The basics of CSR, ESG, ‘sustainability’ — and how technology adds insights to the process

Sustainability has become the burning issue that businesses need to address in the wake of the 2020 Covid disruption, and technology and services providers are responding rapidly to fill gaps in current operating models.

The shift in attention is not just hot air. Multiple firms are putting serious money behind the effort. As just one example, the accounting firm PwC announced in June that it would spend $12 billion over five years to create 100,000 new jobs aimed at helping its clients grapple with climate and diversity reporting, as well as in artificial intelligence, according to a Reuters report.

Part of that staggering 35% increase in planned headcount — PwC currently employs 284,000 professionals globally — is a perceived need to help businesses understand and comply with the exact requirements of “sustainability,” a broad term that can encompass many topics and subareas.

To fully understand sustainability in the business context, we need to know what exactly the key concepts mean, why they’re important and what technology to use for the best return on your investment.

A need for greater clarity

A common error that we’ve encountered in conversations with businesspeople and providers alike is that the “S” in CSR and ESG are mistakenly referred to as “sustainability,” when in both instances it stands for “social.” If one word trips people up, imagine the confusion that could arise around “net zero” or what a “circular economy” means.

Getting these terms right is not just a matter of semantics. Agreement on what exactly is being discussed is essential to aligning on actions to take.

In a speech last month, US Securities and Exchange Commissioner Allison Herren Lee put it in simple yet stark business terms.

“Because matters such as climate change may bear on the valuation of assets, inventory, supply chain and future cash flows, board oversight of audits increasingly necessitates engagement on those issues,” she said at the Society for Corporate Governance 2021 National Conference.

For any company, that’s a wide range of business areas that face risks — as well as opportunities. To get the data to make business decisions in those areas, stakeholders need technology to work for them in new ways so that a company’s sustainability efforts can be showcased and have a material impact for the business.

And it’s not just the SEC and other regulators who are driving accountability on sustainability issues.

These days, more individual importance is placed on environmental and social issues by investors, consumers and a company’s own workers — all of whom will choose whether to spend money on your products or whether to even put their talent to work for your company.

Accountability has risen in the boardroom and in the marketplace.

To clarify matters, a glossary of terms follows that can help people understand the issues and the obligations that businesses face. Familiarity with these terms will be important in the coming weeks as Spend Matters profiles a range of companies that offer ESG technology to measure, manage and optimize the business responses to the vital issues around sustainability.

Circular economy or “circularity” — Under the umbrella of “sustainability,” two main issues are natural cycles (carbon, water, etc.) and human activities. The circular economy focuses on the man-made cycles, the making of parts/goods/products and the delivery of services. The US Chamber of Commerce offered this insight in an article on sustainability vs. circularity:

“The practice of circularity is focused on and grounded in the technosphere — a human construct designed to support the conversion of raw materials for human consumption beyond simple survival needs of food and water. The intentional design of a system is what separates circularity from sustainability.”

Some businesses try to meet sustainability goals by having a circular process that ensures better outcomes for the environment and the company. And some technology providers help track and manage those activities so that ESG data can be put to the best use.

Read more at Spend Matters

16 July 2021