Working with ESG data providers may seem like a challenge. You might not have full control of your data source, you might need to involve multiple people in understanding the risks associated with your data and you might even wonder how you will implement action and make change across your organisation as a result. Working with ESG data providers can be a particularly challenging process for any company or organisation that doesn’t already have similar experience in dealing with similar entities. However, if you are willing to invest time, energy and resources into working with them, there are several ways that you can make it as effective as possible.
Have a clear idea of your requirements
For a partnership to be successful, one of the most important things to keep in mind is that you and your data provider need to be on the same page as to the exact requirements that you are looking for with your partnership. Similarly, you should also make sure that you understand what your partner expects from you. It isn’t enough to just want to work with ESG data providers because you want to do the right thing, you also need to be clear with your requirements as to how you want to use the data.
When you don’t keep this in mind, you open yourself up to the risk of failing to meet any of your requirements, as well as alienating your data provider. If your data provider has agreed to work with you because they see value in working with you, they will be disappointed and frustrated if they feel that the partnership is not benefiting them. As with most things in business, it’s a two-way street.
Build a strong foundation
At the heart of any partnership is trust. When you don’t build trust, you inevitably end up where you should not — where your partner does not feel comfortable sharing their data with you and vice versa. Trust is earned over time, and as with any relationship, it requires effort and forethought on both sides. This can best be done by conducting due diligence on your data provider and on your project’s risks.
Your partners’ data quality, accuracy and completeness, as well as their data integrity, are very important issues that needs to be addressed when working with them. Because data quality is an ongoing process, it is recommended you engage a data provider of high quality and, ideally, an accredited data provider which uses real-time data. If you choose to use an unaccredited partner, you are taking a high risk of receiving poor and/or outdated data that might lead to inaccurate decisions.
Don’t just look at the data — understand the context
This is one of the most important aspects of working with ESG data providers, and it goes hand-in-hand with what you need from your data. Understanding the context of your data and how your project will use it is a critical part of data quality. It’s not enough to just look at your data and analyze it without considering the context, and it’s this context that sets the stage for data quality. You should ask yourself a few key questions when considering your context: What is the basic context that our data is being used in? What is the purpose of using the data? What are the requirements and how will the data help meet these requirements?
Collaborate with your data provider to identify key risks
As part of your data partner’s due diligence, you should collaborate with them on identifying key risks associated with your project’s data. This should include investigating your partners’ data quality, verification practices and data integrity processes. At the same time, you should also conduct your own due diligence and research on your project’s key risks. For example, you can use a risk classification system or algorithm to help you automate the process of identifying and documenting key risks.
Use algorithms to automate the task and identify new risks
In order to best leverage your partnership with your data provider, you should consider using an algorithm to automate the risk identification process and identify new key risks associated with your data. For example, you can use an ESG risk classification system or algorithm to help you automate the task of identifying and documenting key risks. You can then use this system to help you prioritize your risk list and focus your efforts on the most important ones.
2024 update
As we move further into 2024, the landscape of working with ESG data providers has evolved significantly. The importance of high-quality, real-time ESG data has only increased, driven by stricter regulations and growing investor demand for transparency. New developments include:
Standardization efforts
The International Sustainability Standards Board (ISSB) has released its first set of global sustainability disclosure standards, which are being widely adopted. This is helping to standardize ESG reporting and improve data comparability across companies and industries.
Regulatory pressures
With the implementation of the EU’s Green Claims Directive and the SEC’s climate disclosure rules, companies are facing greater scrutiny of their ESG claims. This has increased the need for robust, verifiable ESG data.
Focus on double materiality
There’s a growing emphasis on assessing both the impact of ESG factors on a company’s financial performance and the company’s impact on the environment and society.
Real-time data demand
The market is increasingly valuing real-time ESG data over periodic reports, as it allows for more dynamic risk management and decision-making.
These developments have made working with ESG data providers both more crucial and more complex. Companies now need to be even more diligent in selecting providers that can offer comprehensive, real-time data that meets evolving regulatory standards. The importance of understanding data context and collaborating closely with providers to identify and mitigate risks has only grown.
As we progress through 2024, companies that effectively leverage ESG data and integrate it into their decision-making processes are likely to gain a competitive advantage in an increasingly sustainability-focused business environment.
Conclusion
Working with ESG data providers can be challenging. However, it can also help you gain access to high quality data and provide insight into important trends that help inform your business decisions. It’s important to approach the process with the right mindset, partner with the right data provider and be willing to put in the necessary effort to make it work. After all, working with ESG data providers can help you become more sustainable and efficient, allowing you to reach your goals more quickly and effectively.
