Evaluating data quality for ESG reporting
When it comes to environmental, social, and governance (ESG) investing, data is the most significant challenge. People complain that data is inconsistent, comparable, and untrustworthy.
A special session at Bloomberg Green COP27, an event co-sponsored by SAP for organizations to meet outside the negotiating rooms of the climate conference and delve into pragmatic strategies for cross-sector climate action, was held to better understand best practices and what's happening in this space.
Anheuser-Busch InBev, the world's largest brewer, is one company with extensive expertise in ESG reporting. The company's growth strategy is based on the digitization of its ecosystem, which includes 200 breweries, 6 million customers, and over 2 billion consumers, generating over 10 million weekly transactions.
“Brewing requires the best ingredients, which requires a healthy environment. We are an agribusiness. We see the far-reaching implications of climate change in our operations and sourcing regions,” said Ezgi Barcenas, chief sustainability officer, Anheuser-Busch InBev. “With operations in over 50 countries, we’re looking at many metrics. Just inside our walls, we have 400 operating practices for tracking efficiency, water, energy, maintenance, and sourcing, to name a few.”
Barcenas explained that as the company considers its supply chain, it must consider the environmental and social impact both upstream and downstream, from smallholder farmers to the half million SMEs that are its customers selling its products all over the world, including mom-and-pop shops and large chains.
“That’s a lot of data,” she said. “Now add all your research and innovation data, security data, and ideas about the future of packaging and logistics. The point is, sometimes you need better data, not more. You need to ask yourself: is this data useful for making decisions? Does it help drive the right actions through the business?”
Schneider Electric SE, a French multinational specializing in digital automation and energy management for buildings, data centers, infrastructure, and industries, was also a participant in the discussion. By 2025, it will have assisted customers in decarbonizing and avoiding 800 million tons of CO2 emissions through its energy and sustainability services and green product innovations.
“We need to triple our speed to avert climate disaster. Reporting scope 3 emissions is extremely important, because we can only track what we measure and we can only improve if we measure,” said Michael Lofty, senior vice president, Power Products, Schneider Electric. The good news is that about 70% of Schneider Electric’s revenue already comes from green solutions. The company invests heavily in innovation. “Any innovation coming from Schneider Electric is a sustainable offer,” he explained. “Each product is more sustainable than the one before it, and metrics are key proof points.”
The main challenge at Schneider Electric was getting suppliers on board with the sustainability journey. The company launched the Zero Carbon Project to assist 1,000 suppliers, who account for 70% of the company's upstream carbon emissions, in becoming more sustainable. "This is a movement, and it's a necessary movement, because we are only as strong as our weakest supplier," Lofty explained. The project's goal is to quantify supplier emissions in order to establish a baseline and identify key emission sources.
This enables data-driven intervention prioritization and road map development.
ESG Reporting
Most people believe that ESG investing is intended to reward companies that help the environment. However, according to a Harvard Business Review report, the ESG ratings that underpin ESG fund selection are based on materiality, an accounting principle that states that all items likely to influence investors' decision-making must be recorded in detail in a business's financial statements using GAAP standards.
Some businesses are already connecting materiality to their own and the planet's fortunes. According to a SAP Insights survey, a significant minority of respondents believe sustainability is already financially material to their businesses, and an even larger group believes it will be in the near future. Companies such as Anheuser-Busch IN Bev and Schneider Electric are using data to find ways to make that link pay off.
“One change we’ve seen over the last few years is that investors have a better understanding of which data is material to the business, and they ask more questions around it,” said Barcenas. “We’re increasingly trying to provide more context around our data.”
The only way to truly demonstrate the impact of a changing world on a company's profits and losses is to provide accurate data. A single global framework and mandatory reporting would certainly help address the data challenge, but that is unlikely to happen anytime soon.
“We still need to progress on some of the standards and regulations before we can make them mandatory,” said Gunther Rothermel, senior vice president, head of Sustainability Engineering, SAP. “We need to look at the common denominator underlying the regulations and cover that level first, and then grow this common denominator as the regulations mature and become accepted.”
Companies like SAP, he says, with products that must also meet standards, will have to serve multiple frameworks for the time being. Meanwhile, SAP solutions assist organizations of all sizes and industries in achieving their zero-emissions, zero-waste, and zero-inequity goals through ESG data transparency across critical business processes, business networking, and a large ecosystem of partners.
“We believe that embedding sustainability at the core of business strategy can help drive operational efficiency, innovation, employee engagement, supply chain resilience, risk mitigation, improved sales, and other strategic business benefits,” said Rothermel.
Having the right data proof points will assist businesses in better understanding the return on their sustainability investment (ROSI) and the materiality underlying investor decision-making, resulting in shareholder returns and long-term environmental and societal benefits.
More information on how SAP assists businesses in recording, reporting, and acting on their sustainability goals can be found here.
A special session at Bloomberg Green COP27, an event co-sponsored by SAP for organizations to meet outside the negotiating rooms of the climate conference and delve into pragmatic strategies for cross-sector climate action, was held to better understand best practices and what's happening in this space.
Anheuser-Busch InBev, the world's largest brewer, is one company with extensive expertise in ESG reporting. The company's growth strategy is based on the digitization of its ecosystem, which includes 200 breweries, 6 million customers, and over 2 billion consumers, generating over 10 million weekly transactions.
“Brewing requires the best ingredients, which requires a healthy environment. We are an agribusiness. We see the far-reaching implications of climate change in our operations and sourcing regions,” said Ezgi Barcenas, chief sustainability officer, Anheuser-Busch InBev. “With operations in over 50 countries, we’re looking at many metrics. Just inside our walls, we have 400 operating practices for tracking efficiency, water, energy, maintenance, and sourcing, to name a few.”
Barcenas explained that as the company considers its supply chain, it must consider the environmental and social impact both upstream and downstream, from smallholder farmers to the half million SMEs that are its customers selling its products all over the world, including mom-and-pop shops and large chains.
“That’s a lot of data,” she said. “Now add all your research and innovation data, security data, and ideas about the future of packaging and logistics. The point is, sometimes you need better data, not more. You need to ask yourself: is this data useful for making decisions? Does it help drive the right actions through the business?”
Schneider Electric SE, a French multinational specializing in digital automation and energy management for buildings, data centers, infrastructure, and industries, was also a participant in the discussion. By 2025, it will have assisted customers in decarbonizing and avoiding 800 million tons of CO2 emissions through its energy and sustainability services and green product innovations.
“We need to triple our speed to avert climate disaster. Reporting scope 3 emissions is extremely important, because we can only track what we measure and we can only improve if we measure,” said Michael Lofty, senior vice president, Power Products, Schneider Electric. The good news is that about 70% of Schneider Electric’s revenue already comes from green solutions. The company invests heavily in innovation. “Any innovation coming from Schneider Electric is a sustainable offer,” he explained. “Each product is more sustainable than the one before it, and metrics are key proof points.”
The main challenge at Schneider Electric was getting suppliers on board with the sustainability journey. The company launched the Zero Carbon Project to assist 1,000 suppliers, who account for 70% of the company's upstream carbon emissions, in becoming more sustainable. "This is a movement, and it's a necessary movement, because we are only as strong as our weakest supplier," Lofty explained. The project's goal is to quantify supplier emissions in order to establish a baseline and identify key emission sources.
This enables data-driven intervention prioritization and road map development.
ESG Reporting
Most people believe that ESG investing is intended to reward companies that help the environment. However, according to a Harvard Business Review report, the ESG ratings that underpin ESG fund selection are based on materiality, an accounting principle that states that all items likely to influence investors' decision-making must be recorded in detail in a business's financial statements using GAAP standards.
Some businesses are already connecting materiality to their own and the planet's fortunes. According to a SAP Insights survey, a significant minority of respondents believe sustainability is already financially material to their businesses, and an even larger group believes it will be in the near future. Companies such as Anheuser-Busch IN Bev and Schneider Electric are using data to find ways to make that link pay off.
“One change we’ve seen over the last few years is that investors have a better understanding of which data is material to the business, and they ask more questions around it,” said Barcenas. “We’re increasingly trying to provide more context around our data.”
The only way to truly demonstrate the impact of a changing world on a company's profits and losses is to provide accurate data. A single global framework and mandatory reporting would certainly help address the data challenge, but that is unlikely to happen anytime soon.
“We still need to progress on some of the standards and regulations before we can make them mandatory,” said Gunther Rothermel, senior vice president, head of Sustainability Engineering, SAP. “We need to look at the common denominator underlying the regulations and cover that level first, and then grow this common denominator as the regulations mature and become accepted.”
Companies like SAP, he says, with products that must also meet standards, will have to serve multiple frameworks for the time being. Meanwhile, SAP solutions assist organizations of all sizes and industries in achieving their zero-emissions, zero-waste, and zero-inequity goals through ESG data transparency across critical business processes, business networking, and a large ecosystem of partners.
“We believe that embedding sustainability at the core of business strategy can help drive operational efficiency, innovation, employee engagement, supply chain resilience, risk mitigation, improved sales, and other strategic business benefits,” said Rothermel.
Having the right data proof points will assist businesses in better understanding the return on their sustainability investment (ROSI) and the materiality underlying investor decision-making, resulting in shareholder returns and long-term environmental and societal benefits.
More information on how SAP assists businesses in recording, reporting, and acting on their sustainability goals can be found here.
Companies