Businesses have a responsibility to advance sustainability in their practices. ESG measurement is a popular way to analyze a business’s sustainability efforts. Through ESG measurement, companies have an incentive to improve sustainability. ESG stands for Environmental, Social, and Governance.
So, ESG data refers to information on an organization and its effect on the surroundings. The environmental criterion refers to how the business affects the environment. The social component shows how a company is doing in terms of human capital and its labor standards. Governance involves information on factors like:
- A business’s ethics
- Executive pay
- Involvement in corruption.
Here’s how to produce ESG data insights that matter.
Use a data integration tool
ESG data doesn’t exist all on its own. It needs to get integrated with other data. Businesses usually integrate data to generate more value. They also do it to connect information from a variety of systems.
A business may, for example, link ESG data to supplier and client data. But, integrating different systems at scale is challenging. That is where a data integration tool comes in. Platforms like FigBytes can make ESG-focused data analytics more accessible and more intuitive.
Use artificial intelligence
Businesses use a lot of data to assess ESG risks and opportunities. By using artificial intelligence (AI), companies can find it easier to work with lots of data.
There are computer algorithms that can discover and assess content and tone. These algorithms can take in and break down all the data available about an organization. If humans had to do the same, it would take much longer. So, companies rely on programs that automate the task.
AI can uncover essential data for use by investors looking for suitable investments. But, identifying unreliable data is still a challenge for AI. Thus, human beings will remain helpful to the process for quite some time.
Make use of ESG ratings
ESG ratings are a great place to get an understanding of company performance. However, businesses should regard these ratings with some level of suspicion. That is because ratings stem from many different sources and methodologies. So, a particular rating may significantly differ from another.
Thus, it is a good idea to consider multiple ratings in ESG investing. Doing so will provide a variety of views for the same ESG classification. Combining ESG ratings helps give a better understanding of a business’s performance.
Build an ESG data supply chain
Creating an ESG data supply chain will help gather data from many different sources. To build the data supply chain, you need a platform that can automate the process of finding external data. External data includes both structured and unstructured data.
You will also need to combine and normalize the data. Finally, you can infuse it with insights using AI and machine learning. Doing so will help eliminate false positives, find important sentiments, and score the data. Organizations that use effective ESG practices boost their business profitability.
Investors seek to have a better understanding of the businesses that they fund. Considering ESG factors is a great way to do that.