January 27, 2023 - 547 views
|Here are three ways business can improve the accuracy of their ESG reporting by cleaning up their data.
The fashion industry is one of the most scrutinized and criticized industries in the world when it comes to sustainability and corporate social responsibility. Too often, fashion brands try to improve their environmental, social and governance (ESG) reputation with greenwashing, in the form of evocative marketing, clever labeling or even the sly misuse of KPIs and overpitched sustainability commitments.
But in a global landscape where corporate sustainability and responsibility has reached a point of criticality and legislative focus, consumers will no longer tolerate overblown ESG claims. And at the legislative level, governments around the world are not only taking notice—they are acting, as well.
The question is, how are such brands able to tell a sustainability story that seems at least partially based in fact? The answer is quite simple: dirty data.
Dirty data refers to incomplete, inaccurate, false, inconsistent and unverified data that lacks credibility and validity and is difficult to substantiate and verify. But it’s not as though most brands deliberately set out to use dirty data to intentionally drive greenwashing. Instead, it’s often an outcome of poor data management, low-quality data and poor digital maturity, which results in fragmented, obscured supply chain visibility.
And this is one of the reasons greenwashing is so dangerous—it comes at the expense of governance and accountability. In fact, research by Changing Markets in 2021 showed that 59% of claims by European and UK fashion companies were unsubstantiated or misleading.
Some compare the false claims to a form of fraud that can jeopardize stakeholders, customers, investors—and even the brand itself.
Amid growing discontent with poor ESG practices, governments around the world are putting in place drastic measures to hold brands accountable. What began as a whisper to improve transparency and demand accountability from some of the world’s leading brands is growing into a massive roar of legislative policy with legal ramifications and global implications. Some notable examples include:
More recently in November of 2022, the EU Parliament gave the final green light to the Corporate Sustainability Reporting Directive (CSRD), which is expected to become effective in 2024. The CSRD will play a fiduciary role in the credibility of ESG reporting data and will require granular reporting.
Here are three common causes of dirty data and our recommendations for eradicating it to ensure credibility in ESG reporting:
Dirty data is the “detergent” in greenwashing. Credible and high-quality data is required to protect not only brand stakeholders but also the brand itself to accurately meet demand and better manage its resources, thereby improving its environmental footprint.
Yet, improving only data quality is not a panacea. Companies must continuously work to monitor the supply chain and build a transparent corporate culture. Regular stakeholder engagement within and outside the company is also critical as it reassures everyone that the company’s values, policies and sustainability strategies are respected and implemented.
As mandates and legislative measures continue to grow, businesses will need to adopt robust reporting systems that enable continuous control, monitoring and intake of data from disparate sources. Doing so will ensure they optimize data credibility, deliver on their sustainability commitments and protect the brand far into the future.
The Modern Business newsletter delivers monthly insights to help your business adapt, evolve, and respond—as if on intuition
Subscribe now