Key Takeaways:
- Trusting ESG and sustainability requires first understanding these concepts, their differences and the challenges corporations face to embed and implement sound strategies to meet their sustainability goals.
- The supply chain’s main sustainability challenges involve reducing disruptions, costs and emissions, while promoting a continuous flow of information to enhance operational visibility and strategic decision making.
- IoT is the leading solution to address these supply chain challenges, and Nexxiot’s technology provides real-time data collection and analytic power to enhance logistics visibility, safety and systems optimization.
What is the difference between ESG and Sustainability?
ESG, or Environment, Social and Governance, is a framework used to evaluate a company’s performance in environmental, social and governance areas such as carbon emissions, labor practices, community impact and shareholder rights. Investors use ESG metrics to assess companies’ risks, opportunities, and performance within these areas.
Sustainability is a general term that describes the ability of individuals and communities to meet their needs without compromising the needs of future generations. Sustainability initiatives include responsible consumption, actions to reduce carbon emissions, improve resource use efficiency, promote social equity, and support economic development that benefits all stakeholders.
In a sense, ESG brings the rules and regulations, and Sustainability drives the ethics and actions to promote social, economic, and environmental value.
How can we evaluate corporate ESG and sustainability practices?
Despite such challenges, several standards are commonly used by companies and organizations. For example, on the measurement and reporting of carbon emissions:
- Greenhouse Gas Protocol (GHG Protocol): It is the most widely used international accounting tool for measuring and reporting greenhouse gas emissions, providing guidelines on quantifying and reporting emissions.
- ISO 14064: Provides a framework and guidelines for quantifying and reporting emissions, conducting greenhouse gas projects and programs, and validating and verifying greenhouse gas assertions.
- Carbon Disclosure Project (CDP): A global nonprofit organization that runs a voluntary disclosure program for companies and provides a standardized questionnaire for reporting emissions and environmental data.
- Science-Based Targets (SBTi): The initiative provides a framework for companies to measure and report emissions and set targets consistent with the Paris Agreement.
These standards provide guidance and frameworks for companies and organizations to measure and report their carbon emissions voluntarily. The EU, Switzerland, UK, Singapore, Hong Kong, Japan, New Zealand, and Brazil have introduced mandatory climate risk reporting for large companies, but ESG and Sustainability reporting is not mandatory in most of the world due to this lack of standardization and benchmarking.
How much trust do we place in ESG and Sustainability practices?
The level of trust varies among individuals and organizations. Some companies are highly committed to ESG and Sustainability and view it as an essential part of their business strategy, while others may be skeptical or less inclined to prioritize such initiatives.
Some reasons for the general lack of trust in ESG and Sustainability metrics and reporting:
- Lack of standardization: ESG and Sustainability metrics and reporting are still in the process of standardization, which can lead to consistency gaps in reporting. This can make it difficult to compare and assess a company’s performance.
- Greenwashing: Some companies may exaggerate their ESG and Sustainability performance or use misleading language to create the impression that they are sustainable. This can cause a lack of trust in reporting, making it difficult to distinguish between genuinely sustainable initiatives and marketing schemes.
- Data quality: ESG metrics rely on data from various sources, and the accuracy and reliability of this data can vary widely. This can lead to discrepancies in reported performance and create doubts about the validity of the metrics.
- Lack of regulatory oversight: There currently is no universal set of regulations or standards governing ESG and Sustainability reporting, leading to poor accountability and inconsistencies, making it difficult to trust the accuracy of reporting.
How can trust be built within ESG and Sustainability Practices?
Building trust within ESG and sustainability practices requires strategic development and committing to accountability, transparency, stakeholder engagement and willingness to collaborate and work towards common sustainable goals.
Companies can build trust in their ESG and sustainability through:
- Strategies: Clearly defining ESG and sustainability goals and communicate them effectively to stakeholders. This includes setting targets for reducing environmental impact, improving social outcomes, and maintaining strong governance practices.
- Embeddedness: Incorporating ESG and sustainability into core business practices, including decision-making, risk management, and performance evaluation. This ensures that ESG and sustainability are integrated into the organization’s operations and are not seen as separate practices.
- Disclosure: Providing regular and detailed disclosures on ESG and sustainability performance, including metrics and reports. Information should be easily accessible to stakeholders and presented clearly and understandably.
- Accountability: Setting targets, measuring progress, reporting on performance, and taking responsibility for any negative impacts that the organization has on the environment, society, or governance.
- Engagement: Involving all stakeholders, including customers, employees, investors, and communities, to understand their perspectives and concerns regarding ESG and Sustainability. This can be accomplished through direct contact, conducting surveys, holding public meetings, or collaborating with stakeholders on their sustainability initiatives.
- Certification and standards: Build trust by obtaining certifications from reputable organizations that assess ESG and sustainability practices. Examples include ISO 14001 (management systems), EcoVadis (sustainability rating), LEED (green buildings), and Fairtrade (ethical trade).
- Collaboration: Cooperating with organizations, governments, and NGOs that address sustainability challenges. This can involve joining industry coalitions, participating in sustainability initiatives, or partnering with other organizations to promote sustainable practices.
What challenges exist for meeting sustainability targets across the supply chain?
Several well-known sustainability challenges can impact the efficiency and effectiveness of the supply chain sector:
- Disruptions: Unexpected events can disrupt the supply chain, leading to delays and increased costs.
- Cost Management: Balancing the need to reduce costs while maintaining quality and productivity.
- Information Management: Managing and sharing data across the supply chain can be challenging, with different stakeholders using different systems and formats.
- Emissions: Increasingly, companies are held accountable for their environmental impact and are expected to adopt sustainable practices throughout their supply chain.
How can IoT support companies in achieving sustainability and ESG targets?
IoT solutions help address sustainability challenges of the supply chain while providing a standard for data collection and analysis.
Nexxiot’s solutions have the power to offer:
- Real-time visibility: providing real-time data on the location and conditions of vehicles across the supply chain, allowing for more precise and comprehensive tracking of assets and improved emissions calculations.
- Removal of information silos: ensuring consistency and compatibility across diverse sources of data.
- Automated data analysis: automatically handling and analyzing data, enabling faster and more accurate identification of trends and patterns.
- Enhance safety and prevent losses: our solutions can help improve safety by providing data on asset conditions, potential hazards, and compliance with safety regulations.
- Improved efficiency and cost optimization: information provided from our solutions can help reduce costs by optimizing route planning and reducing the risk of theft or damage to goods in transit.
By providing real-time data collection, standardized data formats, and automated data analysis, Nexxiot’s solutions help bring transparency to reporting and benchmarking, solidify the trust in ESG and sustainability, and promote the tools for enhancing the standardization of carbon disclosures.
This will enable supply chain companies to better understand how sustainability affects their day-to-day activities, track their progress towards increased efficiency and emissions reduction targets, and make data-driven decisions to improve their economic and sustainability performances.
Resources:
1. GHG – Greenhouse Gas Protocol (2023). Setting standards to measure and manage emissions. Online [Accessed: 14 Jun 2023]. Available at: https://ghgprotocol.org/
2. ISO – International Organization for Standardization (2018). ISO 14064-1:2018 – Greenhouse gases — Part 1: Specification with guidance at the organization level for quantification and reporting of greenhouse gas emissions and removals. Online [Accessed: 14 Jun 2023]. Available at: https://www.iso.org/standard/66453.html
3. CDP – Carbon Disclosure Project (2023). Disclosure Insight Action. Online [Accessed: 14 Jun 2023]. Available at: https://www.cdp.net/en
4. SBTi – Science-Based Targets Initiative (2023). Ambitious corporate climate action. Online [Accessed: 14 Jun 2023]. Available at: https://sciencebasedtargets.org/
5. Plan A (2023). The Task Force on Climate-Related Financial Disclosures (TCFD). Online [Accessed: 14 Jun 2023]. Available at: https://plana.earth/academy/tcfd-task-force-on-climate-related-financial-disclosures
6. ISO – International Organization for Standardization (2015). ISO 14001 and related standards for
environmental management. Online [Accessed: 14 Jun 2023]. Available at: https://www.iso.org/iso-14001-environmental-management.html
7. EcoVadis (2023). Business Sustainability Ratings. Online [Accessed: 14 Jun 2023]. Available at: https://ecovadis.com/
8. LEED – Leadership in Energy and Environmental Design (2023). LEED Rating System. Online [Accessed: 14 Jun 2023]. Available at: https://www.usgbc.org/leed
9. Fairtrade International (2023). The Fairtrade System. Online [Accessed: 14 Jun 2023]. Available at: https://www.fairtrade.net/
