VUCA-Proof Big Data for Long-Term Sustainable Growth

Changing investor demands require sharper focus on ESG issues
VUCA-Proof Big Data for Long-Term Sustainable Growth VUCA-Proof Big Data for Long-Term Sustainable Growth
Publ. date 7 Mar 2016
Larry Fink’s latest annual Corporate Governance letter to CEOs recently made its way into headlines as the BlackRock chairman expressed a noteworthy appeal for companies to stop giving quarterly earnings-per-share guidance. In a wider perspective, Fink urges companies to resist the “powerful forces” of short-termism, and invest in long-term growth instead.

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Managing ESG issues as a sign of operational excellence

BlackRock understands that ESG issues offer both risks and opportunities, and expects companies to have strategies to manage them. Therefore Fink addresses his audience urging the need for companies to educate their investors on external dynamics, explicitly underlining the case for a stronger focus on governance, environmental and social factors that companies are facing. “ESG issues (…) have real and quantifiable financial impacts,” he states, and “at companies where these issues are handled well, they are often a signal of operational excellence.”

In a similar development, Nasdaq announced in early March that its Nordic and Baltic exchanges in Stockholm, Helsinki, Copenhagen, Reykjavik, Tallinn, Riga and Vilnius have committed to produce a guidance on ESG disclosure for listed companies by the end of this year. As such, they are joining the United Nations Sustainable Stock Exchanges (SSE) initiative’s “Campaign to Close the ESG Guidance Gap”. Seven Nasdaq and Nordic exchanges are now committed to the guidance disclosure, meaning the campaign will have 15 exchanges with published ESG guidance and 20 exchanges committed to publish guidance by the end of 2016.

The point is clear. If companies are ready to focus on long-term growth and want to be able to align with the shifting demands of investors such as BlackRock, first and foremost they need an unambiguous picture of the external dynamics and factors that impact their business.

From retroactive reporting to capturing value opportunities

In line with the Finch & Beak “Avoiding the Reporting Trap”-study (2015), the Global Reporting Initiative has already incorporated this movement in its 2015-2020 strategy. GRI has extended its scope from mere sustainability reporting (looking back) to focusing on capturing value opportunities (looking ahead). The pioneer of sustainability reporting is aiming to empower companies to leverage their capabilities and competences towards building a more sustainable economy and society. The materiality-driven GRI G4 framework emphasizes the relevance of company-specific issues rather than a fixed set of topics on industry level.

Big data and real-time information on ESG issues

While a full-fledged materiality study is a valuable process for taking stock on the most important issues that matter to stakeholders and impact your business, it’s also often a static and time-intensive venture. In this VUCA (volatile, uncertain, complex, and ambiguous) world, taking the temperature every three to five years is no longer enough. A timely pick-up on new trends and changing stakeholder concerns and demands is required in order to make sure that your company stays on top of external movements and can act in a pro-active manner where necessary.

Responding to this unmet need, smart tools have emerged. One frontrunner example is Datamaran, a collaborative analytics platform developed by eRevalue, which is focused on identifying emerging ESG risks. The tool’s proposition is to consolidate big data crawled from corporate reporting, regulation references and media discussions into tailored insights for companies that can serve as the basis for decisions in the field of reputation, supply chain and stakeholder management.

By leveraging such smart solutions, companies can put their ESG issues to work and use them actively to steer strategic development. It helps them to avoid the reporting trap, where materialities are only perceived as risks and not applied as a vehicle for future value creation. Second step, then, is to incorporate these insights back into transparent guidance for investors and other stakeholders on how the company is managing  these external dynamics. Larry Fink and his peers will be pleased to learn how your company is dealing with this.

Get in touch

To learn more about how to avoid the reporting trap by putting ESG issues to work, please contact Nikkie Vinke, senior consultant, at +31 6 28 02 18 80 or nikkie@finchandbeak.com.

Image sourceRafael Matsunaga/Flickr

About Nikkie Vinke

Multidisciplinary advisor in ESG benchmarking, sustainability strategy development and execution. | nikkie@finchandbeak.com

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