Data the True Currency of ESG Transparency in Supply Chain

Back in 2020 British online fast-fashion retailer Boohoo lost £1.5bn in value in two days, following a media report that one of its factories in its supply chain was paying workers less than half the minimum wage.

It is an ESG-compliance cautionary tale, and a warning to other organisations that they ignore the mission-critical importance of transparent operations at their extreme peril.

And yet a 2023 global survey by Infosys – of more than 2,500 business executives and managers found many firms have not even taken the most basic steps to embed ESG principles into their supply chain.

Those that have will already know that data is the currency of success on the ESG front – that its collection and management are critically important factors.

Levent Ergin is Global Chief ESG Sustainability Strategist for software development company Informatica, and works with leading organisations to help transform ESG strategy. 

Speaking to sister magazine, Sustainability, Ergin says ESG is essentially “a data problem that requires a data solution”.

“The key to strong, accurate ESG reporting is strong, accurate data,” he says. “Although many organisations might currently use ESG ratings agencies to satisfy the regulator, this is often a slapdash solution based on unreliable figures.”

Ergin feels that, as data precision becomes more important, organisations will need control over their own data collection, management, and analysis. 

“They need to be able to open the black box and understand exactly how their ESG figures have been reached,” he says. “The ability to do that is entirely based on their data collection and management capabilities.”

Ergin stresses that the more complete and accurate an organisation’s picture of its ESG status, the more able it is to follow targeted, intelligent decision-making about high-carbon operations. 

“With deeper data-driven insight it’s easier to identify where supply chains and day-to-day functions can be decarbonised, or where particular activities are outputting more carbon than they should,” he says. “This data will not only allow for accurate strategies to address current high-carbon areas, but also well-informed planning for the future, to ensure the organisation’s carbon footprint comes down in years to come.”

He adds that a robust ESG reporting framework “must start with a clear idea of stakeholders’ wants and needs”. Just as important, he adds, is a clear idea of exactly what data needs to be collected – whether from up and down the supply chain, or internally. 

“The next step is to collect and integrate this data in a central ESG data warehouse,” he explains, “where it can be standardised, cleaned, and made available for analysis.” 

He says automation “is a key function for this process to succeed at scale”, because without high-capacity software “the sheer volume of data from so many different inputs is likely to be overwhelming”. 

Andrea Hendrickx is Country Head of Infosys Germany, and also sees data as the key to success in ESG reporting.

“A company’s ESG evolution must start in-house,” she urges. “But it can’t stop there. Almost universally, businesses want their supply chain to follow their lead, whether it is to lower greenhouse gas emissions, treat workers humanely, or reduce pollution.”

ESG data, says Hendrickx, needs to flow in all directions “to create a supply chain that is fully aligned with ESG goals”. 

She adds: “Visibility throughout the supply chain can make every company along the way stronger and more valuable, assuming each business has strong ESG credentials.”

But she warns that If companies fail to share data then “efforts will be siloed instead of integrated”. 

She says many businesses have already experienced the “troublesome dynamics” of data-silos during their technology transformation efforts, and the resultant attempts to take full advantage of their internal data.

Hendrickx points out that supply chains are “already difficult to manage, let alone align fully with an often-evolving set of ESG goals”. 

But, she points out, Infosys research shows that “companies already want and need to take these steps”, but adds that they “still need to share and receive more data.

This, she adds, will allow them to work with the most beneficial partners”. Fail in this, she warns, and “they risk missing the opportunity to make ESG meaningful to their supply chains and potentially losing ground to global competitors”.

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