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On the Road to ESG: Knowledge Is Power

20 April 2022 Justin Katzman

Taking business models from Status Quo to Net-Zero

FIND SOLUTIONS

ESG, or Environmental Social Governance, is the corporate initiative being prioritized in C-Suites and boardrooms across the globe. Their stock values hinge on investment portfolios being analyzed for sustainability risk using corporate ESG scores. These scores, assessed by third- party ESG rating agencies, are an aggregate of every facet of a corporation's operational procedure — from upstream to downstream.

But, ask engineers how ESG impacts their operations. The responses may still be blank. While the executives, analysts, and consultants look to solve these large sustainability challenges from the top-down — challenges without easy answers — the solutions can start with a shift in approach to daily operations. This is especially true for engineers designing and building products to be more sustainable.

Through multiple conversations with customers of S&P Global Engineering Solutions, we uncovered three key insights that corporations should consider when taking on the challenge of sustainability — starting from the bottom up.

Sustainability as an Organizational Mindset

Current ESG practitioners are working to incorporate sustainability efforts in day to day activities of their businesses. To achieve this, companies must start communicating ESG goals at every level of the organization for any application of ESG strategies to begin. Even if the first step is "small," say switching to more sustainable product packaging, the awareness and momentum this creates internally, if communicated effectively, can be invaluable.

ESG-driven initiatives lead to changes in business models, and as a result, require a high level of organizational commitment and change. This is daunting for any sized organization. The sooner there is buy-in from executive sponsors and the colleagues doing the functional work, the sooner everyone will be going in the same direction for progress to be made.

Solving for Sustainabilty-Driven Data

The challenge of data management is a recurring theme in any business sector, but adding a new layer of sustainability data
into an already complex operation makes that challenge even greater for engineers and manufacturers. Mapping the correct internal and external data sets to find the correct prioritization, the right materials,
the right manufacturing processes, and the right partners — it's overwhelming, especially as many companies are still on the ESG learning curve. The stakes get higher as the expectation to hold current profits and the product lines that sustain them remains.

From an efficiency standpoint, standardizing sustainability data dramatically reduces errors and wasted effort when connecting "traditional" data with new inputs such as material, regulatory, and supplier information. Data standardization can reduce risks of human error and blind spots, positively impacting sustainability driven goals.

Many of our customers have expressed a similar sentiment: sustainability won't work as an add-on. Sustainability goals, strategies, and data have to be seamlessly integrated.

Embedding Sustainability into Every Decision

To create that seamless integration, companies must make the right sustainable information available and accessible for decisions to be made, and for daily functions to be evaluated through a new lens. Sustainability data must be paired with institutional learnings so colleagues can interpret what this new data is telling them to do — and know the varied effects of that decision point. Data is just data without the human insight to make it actionable.

This is why it is important to start talking about sustainability goals now, within every level of an organization. It's not enough for engineers to just know what sustainability means; they must know how sustainability is applied to their decision-making.

Changing existing products is hard. Sustainability makes it even more complicated. It makes sense to apply changes as early as possible in the design phase, yet many corporations are only in the initial phases of understanding their ESG baselines. Prioritizing the most effective engineering and manufacturing approach to net-zero is still in the future.

What can be done right now?

At S&P Global, we are leading conversations with our customers to understand what strategies are being crafted.

We're thinking ahead to help streamline solutions. Sustainability answers are coming, we encourage your teams to learn more and to start asking more questions.

JOURNEY TO NET-ZERO

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