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What is ESG Data Analytics and Strategy?

Tanya Gupta

@tanyagupta

May 9, 2023

ESG & Sustainability

527

Investors want sustainable companies in their portfolios. Simultaneously, governments and consumers expect companies to conduct their business operations responsibly. After all, the world knows how industrial activities have threatened environmental and social harmony. This post will explore ESG data analytics and strategy for sustainable development.

What is ESG Data Analytics?

ESG data analytics leverages computing science and statistics to inspect an organization’s environmental, social, and governance compliance levels. Industries and asset managers utilize ESG data analytics for sustainability accounting compliance reporting and peer analysis.

Two companies in the same industry will perform differently on ESG metrics. Therefore, data analysts have redeveloped their legal compliance models to address the challenges in comparative studies. The ESG reports they offer will enable impact investors to make more informed choices regarding whether to buy or sell a particular stock.

Components of ESG Analysis

1| Environmental

Sustainable accounting guidelines expect corporations to address carbon risks associated with their industrial operations. So, metrics like deforestation and threats to biodiversity will encompass mining, construction, and fishing companies.

Each industry will affect an environmental aspect differently. Therefore, analytics consulting services tailor their offerings for each company. For instance, pharmaceuticals and textile companies are more likely to pollute water resources. Meanwhile, petroleum extraction and natural gas processing firms have a conflict of interest with renewable energy transition compliance in ESG.

2| Social

Multi-ethnic work environments have become the norm because of globalization. Women’s empowerment, as well as affirmative actions for marginalized communities, have gained momentum today. Yet, discrimination, workplace harassment, and bias in recruitment continue to plague the world.

Investors like to support enterprises that enforce diversity, equity, and inclusion (DEI) policies to prevent abusive interactions between professionals with distinct cultural backgrounds. Moreover, a business must maintain a safety and workplace hazards protocol to keep workers safe.

3| Governance

Transparent accounting practices and the latest cybersecurity measures enable corporations to improve their ESG ratings in the governance pillar. Besides, investors refrain from buying stocks of a company not complying with financial and technological requirements.

Corporate governance improves the relationship between the private sector and governments. Companies also become more resilient to legal risks and cyber threats when they enhance their infrastructure. Remember, the significance of consumer data protection and documentation confidentiality is increasing each day.

What is an ESG Data Analytics Strategy?

An ESG strategy offers logical roadmaps to businesses and investors that help increase sustainability accounting compliance. It will assist in auditing and benchmarking an organization’s ESG performance data.

Investors will need a dedicated ESG strategy to find sustainable company stocks and support projects focused on renewable energy. Simultaneously, company owners will utilize ESG data to modify how they operate.

Although ESG strategy differs between investors and managers, the following components remain consistent in most reporting solutions.

What Does an ESG Strategy Include?

1| Specifying Data Source and Framework

A sustainability framework offers guidance on which compliance metrics are relevant to the target industry. Many frameworks also elaborate on how to quantify ESG scores. Similarly, a data source can be an authoritative knowledge base like a research journal or industry magazine.

For example, the global reporting initiative (GRI) has modules that facilitate flexible report creation. Its GRI 11 standard is relevant to oil and gas companies, while GRI 203 focuses on indirect economic impact.

2| IT Infrastructure Development

An extract, load, and transform (ETL) pipeline reduces the burden on data analysts by automating data acquisition, cleansing, and validation. However, insight exploration can be inefficient if IT infrastructure lacks the latest specifications.

Manually handling data quality tasks is infeasible, primarily due to the multiple sustainability frameworks applicable in different regions. So, ESG analysts must maintain a robust technological ecosystem that can perform complex ETL tasks and data quality management (DQM) operations.

3| Report Generation

ESG compliance insights must become available as visualized reports. All the tabulations and jargon can have independent appendices for more tech-savvy stakeholders. The documents must exhibit a consistent arrangement of reporting elements.

Each report must be presented in multiple formats. Selecting a platform that allows exporting the report dashboards as PDFs, CSVs, JSONs, or XML files is necessary.

Conclusion

An ESG data analytics strategy involves a company’s sustainability compliance inspection across the environmental, social, and governance pillars. Its applications have guided investors and business leaders in responsible decision-making.

Therefore, impact investors and modern businesses leverage ESG benchmarking. They want to realize the sustainable development goals (SDGs) for a cleaner, happier, and more secure future.

ESG Data Analytics ESG Analytics ESG and Data Analytics

Disclaimer

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Tanya Gupta

Google certified Digital Marketing Strategist with 6+ years of experience in digital marketing. Started my career as an SEO executive and slowly moved into mainstream digital marketing. Have worked in a digital marketing agency with the multiple USA, UK and Canada based clients. Also, worked with Information Technology and services industry.