Getting Our Heads Wrapped Around All That ESG Data

ESG (environmental, social and governance) ratings and rankings are at an inflection point; among the reasons is that there are so much data out there that it’s hard to gauge what’s compelling and what creeps into green- and purpose-washing. So, how exactly can sustainability professionals actually collect this information, what can they do with it and how do we drive sustainable decision making?

As Mandi McReynolds, who heads global ESG at Workiva, the first problem to confront is that stubborn "trust issue" — as someone who has done more than her fair share of surveying investors, she added that the trust issue conflicts both institutional and individual investor alike.

“There’s a trust crumbling and quality crumbling, so you need a strong strategy and solution-driven systems,” McReynolds said earlier this week at a sustainability conference earlier this week hosted by The Economist in Washington, D.C. “You can’t chase everything — so you chase what are the strong data drivers.”

Among the concerns of investors she’s found while conducting research, McReynolds shared that one of their largest worries is what is occurring as a result of their companies’ operations. For example, one survey Workiva recently completed found that 50 percent of sustainability professionals had doubts whether the data they were supplying to their stakeholders was accurate and timely enough.

Earlier this year, McReynolds offered three high-level suggestions on how companies along with their executives, boards, investors and stakeholders can best gauge the links between ESG and value creation. First, focus on those ESG challenges that matter the most; next, be sure to accurately identify those business value drivers; and finally, keep reviewing and updating the company’s value chain.

Bottom line, think of ESG materiality and data as the horse-versus-cart scenario: Companies need to identify what absolutely matters before they sort through all those copious amounts of data. 

Nevertheless, more guidance from the folks on Capitol Hill and down the street on Pennsylvania Avenue would offer a lift. Late last month, Workiva was among the companies offering public support for the Financial Data Transparency Act (FDTA), which if passed into law, would instruct eight major U.S. financial regulatory agencies to implement uniform data standards for the information they are already required to collect from any companies subjected to U.S. federal disclosure laws.

McReynolds was among the sustainability leaders who spoke during The Economist's second annual Sustainability Week U.S., the lineup of which included many global brands, officials from the Biden administration and elected leaders from across the United States.

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