Data transformation: the role of consumer business leaders

Mon 18 Dec 2023

As detailed in our ‘Sustainable, smart and synchronised: using technology to accelerate the ESG transition’ report, the impact of environmental, social and governance (ESG) on the consumer sector brings new strategic choices. That’s particularly true for mid-market businesses, who often sit in the middle of a supply chain and are at the mercy of pressure from their larger suppliers.

The initial steps companies need to take are strategic, embracing the need for business transformation by mapping out the risks and opportunities of ESG. Given that most ESG programs are data driven, establishing effective systems to draw quality data that can be acted upon is a vital step on the journey.

Challenges in data collection

The pressing challenge for business leaders is to ensure that not only is the right data being collected in the right way, but that it is of sufficient quality and depth to validate ESG policies and actions. That means collecting data on relevant metrics such as impact on biodiversity, labour rights in the supply chain or employee age or diversity demographics. For Samuel Janin, Mazars in France, efficient data collection can also play a key role in optimising the logistics and distribution processes as well as energy consumption and other stages of the consumer goods production.

“Businesses often don’t know what data they’ve got or how to use it and, when it does come through, the quality isn’t there either,” Asam Malik, a Partner in the United Kingdom, says. “Sometimes it will be a cobbled together dashboard that, when looked at objectively, could be argued is just something that’s been created to suit a particular narrative the company wants to portray.” The way to get it right, he believes, is to “create real time interfaces to key systems and third parties into a live ESG dashboard”. By doing that, he says, “a senior leadership team can see where its business is against all the metrics it deems critical for ESG”.

This can pose a significant challenge for mid-market businesses as they will not have the workforce, skills, or experience to collect the data they need at first. Undertaking a piece of work of this nature also comes at a financial cost, meaning businesses with smaller budgets can struggle. Assessing the resources needed to outsource their data collection and analysis is a good first step to take, as is setting up data collection so that it can report in a specific way, such as drawing the information needed for a seasonal piece of work.

Data quality

In terms of data quality, heightened accountability is a key driver. While larger, regulated businesses have achieved a deeper level of sustainability maturity thanks to increased regulation, mid-market businesses have not been subject to the same ESG scrutiny – yet. The web of regulation is widening, with businesses of all sizes under extensive pressure to comply in a transparent and proactive way on sustainability activities. On the other hand, the sustainability reporting requirements are becoming increasingly stringent, too, which means that correctly collecting and leveraging quality data is a key strategic measure for businesses aiming to stay compliant and establish an effective ESG reporting mechanism.

Internal responsibility can also impact sustainable data quality. While the CFO or CEO should deal with sustainability at a strategic level, ESG data is often assigned to a support function. That can be particularly challenging in owner managed businesses. The ability to leverage data relies on tracking where that data comes from, where it sits within the organisation, who owns it and who has access to it. Without that clearly in place, data will lack quality and won’t provide the level of value required to meet sustainability ambitions.

To help, a business can identify someone internally who can step up. The downside of this approach is that it becomes a significant part of their focus, so it’s important a business reallocates people to the right roles. Identifying a team member who it would make sense for and who understands the business very well is a good first step. It’s also important that management embrace the changes, and then push and drive it down through the organisation.

Once leaders are in a position to draw on data-driven insights they can create a cohesive strategy that encompasses both sustainability and business objectives and engage their stakeholders around a vision for a sustainable future.

Data protection

Another key commitment businesses are expected to make is protecting consumers’ data. According to Samuel Janin, data protection constitutes part of the social element of ESG and is becoming increasingly regulated which was illustrated with the adoption of the GDPR in Europe.

In the light of new legal requirements, companies need to find a balance between making the best of collected data for production and business purposes while ensuring that only necessary data is being collected and retained and it is being leveraged ethically.

More insight on the right ESG data approach can be found in our C-suite ESG series report, The ESG data challenge. To discover more, please visit our dedicated area for privately owned businesses, which has a collection of resources to support you on your sustainability journey.