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How does Technology Impact ESG?
Technology has become integral in organisations of all sizes. Whether its operation-led importance or fundamental dependence, no organisations in the 21st century can discount technology.
A critical inflection point is upon us, as ESG crosses paths with digital transformation initiatives. Technology decisions will increasingly weigh, affect and impact ESG performance.
Interlinking Technology and ESG
Linking between ESG and technology can be multifaceted. On one hand organisations should drive technology adoption with direct impacts of ESG in mind, and at the same time leveraging technological advancements to govern, store and report data in a meaningful way to track ESG performance.
1. Building and Designing of Products
How a product is designed and built can have a direct and proportional impact on ESG. From inception, the planet and future generations should be considered as critical stakeholders to factor into the creation of a product to ensure sustainability and other ESG aspects are satisfied.
2. Data Collection
The data collected which forms part of the ESG reporting process has multiple uses and stems beyond compliance, accountability and investor governance. ESG reporting can objectively measure all aspects of ESG initiatives, so that they can be fine-tuned and iteratively improved upon over time.
3. Transparency
Stemming from ESG reporting, the accuracy of data is equally as important as inaccurate or data that has been tampered will undermine the truthfulness of the insights generated in the corresponding reports. Leveraging technology such as blockchain can help ensure the data is tamper-resistant and also verifiable via an agreed consensus.
Technological Challenges
The strong foundations of an ESG program fundamentally relies on data. Underpinning a successful ESG program is the effectiveness data collection, storage and representation inside an organisation.
There’s a much better chance that a data-rich organisation will perform better in their ESG program. Whilst ESG reporting is important, it should be seen as a by-product of having real-time and comprehensive quality data. Without this, it would be otherwise impossible for reporting to be accurate and meaningful. Some of the common challenges that organisations face are:
- Alignment of ESG strategy to tech strategy
- Data scarcity; limited data collected / available
- Lack of data accuracy, transparency and verifiability
Can Blockchain Help?
The blockchain technology solves one of the biggest challenges with data; it enables transparency / verifiability of any data that is stored on-chain.
It is important to understand that whilst blockchain can solve some of the shortfalls of current technologies, it is not a one-size-fits-all solution that can alleviate all the current technological problems. In saying the above, blockchain is very useful in providing a way for organisations to ensure the data is tamper-resistant and accurate.
Providing the transparency and verifiability properties to any ESG-Reporting critical data set will give an extra layer of confidence to stakeholders and investors as they are able to clearly see the data originality and ensure it has not been manipulated in any way.
The Future
Technology is increasingly playing a pivotal role in any organisations’ ESG program and initiative. Its inseparable tie to data, which consequently underpins the accuracy and reliability of ESG reporting, means that technological decisions and the strategies around implementations will directly affect the effectiveness of any ESG program.
To have a sound ESG strategy, the organisation must also have a sound tech strategy to compliment. Having strong data collection and management fundamentals through the leverage of technology will ensure ESG reporting and other endeavours are accurate and dependable.
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