ESG data provides information about the environmental, social, and governance (ESG) attributes of a company or investment. ESG data is used by investors, analysts, companies, policymakers, and other stakeholders to understand and make informed decisions about business effectiveness, risk, and sustainability.
ESG data is used in many different ways, including:
For companies, collecting, tracking, and reporting ESG data is a to establish transparency, trust, and accountability in their environmental goals, social sustainability, and corporate governance so that they can appeal to future investors, employees and customers.
ESG data refers to information related to a company's environmental impact, social responsibility, and governance practices. The different types of ESG data can be broadly categorized into the following areas:
There are many different methodologies used to collect and analyze ESG data, including investment incides and ratings from MSCI and S&P, as well as ESG data collection platforms for companies like Brightest.
ESG data can provide a number of benefits for companies, investors, and other stakeholders. Some of the key benefits of ESG data include:
A number of researchers, analysts, and companies like Campbell's, Havas, Nike, Starbucks, TIAA, and Unilever have all found clear correlations between robust ESG programs and employee morale, loyalty, and retention, and - in some cases - direct sales growth. Understanding those relationships require strong ESG data foundations, infrastructure, and analytics capabilities.
These benefits make it important for companies to accurately collect, management, and disclose ESG data, particularly publicly-traded or listed organizations.
ESG data is commonly used to calculate ESG scores and ratings that can be used to evaluate a company's performance on environmental, social, and governance issues. There are different methodologies, frameworks, and types of data used to determine ESG scores and ratings, but the basic process generally follows this type of pattern:
It's important to note that different organizations, analysts, investors, and agencies use different methodologies and weighting to calculate ESG scores and ratings, so scores can vary depending on the provider. Some organizations also use different data sources, therefore the scores and ratings can vary based on what data's used. Most leading ESG analysts publish their methodology on what data they collect and how it's used.
Most large, international companies have internal teams and processes to collect ESG data. This includes:
For example, its common for ESG, sustainability, and finance teams to collect and gather environmental data from accounting, operations, and/or facilities, social data from HR, and governance data from the board, finance, legal, risk, and other parts of the organization. ESG data collection and management may require onboarding an ESG data management system like Brightest, and coordinating that with IT and procurement. Support from consultants may also be needed. ESG data collection is truly an aggregation process, one that requires significant cross-organizational collaboration, communication, and stakeholder engagement.
Brightest helps hundreds of companies around the world prioritize, manage, measure, report, and improve their ESG data collection, accuracy, and insights
While individual departments may be responsible for specific ESG metrics and measurement areas, it's important for CEOs, CFOs, and sustainability leaders to create a unified, company-wide analytics approach. In order for ESG to really drive business benefits, competitive advantages, and social impact, it must be part of the company's top-level strategy, supported by the C-suite, and adopted across the organization.
You can't delegate ESG or sustainability to a single department - it's a company-wide effort
Similarly, rather than trying collect data on everything, it's best to focus ESG data efforts on accuracy, data quality, and measuring a few core ESG and sustainability KPIs first, then building from there.
There are several steps and best practices any company can follow to effectively collect operational ESG and sustainability data:
A good ESG data collection system should be able to gather data across a company's operations, supply chain, disclosures, third-party data providers, and publicly available information. The system should also be able to organize and analyze the data in a way that is meaningful and useful for stakeholders, such as investors, customers, and employees.
In many cases, implementing ESG data collection improvements will require organizational change management. Above all, organizational alignment, resourcing, and executive support are critical for efficient, effective, long-term ESG data collection success.
ESG data partners like suppliers, third party experts, consultants, independent standards organizations, industry associations, or ESG technology providers like Brightest can often provide helpful best practices when it comes to collecting and working with ESG data.
Brightest helps collect and centralize ESG data across all of a company's systems, teams, and data sources
There are a variety of reputable ESG data analysts and providers available, including Bloomberg, CDP, ISS, MSCI, Refinitiv, RobecoSAM, S&P, Sustainalytics, Vigeo Eiris, and others. Familiarize yourself with their research, methodology, and offerings to see if their ESG data solutions are a fit for your needs. The ESG data market is also constantly evolving, with new players emerging.
Effectively understanding, communicating, and working with ESG data is one of the most important responsibilities of any ESG professional. Data underpins overall ESG performance and disclosure.
Overall, ESG data is a vital tool for companies, investors, and other stakeholders to understand and manage environmental, social, and governance issues. By providing insight into a company's performance on ESG issues, ESG data can help to mitigate risks, improve long-term performance, enhance reputation and brand, increase investor interest, and help comply with regulations and international agreements. Our hope is this article served as a helpful initial overview of the different types of ESG data, the benefits of ESG data, and the methodologies and frameworks used to determine ESG scores and ratings. As the importance of ESG data continues to grow, it is essential for companies, investors and other stakeholders to understand and use it to make informed decisions.
With that said, we wish you all the best with your ESG data work and learnings. If we can be helpful at all (at any step in your process), please get in touch. A central part of our mission here at Brightest is empowering more efficient, transparent, and well-governed ESG data.