Deloitte & Informatica: The ESG Opportunity for CDOs
The increasingly complex nature of sustainability regulation and strategy requirements requires a lot of data.
This in itself can be complex and energy intensive, so companies are turning to their Chief Data Officers to lead the charge and provide direction through the muddy waters of sustainability data.
Here to help are leading global consultancy Deloitte and data and AI specialist Informatica, companies that have been working in data management for over two decades.
Wout Vandegaer, MD and Informatica Alliance Lead at Deloitte, working with Levent Ergin, Global Chief Strategist for ESG Sustainability and Global Head of ESG Strategic Alliance Partnerships at Informatica and Meredith Kalman, ESG Informatica Lead at Deloitte, has explored the possibilities for sustainability and data in the report 'Does this data come in green? The ESG opportunity for Chief Data Officers'.
“As organisations navigate the complex world of ESG deployment and compliance, this paper serves as a guide for Chief Data Officers to help their organisations address ESG data management and reporting,” Wout says.
“This includes adherence to regulatory and legal requirements, building trust through transparent disclosure, mitigating risk and alignment of responsible business practices with societal values for positive environmental contribution.”
The partnership between Deloitte and Informatica
Deloitte and Informatica, like many companies willing to prioritise sustainability, are big believers in partnerships.
“There isn't a single vendor out there that can solve the sustainability challenge on their own,” Levent says. “So, partnering is a critical component of our strategy and our partnership with Deloitte is a perfect example.”
Informatica sees the reporting side as the tip of the iceberg – with data the hidden giant below.
“We’re about where financial reporting was 20 years ago – companies think that getting a reporting solution will be enough, and are treating data like an afterthought. But, when you can’t trust the data going in, you can’t trust the results you’ll get,” he says.
“Given that 80% of the effort is with the data itself, ultimately what we want to achieve is data-driven sustainability transformation in addition to ESG disclosures.”
And that is exactly what the partnership between Informatica and Deloitte aims to do – rapidly help their customers achieve a very strong data foundation, so that sustainability transformation can be data-driven using clean, trustworthy data.
How is ESG and sustainability impacting the role of the CDO?
Sustainability is seeping into every corner of the boardroom. Supply chain leaders are working to reduce Scope 3 emissions, finance controllers are working on green investments and diversifying portfolios, staff and people leads are working on DE&I – so how is sustainability impacting the Chief Data Officers?
“In today’s ever-evolving business landscape, sustainability is more important to enterprises than ever,” Meredith explains. “It’s not about simply meeting compliance requirements — ESG is seen as a major contributor to growth and competitive advantage, which makes accurate ESG reporting essential.
“Chief Data Officers have a leadership role to play in modernising their organisations’ ESG data management capabilities and protecting their organisations from the compliance and reputational risks that come from inaccurate or faulty ESG data and reporting.”
So the weight of sustainability is sitting on the CDO’s shoulders.
“The role of the Chief Data Officer is continually evolving,” Levent explains. “When the role was first created, the CDO used to also cover data security and cybersecurity. As industries and companies have realised the importance of data, the CDO’s role has been pruned back a little and the Chief Information Security Officer role has been introduced.
“Because sustainability data cuts across all lines of business, it's naturally going to be the role of the CDO to build an ESG data strategy in order to be able to deliver against the requirements of the various sustainability teams.”
Not a small task. Who will the CDO work with on ESG data strategy?
- Chief Sustainability Officer – the end of the line for all things sustainability.
- Chief Executive Officer – as sustainability strategy begins to play into wider company strategy for more and more organisations, CEOs are becoming a more crucial voice in the conversations.
- Chief Finance Officer – despite ESG data being non-financial, it will still form part of financial statements so it is key for the finance team to ensure that the ESG data is accurate.
- Chief Supply Chain Officer/Chief Procurement Officer – as more than 80% of emissions live in the supply chain, the CSCO/CPOs have a crucial role in ensuring that a company can capture all of this carbon emissions data from the supply chain.
“It’s really not just the Chief Sustainability Officer,” says Levent. “The CDO really needs to work with all of the CXOs and cross functions in order to create a holistic ESG data strategy.”
What is the business case for better ESG reporting?
ESG disclosures are a part of business, especially now that all countries in the G7 and G20 have introduced some kind of ESG regulatory requirement. Naturally, due to the nature of Scope 3 emissions, this is having a global impact as countries with regulatory requirements are extending that to their suppliers.
With CSRR in Europe, SEC’s climate task force in North America and the World Economic Forum ranking extreme weather events as the number one global risk for businesses in its annual global risks report for 2024, there are increasingly urgent motivations for accurate ESG data management in both regulation and risk.
“As corporate boards and customers continue to focus on sustainability and corporate responsibility, demands for better ESG reporting are getting louder, both to back up claims around sustainability and respond to consumer demand and also to mitigate risks related to ESG regulatory compliance,” Wout says.
“Yet, better ESG reporting is about more than just compliance. It can lift financial and operational performance, enhance stakeholder trust, help attract and retain talent and improve customer loyalty. And together, all of these business benefits can position a company for competitive advantage.”
The business case for ESG data management does not just lie in opportunity.
“The cost of getting this wrong is quite high really,” warns Levent. “The examples speak for themselves – the DWS group, part of Deutsche Bank, got fined US$19m by the SEC for ESG misstatements. I’m sure that US$19m will sit outside of their risk appetite statement.”
What are the sustainability challenges when it comes to data?
As with any developing strategy, it is important to look at the challenges presented with data management – especially through the lens of sustainability.
Crucially, the journey of data management sits on foundations of trustworthy, well-rounded data. Only once this is in place can it be used and understood.
“One of the biggest challenges for sustainability is that a lot of this data is simply not available today, so companies are using proxy data,” explains Levent.
“Organisations need to be able to manage their metadata (data about data) really well so that they don't let perfection be the enemy of good – because we really need to get going.
“By using a robust data foundation and a good foundational data platform, you can always see what proxy data was used at whichever point in time to feed those decisions or to feed those calculations.”
The reality of this is that companies are using spend-based carbon calculations to estimate emissions, rather than relying on accurately recorded data.
“At Informatica, we are now leveraging the latest innovations in technologies like geospatial satellite remote sensing data to be able to measure the actual emissions from space,” Levent says.
“The actual emissions are sometimes three times higher than reported because spend-based calculations or estimations are being used. So this is where the industry in itself is maturing in their methodologies to be able to leverage the latest innovations and technologies that become available to get more accurate proxy data.”
This is not the only issue facing CDOs trying to use data for sustainability.
Deloitte’s “2023 CXO Sustainability Report” found that nearly a quarter of responding CXOs said the difficulty of measuring their organisations’ environmental impact was a top barrier to driving sustainability efforts, and nearly one-fifth cited cost and focus on near-term issues as barriers.
“As the ESG landscape shifts and expands, data management has emerged as the cornerstone for meaningful progress,” Wout concludes.
It is undeniable that trustworthy foundations, steadfast collection and clear interpretation of data can be crucial to successful sustainability strategy implementation, the report says.
“Data is key to evaluating ESG commitments and performance metrics,” Wout concludes.
“Yet, creating a trustworthy store of ESG data remains a complex undertaking, requiring coordination with internal and external collaborators. Data risks can’t be outsourced and regulators expect that standards of data quality and governance will be applied regardless of how ESG data has been acquired.
“Boards naturally look to their CDOs to provide data expertise, and guidance on the systems, processes and change management needed to make ESG reporting effective, trustworthy and compliant.”
So, what are you waiting for? It’s time to check in with your CDO.
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