ESG: The Rub of the Green

An increasingly critical benchmark of both organizational credibility and intent, ESG (environment, social and governance) encompasses standards that comprise a deeper, more complex, more important undertaking for today’s enterprise than it may seem on the surface.

The proof? Well, when a multinational giant like Unilever (with revenues of over $58.2 billion in 2019), announces that it’s going to provide every worker in its supply chain with a living wage, increase supply diversity, ditch fossil fuels, and make its products biodegradable, it’s surely a clear indication of a major, global, critical sea change.

Consider also that Unilever is by no means alone in making such a bold operational statement.

Commercially speaking then, green is looking very much like the new black.

Why, though? Why are so many corporations, particularly in the financial arena, working so hard to enhance their green credentials? What’s behind this global drive to embed more robust ESG policies? And why do it so visibly? After all, it isn’t strictly a regulatory requirement. There are no financial penalties. At least not official ones.

Given the world’s increasing freedom of and hunger for information, and its burgeoning spirit of awareness, the reasons are manifold, well publicized, well understood, and increasingly self-explanatory.

Besides, the reasons scarcely matter. The fact is that ‘green’ is now a very big noise.

Green credentials — corporate social responsibility (CSR), ESG or whatever else you choose to call them — are now vital. Moreover, it’s not merely the cost of fully and demonstrably adhering to the principles of sustainability that must be considered now, but also the cost of NOT doing so.

What is perhaps less widely appreciated, however, is what ‘going green’, and staying that way, truly entails for the organization.

First, it requires thinking far beyond the notion of green in its historic, commonly understood sense. It means widening the net so that it encompasses not just green’s more recognizable themes — sustainable energy being the most obvious — but its fledgling ones, too. It must include the sustainability of people, skills, livelihoods and practice for example.

Second, it requires a keen appreciation of how deep the ‘rabbit hole’ goes and how complex the warren is beneath it.

Let’s take the example of Investment Bank X. The financial ecosystem of which that bank is a part — the companies it deals with, the stocks it trades and so on — will be a hugely complex, multilayered, multifaceted entity.

Imagine that, hidden somewhere in the depths of that ecosystem, is a fund that includes the stock of a coffee company that employs child labor; perhaps unknowingly. If the world finds out, the rest of that fund — and therefore potentially the rest of Bank X’s operations — will be tainted by association. In short, the firm itself could end up being unsustainable.

What is clear then (another dynamic of which I’m sure you are already acutely aware), is that the business needs to have complete confidence, total trust, that when it thinks and states that something is green, it genuinely is.

How can this be achieved? Such confidence fundamentally hinges on having commensurate confidence in your operations, and sure and certain knowledge of every counterparty your organization deals with. Which equities, stocks, and bonds comprise its ‘portfolio’ in whatever sphere it happens to operate? Are they suitable? Are their activities sustainable? Are they fit and proper partners? Should you be holding on to such assets or disposing of them as quickly as possible?

The ability to answer such questions begins and ends with data. Why? Because in order to not only answer those questions, but even know you need ask them in the first place, you must have total transparence and visibility. You need complete control of every dataset at your disposal, and maybe even some that currently aren’t.

You also need the ability to link up and synergize every data element, to know which datasets and sources are trustworthy, up to date, and accurate. And, equally, you’ll want to discount and/or eradicate those that aren’t. Your aim is to build the biggest, most informed, most reliable picture you can — the single source of truth in a post-truth world.

All of these requirements can reveal a major reference-data-management problem.

Adopting the right strategy is essential. And this is where I believe Hitachi Vantara is uniquely positioned to help: we can help you ensure that every last mote of data is brought together, sorted, stored, managed, leveraged, and made available where it’s needed most, when it’s needed most.

I say uniquely positioned because Hitachi’s approach is truly unlike that of any other provider in a green context. Why? Because ESG lies within our very foundations. Because, as our overarching message testifies, Hitachi is dedicated to such principles as Powering Good: to helping create a safer, smarter society and a better world for everyone.

Whether it’s flattening the COVID-19 curve through intelligent patient monitoring and body temperature detection technology, or harnessing and leveraging IoT data to help tackle social problems, it’s our aim to marry social, environmental, economic, and digital values to drive sustainable innovation. We champion innovation not for its own sake, but for the greater good.

How is this playing out in the financial services sector? We help FSI organizations to:

• Generate deeper customer insights
• Use those insights to diversify not just their services, but their appeal
• Develop green financial products
• Manage ESG data
• Integrate it as evidence for their green credentials

Such nuances really can make the difference on the double-edged sword of innovation: transformation, survival, and success on one side; stagnation, loss of relevance, and failure on the other. This is especially and critically true in a rapidly evolving arena like the financial services.

Is green really the new black? Perhaps. One thing is certain, though. Approached in the right way, it could help keep your business out of the red.

Suranjan Som is VP, Head of Financial Services Consulting, and Client Engagement Partner EMEA at Hitachi Vantara.