliance management teams will prove especially valuable.
For starters, they control the collection and management of EHS compliance data, a necessary input for numerous ESG disclosure frameworks. Moreover, EHS professionals oversee incidents of EHS non-compliance over their full lifecycle, from their investigation and remediation to the evaluation of the effectiveness of their intervention and its subsequent recording in the appropriate ledger. Most invaluable for ESG program successis how these professionals are uniquely qualified to assess the probability and severity of potential EHS non-compliance incidents on enterprise performance and, accordingly, assign them priority for preemptive intervention.
These latter insights are essential for an ESG program that serves the bottom line. They will not only help executives determine which of their actual and potential ESG risks are material and, in turn, subject to management and disclosure, but help them shape the goals and strategies for managing them.
Despite their expertise, business leaders must avoid the temptation to delegate sole responsibility for pursuing their companies’ ESG performance goals. It’s a matter of efficient resource allocation; EHS leaders and their personnel cannot be expected to procure and manage the complete range of often siloed enterprise performance data needed to inform a credibly holistic ESG management and disclosure effort.
On the contrary, business leaders will need to implement dedicated, cloud-supported data management and reporting platforms capable of automating the collection, collation, storage, retrieval, and reporting of ESG performance data generated by distinct business units and functional areas. These systems can be integrated with artificial intelligence that can not only predict divergence of actual and targeted outcomes for ESG performance (and EHS compliance) but study the data stored within the cloud-based platform to identify the actual or potential divergence causes.
The case for the approach outlined is well established. Yet, in today’s market especially — where inflation is pushing upwards the prices of labor, material inputs, and everything in between — the capacity of a data-driven, platform-supported enterprise ESG program to delineate paths toward resilience cannot be overlooked.
To mitigate market-borne risks, a continuously monitored and managed enterprise-wide effort to stay abreast of employees’ sustainability priorities, identify more energy-efficient process configurations, and regularly disclose to investors the company’s progress toward its long-term ESG goals has clear advantages.
And on regulatory risk, the actions of the SEC, for instance, will continue to close the gap between the value of setting, pursuing, and achieving bold sustainability goals and the cost of foregoing the practice altogether. To that end, cloud-supported ESG platforms with dual AI-powered EHS compliance management functionality can generate a range of relevant insights. Beyond providing ex post and ex ante alerts of ESG performance failures or EHS non-compliance incidents, these systems can be programmed to independently identify new regulatory requirements and upgraded to accommodate new data and reporting needs as they emerge.
Weathering the storm is about working smarter, not doing less.
About the Author
R Mukund is a proven organizational leader with 30 years of experience in progressive roles as a technical professional, team leader, Six Sigma Master Black Belt, executive program manager, and now chief executive officer. He has a track record of distinction in diverse organizations in research and technology, consulting, corporate diversified and global, and cloud-based, tech-enabled services.
Mukund has consistently gravitated toward developing IT solutions for practical business solutions, from his doctoral research to Battelle in Columbus, OH, to ERM-Northeast in Albany, NY, and later at GE Power Systems. He dedicated his spare time to developing novel web-based application solutions for Environmental Health & Safety. Heartened by the support from peer EHS managers at the operating units within the business, Mukund expanded his efforts to enable key process owners and stakeholders to be more effective in their responsibilities, share & collaborate with their peers; and allow business leaders to benefit from the deployment of such IT solutions at their sites.