With 83% of consumers saying they believe companies should be actively shaping environmental, social and governance (ESG) best practices, retailers are feeling more pressure than ever to demonstrate their sustainability credentials. Paired with new ESG disclosure rules likely to be implemented by the U.S. Securities and Exchange Commission (SEC), it’s easy to see why many retailers are now facing a new sense of urgency to get ESG reporting processes in order.
The push from consumers to improve sustainability is already impacting how and where they do business. According to a recent survey, 66% of shoppers are now seeking out eco-friendly brands, and 55% say they would pay more for more sustainable products. Further, the same survey reports that 75% of shoppers will part ways with a brand over a conflict in values, adding to retailers’ need to prioritize sustainability initiatives.
Yet ESG reporting is no easy feat for retailers. First, they tend to amass a tremendous amount of data at each point in a product’s lifecycle. Second, there is then the challenge of ensuring that all the data being collected has enough integrity to fuel meaningful reporting — in other words, ensuring that it has maximum accuracy, consistency, and context.
Mistakes with ESG reporting can be detrimental to a retailer’s financial stock performance, cause irreparable damage to trust and negatively impact public perception. Retailers can best prepare for ESG reporting and get ahead of upcoming requirements by taking the following four steps: breaking down silos within their data; implementing a robust data strategy; enriching data sets; and scaling for long-term success.
Step #1: Break down data silos.
Ahead of developing an in-depth data strategy, retailers first need to have a handle on all of their different data sources. For any single product, retailers have to synthesize data on how it was made, what it was composed of, the labor used for its production, how it was shipped to market and more.
Retailers then have to combine this data with things like the carbon footprint of their operations and how the product was sold, including the energy consumption of brick-and-mortar stores, employment practices and shipping products to consumers. Adding to the complexity, this data is often stored across various systems with no consistency in format or origin.
Retailers need to break down these silos through robust data integration capabilities. Data integration combines data from multiple sources into a unified view. Data integration also ensures that changes to one dataset are reflected in the other subsequent sets, making the data fresh, accurate and complete. Retailers can leverage integration to build a more complete picture of their data, which in turn can help fuel more accurate ESG reporting.
Step #2: Develop an effective data strategy.
Retailers can begin charting a course for success with ESG reporting with a comprehensive data strategy, which will enable retailers to:
- Set an effective initial benchmark for ESG initiatives internally
- Make better, more confident decisions as it relates to ESG goals
- Confidently report ESG results to the SEC and the public
To achieve these goals, retailers must start by developing a data strategy that helps to ensure maximum accuracy and consistency. While data integration helps to combine multiple data sources, data governance tools ensure that rules, regulations and enforcement protocols are followed in data collection. It also helps organizations to understand the source of their critical data elements, providing information on its lineage in order to support ESG metrics.
Establishing a thorough data governance model supports retailers in actively monitoring and reporting on sustainability commitments, particularly amid new regulatory mandates. Data governance also maximizes the value of a retailer’s data by preserving its quality, ensuring it’s high quality enough to source decision-making. A data strategy with the right components will support retailers in being prepared for evolving ESG reporting needs and requirements.
Step #3: Enrich data to unlock hidden context.
Retailers can build on a data strategy and continue fine-tuning their ESG reporting with the help of data enrichment. This refers to enhancing data with third-party datasets, including location data, demographic data, dynamic weather data and more.
Data enrichment can help reveal hidden patterns or relationships in the data that may otherwise go unnoticed. For example, location data can help uncover unknowns in a retailer’s supply chain — highlighting sustainable practices or providing much-needed visibility into areas of weakness that need to be addressed or optimized.
Step #4: Scaling for long-term success.
While retailers may be prioritizing ESG in light of upcoming SEC disclosure rules and rising consumer demands, the strategies and processes developed for ESG reporting need to be future-proofed and not just a quick fix. Retailers need to build their data strategies for long-term success and ensure the processes put in place are scalable and adaptable.
A retailer’s preparedness for ESG reporting boils down to adopting an effective data integrity strategy. Those that invest in foundations of accurate, consistent and contextual data will be best equipped to ensure robust reporting processes for more meaningful sustainability outcomes — and will ultimately be the ones to establish a competitive advantage for long-term success.
As Precisely’s Chief Revenue Officer, Patrick McCarthy is responsible for driving sales performance, client satisfaction, go-to-market strategy and overall operations of the Precisely field facing organization globally. Prior to joining Precisely, McCarthy was the EVP of Sales and Client Development at Risk Management Solutions (RMS), where he was responsible for the global go-to-market strategy and sales execution. McCarthy has also held a broad range of roles at SAP and Oracle and has led supply chain and procurement functions for PepsiCo and Frito-Lay.