Organizational leaders can't just assess sustainability efforts by feel. Instead, using data and analysis is key. So why aren't more organizations using these?
Sustainability data is one area too few leaders are mining as a potential vein of gold.
Organizational leaders now use data analytics to gain insights that help them determine the best course of action to take in many of their functional areas, including product design, operations, production and marketing.
Similarly, data analytics can help leaders spot pathways to a more sustainable supply chain, help uncover areas where energy efficiencies and cost savings exist, and lead to ways to lower the organizational carbon footprint. Today, however, too few organizations are collecting environmental, social and governance (ESG) data or using data analytics to help improve sustainability, much less to spot competitive edge opportunities.
Data analytics can bring equally substantial benefits to enterprise sustainability efforts as it does to other areas, said Elizabeth J. Durango-Cohen, an associate professor of operations management and assistant director of the M.S. in marketing analytics program at the Illinois Institute of Technology.
Data analytics enables leaders to understand where the opportunities for more sustainable processes exist and how they should take action, Durango-Cohen said. The business adage "you can't manage what you don't measure" applies to sustainability efforts, too.
"Analytics allows companies to set targets, do reviews and see where they are," she said. "They can then think about the next steps, the next goals, and how they forecast where they want to be and how they get there."
Other industry experts share that view.
Data analytics can yield big boosts to sustainability efforts by helping organizations gain visibility into the very complex set of considerations that affect an organization's environmental footprint, said Ryan Bogner, digital sustainability leader for the Americas at professional services firm EY.
"[Sustainability] is a highly complex and technical space where you can't just [use] intuition; you have to take an analytical view," Bogner said. "There's a whole lot of data that goes into making the optimal decision, and you need to structure the question in the right way, which is why analytics here is very powerful."
Moving toward strategic sustainability
Too many organizations are missing a chance to gain greater insight into sustainability opportunities, such as more sustainable IT or circular economy opportunities.
The vast majority of organizations are not yet using data analytics to advance their sustainability programs, said Lillian Oyen-Ustad, a principal analyst at research firm Gartner, whose research area includes ESG management strategy and technologies.
Many organizations -- particularly small and midsize ones -- are not subject to ESG regulations and reporting requirements, such as those proposed by the U.S. Securities and Exchange Commission, Oyen-Ustad said. As a result, these organizations tend not to gather -- let alone analyze -- ESG-related data.
Meanwhile, although many larger regulated organizations and those in industries subject to stricter environmental oversight do collect ESG data, that data is often siloed, Oyen-Ustad said.
Only the most mature organizations are integrating their ESG data with other data sources, such as their operations and supply chain data, in ways that would allow them to use analytics to rethink decisions and processes with sustainability goals in mind, she said.
In other words, sustainability and ESG data can unlock a competitive advantage, but too many leaders are missing the potential value.
Most organizations are collecting data only about their greenhouse gas emissions, and they're mostly using that data to report on their carbon footprint, Bogner said.
"Most companies have some sort of digital infrastructure around sustainability for reporting carbon emissions, but as you get away from carbon, it goes down pretty quickly," Bogner said.
However, organizations are beginning to seize on opportunities to use data analytics to more strategically support and inform their sustainability efforts -- similar to the way they use data to drive decisions in other areas of their business, Bogner said.
"There is a trend to move from [just] reporting to using data to make a meaningful impact," Bogner said.
More organizations are investing in their data infrastructure not just to support better reporting but also to set up their company for future sustainability initiatives.
Bogner pointed to the work he did with one apparel company, which uses sustainability analytics to create sustainability scorecards for its suppliers. The scorecard analyzes suppliers on about a dozen environmental metrics, such as carbon emissions and water use, along with cost so that the company can incorporate sustainability attributes into its sourcing decisions.
As another example, Bogner cited the work of an energy sector company, which is investing more than $100 million in its carbon-related digital infrastructure so it can integrate that with its ERP software and create dashboards that will enable managers to make data-driven decisions, though he noted that scale is unusual.
"That's an extreme case in a very carbon-intensive industry," he said. "We don't see that scale of investment often."
Durango-Cohen said she, too, has seen some leading-edge companies using sustainability analytics -- analytics that considers environmental impact to inform enterprise decision-making, management and strategy -- to shape their processes and operations.
She pointed to a Japanese manufacturer that's using sustainability analytics to understand the lifecycle of its products from design to disposal so that it can identify and capitalize on viable changes that could make its products more eco-friendly.
Sustainability analytics holds potential in a myriad of areas.
Organizations could use analytics to understand which sustainability-related proposals will impact their costs or revenues, whether those impacts are positive or negative and to what degree, and whether other changes would offset those impacts, Durango-Cohen said.
"It lets them do impact analysis of different decisions," she explained.
Organizations can also use sustainability analytics to create dashboards that visualize their ESG information, enabling them to more easily share how they're doing with stakeholders, Durango-Cohen said.
And although these examples are the exception and not the norm, many general data analytics programs are helping to create leaner, more efficient operations that in turn produce gains for sustainability.
Infrastructure needed to support sustainability analytics
Sustainability analytics does require technological support.
Data teams might find that they can use enterprise-grade analysis tools to support their sustainability objectives, Oyen-Ustad said. However, some organizations -- particularly those in highly regulated industries or in sectors with significant environmental impacts -- may require specialized technologies.
Gartner puts such sustainability data specialty software types into the following buckets, Oyen-Ustad said:
The maturity, industry and goals of an organization should determine whether it needs one or more of these targeted software types or only enterprise-grade data analysis technology, Oyen-Ustad said.
Challenges in establishing, maturing a sustainability analytics program
Regardless of which type of sustainability data analytics an organization uses, quality data is key.
Probably the most important thing for companies is to understand where their most material issues are, because running off and doing things that they hear other companies doing is not the right approach.
Ryan BognerDigital sustainability leader, EY Americas
As is the case with most analytics programs, getting the right data and ensuring that it is well governed is typically the top challenge with establishing and maturing a sustainability analytics program, Oyen-Ustad and others said.
"[Organizational leaders] have to understand the data they need, where it is, how to collect it, who owns it and who governs it," Oyen-Ustad said. "Those are some of the questions that organizations are starting to ask themselves."
Creating a connected ecosystem of technologies and data is another significant hurdle for many organizations.
Given the complexity of sustainability and ESG efforts, focus is also important. Executives must identify where to focus their sustainability efforts and, thus, their sustainability data-gathering and analytics work, in ways that produce value for the organization, Bogner said.
"Probably the most important thing for companies is to understand where their most material issues are, because running off and doing things that they hear other companies doing is not the right approach -- there is so much variation from sector to sector," he said.
Organizational leaders need to understand where their company sits and apply the tools for their specific company context, Bogner said.
"If they're applying these tools carte blanche, they're not going to get significant value."
Mary K. Pratt is an award-winning freelance journalist with a focus on covering enterprise IT and cybersecurity management and strategy.
