How Finance Organizations Can Ensure the Success of Their ESG Initiatives

Environmental, social, and governance (ESG) initiatives have increasingly gained traction as more organizations have come to realize just how much they can impact their bottom line. Certain changes in worker, customer, and regulatory expectations have made ESG reporting especially critical for finance and insurance agencies. For example, new Securities and Exchange Commission (SEC) climate disclosure rules require businesses to report all types of important data. These requirements range from information about risks impacting operations and financial conditions to direct and indirect emissions data.

If you're not sure what approach to take for ESG initiatives in your finance or insurance organization, there are some key factors to consider.

Factors That Help Ensure ESG Success

When integrating ESG efforts into your operations and attempting to achieve specific ESG goals for finance, the following are some of the items to keep in mind as you integrate the right solutions for your organization.

Accurate Data

Effective ESG initiatives can improve operating profits by up to 60%. One of the keys to this success is collecting good, reliable data. If your data is sufficiently accurate, you'll benefit from actionable information that can help your organization establish a system of continuous improvement with its ESG efforts as well as stay compliant.

For example, to appease the new SEC rules, you must maintain accurate and timely data around direct and indirect greenhouse gas (GHG) emissions. This includes emissions data from various points along the value chain.

The problem is that for finance and insurance organizations that are still early on in their digital transformation journey, data is frequently kept in disparate, aging systems and is often not reliable. 

A Dedicated Team or Specialist

ESG initiatives aren't simply something to pay attention to and address on the side. Meeting ESG goals for finance should be a core focus for your business, just as much as any other aspect of your operations. To give this area of your business the attention it needs, it's often best to have a dedicated specialist or team on your side to focus primarily on ESG data and efforts. This person or team can work cross-departmentally to educate stakeholders, find opportunities for improvement, and ultimately move the needle in the right direction. 

The Ability to Identify and Address New Challenge Areas

Based on the data you collect and analyze in reports, you should be able to identify specific challenges in areas where your organization is underperforming. Dependable analytics tools will provide you with accurate data that you can measure against your targets and goals. If you find that you're struggling in any area, be it the environmental, social, or governance side of ESG, you can take the best approach to tackle these challenges.

According to one recent study, some of the top ESG challenges that organizations face include:

  • Lack of robust ESG data
  • Performance concerns
  • Greenwashing concerns
  • Complex regulatory landscapes
  • Lack of suitable products and strategies
  • Too much focus on short-term investment horizons

As you continue to identify and address these challenges, you'll continue to progress in your ESG initiatives. Ultimately, this will help in boosting sustainability and maintaining compliance.

Knowing Which Frameworks to Follow

Governance is a challenge for many companies. One NAVEX Global survey found that a mere 39% of companies believe they're performing well for governance.

In appealing to the governance portion of ESG, you must ensure you have the right frameworks in place to optimize data governance. Which frameworks will provide you with the most valuable and consistent data you can put into action to optimize ESG initiatives? 

There are multiple ESG frameworks that you can implement, depending on your specific requirements. These frameworks include:

  • Sustainability Accounting Standards Board (SASB). Many companies use this framework for compiling data. It's also useful for publishing sustainability reports, annual reports, and financial disclosures.
  • Global Reporting Initiative (GRI). This type of report framework is ideal for presenting data in a format that's easy for investors to comprehend.
  • Carbon Disclosure Project (CDP). This framework specifically helps organizations understand their environmental impact. It can provide investors with relevant, comprehensible information.
  • Task Force on Climate-Related Financial Disclosures (TCFD). Companies can use this framework to determine their climate change impact. It can also help investors make better decisions regarding ESG initiatives.

Maintaining Transparency of Data

One of the biggest challenges for financial organizations of all types is transparency. These companies often rely on legacy systems that make facilitating a meaningful digital transformation harder. Still, this type of transformation is integral to ESG initiatives and meeting ESG goals for finance.

According to one recent study by Workday, 47% of leaders in the financial industry stated that they're seeing a widening gap between where their business is and where it should be to maintain a competitive edge. Digging deeper, these leaders stated that only 14% of their data is fully accessible. 

To ensure all ESG and other data will be transparent and highly accessible, organizations must implement the right systems for collecting and maintaining data. Cloud-based solutions are among the best to use. They centralize all critical data to allow for improved accessibility and transparency across the organization. Cloud tools will also help identify areas of improvement in every aspect of ESG, including sustainability and diversity efforts within the organization.

The Key to Implementing ESG Programs = Technology

If you want to get the most from your ESG efforts, having dedicated teams and learning everything you can about these initiatives is key. However, you must also ensure your organization has the technological capabilities to make your efforts meaningful. 

Consolidating key types of data, such as HR and Finance, into a single source of truth will help ensure your data is always accurate and easy to audit. By using a powerful tool like Workday, you'll give your ESG-devoted teams access to a solution that helps them visualize data effectively, allowing for more actionable insights.

If you want to learn more about Workday and how it can meet ESG goals for finance organizations, contact us today.


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