How do you comply with legislation and crucially, earn your customers’ trust? Transparency. That’s fundamental, according to Kent Eriksson, Professor of Applied Business Studies and Director for Sustainable Finance Lab.
”You can use data and metrics within a corporation, by using new technologies, to present the good stuff that’s going on in the corporation,” Eriksson said at Dun & Bradstreet’s 2022 Power of Data event, the main focus of which was how to build business resilience.
It doesn’t take a genius to figure out that customers are increasingly expecting companies to take sustainability seriously. And that pretty words on paper are nothing but pretty words. “You’re one of the good ones, are you?” they might say. ”Prove it!”
While recent and upcoming Environmental Social and Governance (ESG)-related directives can feel bewildering, they are forcing companies to clean up their act. Not just to combat climate change, ”which has taken up so much space in public debate that other components of sustainable business have been crowded out.”, pointed out Human Rights Lawyer, Parul Sharma, at the Power of Data event.
While social and labour standards have also garnered much attention, the seemingly tricker governance aspects, such as financial steering, anti-corruption and choosing business partners wisely, needs equal due diligence.
The upcoming European directive on financial steering has confirmed what Sharma, and Eriksson, noticed in the run-up to the introduction to General Data Protection Regulation
(GDPR). Many companies don’t know what they’re doing.
"Lack of competence is now regarded as a high-level risk," Sharma said. "You will be obliged to report on what you've done to raise and recruit competence."
In meetings with auditors at several companies, Sharma has been asked to share a list of risks that companies should tackle to meet the new directive. She doesn’t have one list. ”Each company has its own list of risks,” Sharma said, advising companies to invest in their auditors because they are one of the key professions able to meet new demands.
Put simply, as legislation and regulations get tougher and customers get more knowledgeable, companies drag their feet at their own peril. Focusing on ESG is no longer optional.
One structural challenge when it comes to ESG work is that definitions change. To be resilient, businesses must be prepared to adjust their targets – and their working methods, including data collection, analysis and insight application.
"Standards change all the time, society changes,” said Eriksson. ”You need to continuously develop science-based methods and use metrics to get to know how sustainable your corporation is.”
"To do that you need advanced competence development,” he concluded, "which won't be a problem when all levels of a company see sustainability as important."