ESG

How to Close the ESG Skills Gap With Technology

By Marjella Lecourt-Alma, CEO of Datamaran

ESG is amongst the most dynamic challenges businesses face, but many companies simply don’t have the skills to deal with it. New laws that limit how much responsibility can be outsourced to external ESG advisors further compounds the problem. The solution lies in-house and the buck stops with the C-suite.

A new type of regulation is accelerating this change. The EUs existing Corporate Sustainability Reporting Disclosure (CSRD) rules, and the upcoming US SEC Climate Related Disclosure Proposals, are shifting the focus for businesses from only measuring things like carbon emissions or waste, to being transparent about sustainability policies and the plans to implement them. Not just disclosing, but actual performance and accountability.

Metrics and measurement are now secondary, the first step is understanding the corporate governance around ESG and the strategic decisions made by business leaders. As a result, tens of thousands of companies in Europe and the US are rethinking their approach to ESG - explaining why it’s important to their businesses and how they are doing it. But the skills needed for this are in great demand and short supply. What is the solution?

Focusing on governance requires different ESG skills

A focus on governance - the business structures and processes that guide management and decision-making in the right direction - has passed the burden of responsibility to businesses. Some organizations have a dedicated ESG professional to collect and interpret the data that informs these decisions, but most don’t. However, the skills gap is much wider than that.

With the consequences of ignoring regulations or investor demands for greater ESG disclosure getting more serious, responsibility has risen to the C-suite. CEOs, General Counsels and more often CFOs, will be asked to sign off the ESG goals and targets included in their organizations’ financial reports. Goals and targets that will be integrated with their financial responsibilities.

The speed of this change has left little time to acquire the necessary skills to take on this ESG leadership role. They want to make informed strategic business decisions and, perhaps more importantly, have the confidence to divert resources away from the areas of sustainability that matter least to their business. But there are many risks if they don’t get it right. They can’t do this alone and, as with their financial responsibilities, technology is perhaps their only option.

Technology and people reduce risk

Having trustworthy data that can point someone within your business in the right direction and inform your ESG strategy minimizes these risks. It also helps avoid the pitfalls of focusing on too many issues, or even the wrong issues.

Technology allows you to ask and answer the right questions in-house - should you invest time and money into human rights or water and hazardous materials management? Is your business planning effectively for climate change and GHG emissions, or employee diversity and inclusion?

Not even the largest companies can do everything. Combining data-driven insights gathered from stakeholders, peers, regulations and the media using technology, together with the business overview of the C-suite responsible helps to focus on a strategic and targeted approach.

Getting this wrong can lead to accusations of greenwashing, resulting in financial and reputational damage. Making promises you can’t keep, or ignoring an ESG topic because you don’t understand the demands of your stakeholders are some of the easiest “unintentional” ways this can happen. Again, technology can deliver the insights to inform those decisions.

Without senior in-house ownership there is also a risk of non-compliance with CSRD rules through not governing the most material ESG issues appropriately. This now requires board oversight and accountability at C-suite level, supported by regular reporting on progress, continuous monitoring for changes, and the audit of data to ensure decisions are based on reliable information - all now possible through a range of technology solutions.

The new ESG Tech Stack

The skills shortage means fewer people have greater responsibility. They rely on new ways to automate measurement, data collection, progress monitoring and reporting to make it work.

Skilled ESG professionals can manage this, however, they should be innovating and identifying opportunities to drive business value from ESG by being freed from these laborious manual processes. As rare and sought after resources, maximizing their effectiveness is critical.

But this expertise is no longer essential. With the right balance of skills and technology, companies can deliver against these new increased demands. A “Tech Stack'' is routine for disciplines like finance, HR or marketing. The same is now available for ESG and it comes at just the right time.

The solution is a smarter approach. Focusing on reducing manual labor; using and nurturing the expertise within your business efficiently to add value rather than consume resources; and crucially empowering business leaders with the insight, skills and confidence to take ESG in-house. Smarter ESG is the only long-term fix for the ESG skills gap.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.