Unlocking the Power of ESG

Peter Kreutter (left), Managing Director Foundations at WHU – Otto Beisheim School of Management,
with Harald Koenig (CIOmove) and Uli Baeumer, Osborne Clark

The concept of environmental, social, and governance (ESG) has gained significant attention in recent years. A plethora of considerations fall under the realm of ESG matters that are becoming more imperative for companies to address, including but not limited to environmental and climate impacts, human rights protection, fostering an inclusive environment and employee well-being.

As consumers, investors, employees, and stakeholders are increasingly demanding a higher degree of accountability and transparency from corporate organizations, business leaders across all industries continue to further integrate ESG objectives into their business strategies and decision-making processes. In fact, research shows that companies that take ESG factors into account are in better positioned to (a) reduce negative social and environmental impacts, (b) navigate the fast-changing, competitive business landscape, (c) attract talent, and (d) capitalize on new opportunities.

Navigating the evolving ESG landscape

“Companies are increasingly recognizing the role they play in shaping society,” says Holger Krimmer, CEO of ZiviZ im Stifterverband. “This is evidenced by the growing number of initiatives and projects they undertake. Many companies also have business models or dedicate budget to ESG activities that support the UN’s Sustainable Development Goals. What is more, corporate commitment to these issues is resilient, even in times of crisis. While there may be temporary dips in resources during economic downturns, such as the recent COVID-19 pandemic, companies have resumed their commitment as soon as the economy recovered.”

And yet, navigating the evolving ESG landscape is no easy task. Faced with a broad range of considerations, it can be difficult for companies to determine which of these ESG factors are most relevant to their specific operations and to implement policies and procedures that effectively address these concerns.

CIOs are ideally placed to take a key role in ESG strategy

We believe that CIOs have a critical role to play in establishing strong ESG strategies and contributing to their organizations’ ESG performance. As technology leaders, they are in a unique position to report on ESG data and evaluate the effectiveness of ESG initiatives. By leveraging and implementing technology and data-driven approaches, CIOs can drive ecologically and socially sustainable practices across the organization and help achieve its ESG goals.

Take, for example, Credit Suisse’s Chief Technology & Operations Officer Joanne Hannaford, who affirms that “the CTOO function at Credit Suisse plays an important role in the Credit Suisse ESG strategy. We work together with the Chief Sustainability Officer to design the group-wide ESG data strategy that powers our sustainability frameworks and ultimately helps the bank to steer its capital towards sustainable activities.”

Moreover, by embedding ESG considerations into their own IT operations and projects, CIOs can lead the way and set an example for other departments to follow. As Joanne Hannaford states, “Our CTOO team contributes directly towards Credit Suisse’s ambition to achieve net zero by 2050, through targeted emission reduction initiatives for our technology and data center infrastructure.”

The crucial role of high-quality data

“Given the importance of reliable, transparent and robust ESG data for decision-making and progress measurement,” she adds, “Credit Suisse has invested in a central hub to standardize and improve the data quality used in these processes.”

Peter Kreutter, Managing Director of the WHU Center for Non-Profit Management and Social Impact, shares the same sentiment, reaffirming the importance of having high-quality data: “In order to achieve successful implementation of ESG principles, it is crucial to have robust data and performance metrics. This enables organizations to evaluate their practices, pinpoint areas that need enhancement, and monitor advancements.”

“The CIO plays a pivotal role in obtaining this information and making sure that data is consistently and effectively gathered and analyzed using established standards,” Peter Kreutter notes. “By collaborating with other divisions and external partners to adhere to industry best practices, CIOs can ensure that their company’s data and KPIs are reliable, trustworthy, and able to be compared.”

CIOs can deliver ESG metrics that investors want

In the credit and capital markets, the relevance of ESG can be seen in the growing number of investors who consider ESG factors when making investment decisions. This is driven by the belief that companies with strong ESG performance are more likely to be sustainable in the long-term and therefore less likely to experience financial distress. CIOs can help identify and implement tools and technologies that can be used to collect relevant data. They can also work with other departments to establish common definitions and metrics that can be used to compare performance across the organization.

However, this is a rather complex and challenging process that requires multiple resources, as the following example of KfW, one of the world’s leading promotional banks, shows. “Over the past few years, KfW has set up a group-wide, data-based impact management system with around 50 measurable and comparable impact indicators. Guided by the UN’s 17 Sustainable Development Goals, these indicators cover all three dimensions of sustainability – economic, environmental, and social – and help us to quantify and steer KfW’s sustainable impact,” says Melanie Kehr, Member of the Executive Board of KfW.

“Having the necessary IT infrastructure and data architecture in place is absolutely critical to managing and enhancing ESG performance. For our impact management system, we implemented a cloud-based application for data collection, with API interfaces for the prospective connection of third parties.“

A contribution by Felix Wienen, editor at CIOmove and Faktor 3.