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Written by Cognizant Benelux
8 August, 2024
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4 mins
At an ESG and data workshop event in Amsterdam, experts from Cognizant and ERM, a global sustainability consulting company, shared their thoughts on the sustainability transformation of today’s businesses, the challenges they face, the Corporate Sustainability Reporting Directive (CSRD) in the European Union (EU), and the impact of generative AI in interpreting data.
Rapid climate change, which is pushing the limits of planetary boundaries, necessitates that today’s businesses make a shift toward sustainability. While there are companies that are leading the change, there are others that are neglecting the transformation. Talking at the event, Laurent Beuselinck, EMEA Regional Service Leader Corporate Sustainability & Climate Change from ERM stated, “There are parallels in digital transformation. There were frontrunners who benefited from it. But those who underestimated that transformation went out of business. We see the same happening in sustainability transformation as well. After interviewing 150 executives and other experts on their sustainability transformation journey, ERM, along with the World Business Council for Sustainable Development, recently published a report—Catching the wave and seizing the opportunity of the sustainability transformation.”
The report also speaks about the challenges different companies face in undertaking the sustainability transformation. “One is the focus on short-term business outcomes, which clashes with the longer-term nature of sustainability. Second is the perception of CEOs who see sustainability as a cost, not a commercial opportunity,” shares Laurent. However, markets for electric vehicles and sustainable solar aquaculture will grow significantly. Also, green financing could reach a market size of $29 trillion in 10 years. Despite the challenges, companies should embrace sustainability to future-proof their businesses. And this thought aligns very well with the messages in Cognizant’s Deep Green report.
The difference in the way different stakeholders understand data needs is one of the main challenges in the ESG data strategy implementation. Explaining a situation, Noah Nzuki, ESG Lead EMEA from Cognizant said, “When we went for a governance meeting, they said, there were two priorities—one, sustainability and two, digitalization. We had everything in place for the implementation, but no one knew what we were implementing.” So, what’s the solution? While policies are essential, there’s a greater need for education and training, and cross-domain learning.
The significance of ESG data disclosure proved right during the pandemic. Companies that made ESG disclosures and had good governance structures gained access to institutional funding, and they managed the crisis better than others who didn’t focus on ESG. “Today, would you find a company without a website? Similarly, it would be imperative for a company to be on top of their sustainability data and leverage it for value. Companies that don’t do it will be outperformed by their competitors,” noted an event attendee.
Businesses today are looking to use sustainability data as an opportunity to win the trust of stakeholders. And the CSRD plays a crucial role here. “It enables incorporating factors such as biodiversity and human rights into decision-making models, pushing organizations to go beyond operations and to take actionable and tangible business decisions,” shared Noah.
Another question around data is its quality. Availability of data isn’t a problem today. But can we trust this data? That’s why it is essential for companies to transition from simply disclosing data to deriving actionable insights. “And the CSRD objectives include public disclosure and reporting of information, which will enable different stakeholders to take a look at it and compare,” added Noah.
Here’s a closer look at the processes involved as part of the CSRD and how organizations could benefit from the same.
Processes
Benefits
While most companies collect their sustainability data, the next challenge is decoding the report. An actuary or a risk manager may not be able to decode a customer’s ESG report. AI can help here. “You can ask questions in English and get interpretative answers from the data. AI can do a lot more in terms of automation, algorithms, tracking and more. Meanwhile, one of the strongest abilities of generative AI is to democratize data across functions, helping to interpret accounting standards, electricity bills, etc. Generative AI has the ability to interpret data for specific objectives,” explained Manoj Mathew, Global Head of Sustainability Engineering and Services of Cognizant.
For more information on our services, visit our Generative AI hub and Sustainability services pages.