Bruce Dahlgren is CEO of MetricStream, a leader in Governance, Risk Management and Compliance empowering organizations to thrive on risk.
When is the last time you considered how your life would be without your cell phone? Some of us can recall the days when pagers first came out. A little-known fact is that the first “pager-like system” is said to have been used as early as 1921 by the Detroit Police Department, but telephone pagers did not hit the mainstream until the ’60s, according to ThoughtCo.
And what about ATMs? They also offered a whole new level of freedom with the ability to access cash without being tethered to bankers’ hours. I had the privilege of working at a leading technology provider during the early stages of the ATM. Believe it or not, there were bankers who needed to be convinced that people would actually use an ATM.
The same goes for concepts like video conferencing. I encountered some naysayers who thought people would not want to see one another while talking over the phone. Today, it’s the only way to connect for many people.
The innovations introduced over the past couple of decades have changed how we interact with our world, how we work and how we connect with the people we love. Technology has changed our culture. Many of us can’t imagine a world without smartphones packed with cameras, social media applications or productivity tools for banking, shopping and even managing our own businesses.
So, what’s next? As the CEO of a risk-management platform that provides ESG solutions, I think we are seeing a paradigm shift. I believe culture is now in the driver’s seat and fundamentally changing our approach to innovation. Here’s the premise: Recently, we have experienced a distinct shift with a greater emphasis on the need to operate businesses responsibly. That means business leaders are not only considering how they impact the environment and how they treat people, but they are also seeking out innovation that helps them measure their impact. More and more, I’m seeing that companies and their key stakeholders are being held accountable for their role in sustainability, social responsibility and corporate governance. As such, I predict ESG is the next big frontier in risk management.
Why You Need To Be Thinking About ESG
Aside from superior performance, more organizations are realizing that good governance as it relates to your environmental and social impact can also help foster trust and transparency.
At the same time, many investors and asset managers are looking for businesses that have sound ESG programs. Now is the time to innovate to meet this need. In fact, CEO of BlackRock Larry Fink wrote in his 2021 letter to CEOs that in just the first 11 months of 2020, more than $288 billion dollars was invested in sustainable assets. That represents a 96% growth from 2019.
Demand for transparency into a company’s ESG practices to better understand how the organization behaves, reacts and adapts based on various ESG factors is rapidly increasing as well. As a result, there are financial risks associated with ESG practices that can impact an organization’s valuation and bottom line.
How To Get Started
Start by connecting your structured and unstructured data across multiple facets of the organization. For example, a simple measure on carbon footprint might require assessing data from across the enterprise, such as energy consumed in buildings across the organization, manufacturing, commuting costs, etc. In doing so, you can gain clear visibility and start managing that data with automated processes. You will also be able to create standard reporting templates that can be used for board members, partners and key stakeholders.
Next, align external and internal data. Access to ESG data exchanges is required to set benchmarks. With many metrics you could potentially review across ESG standards, you can consider looking to artificial intelligence, robotic process automation and machine learning to allow for greater visibility and speed. A number of companies, my own included, provide ESG platforms. Through this experience, I’ve seen that when researching solutions, business leaders should ensure the provider they’re considering will enable them to turn insights into action. Some solutions allow you to review insights that enable you to establish priorities, allocate investments and, most importantly, report measurable results to your board.
Supplier management is another critical function of ESG. Ensure you’re building profiles of your suppliers, conducting assessments and creating reports to measure how they’re affecting your overall ESG score.
I believe our culture is driving the need to foster responsible growth. Just as Winston Churchill once said, “The price of greatness is responsibility.” ESG is not just an imperative because it makes good financial sense; it’s an imperative because, collectively, we can all agree that holding ourselves accountable, reducing our impact on the environment and ensuring equity and inclusion for all is the right thing to do. It’s powering the future of managing risk — and helping prepare us for what’s next.