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ESG: Bureaucratic Burden or Business Benefit – Part 2: A good environment for investment
Posted on November 10
Part 2: A good environment for investment
(Note: This is our second post on ESG management. Our first can be found here)
The environment is a complex subject, but one that touches nearly every part of our economy—and indeed, our lives. To continue our society in a sustainable manner, we must be aware of the impact we have on the environment, as the environment will certainly have an impact on us. To that end, companies typically work pretty hard to remain profitable while respecting the need for the environment to remain healthy. The thing is, putting that effort into something trackable and reportable is difficult.
What do we mean when we say “environment?”
When viewed through the ESG lens, environment means two things, primarily. Responsible development and environmental stewardship.
Responsible development looks at how a company develops and maintains their infrastructure and operational integrity. Are assets being modernized inteliigently? It also considers the strength of the infrastructure. Are there policies and procedures in place to ensure things are running to maximize production but to avoid causing harm? This often manifests itself as strong maintenance practices, but also touches how decisions are made and whether regulations (be they local, state or provincial) are complied with regularly.
Environmental stewardship looks at practical decisions to protect the environment and remain sustainable over time. The specific criteria change by industry, but there are some common categories. Water management is already an area of concern, as water may become our most valuable resource. It is important every company treats it as such, and ensures that clean and plentiful water exists for future generations. Emissions are probably the most familiar concern. Rogue emissions pollute the air and steal profits. No one wants rogue emissions, so keeping them in check is pretty important to everyone.
A word on climate change
The purpose of this blog is not to wade into the discussion on climate change and its causes. The reality is our resources are being depleted and our job as a civilization is to manage the situation and ensure the long-term health of our descendants and the billions of other lifeforms sharing the planet with us.
However, it is easy to be seduced by short-term thinking in the fever of a good quarterly report. When and if that happens, consider this: how many bad quarters will an unplanned incident cause? Most companies already think in these terms, but ESG prods the outliers into the fold.
But what are the KPIs?
A fair question. The answer is there are no official, standard KPIs for ESG. Instead, there are goals and benchmarks the company sets for itself. Obviously these meet or exceed regulatory requirements; if not, then ESG is the least of a company’s concerns. The lack of standardization can lead to a reporting nightmare. How is a company supposed to show they are championing ESG, both ethically and competitively?
HUVR can help
Before a single shiny report can be printed, data must first be gathered via inspections, something companies are already doing. HUVR can help ensure that this data is gathered in the most efficient way possible. Since data tends to flow from inspections in multiple formats and from multiple tools, HUVR is vendor-agnostic. The platform can ingest information from any source and store it in a single, secure repository. HUVR uses automation to make this process as efficient as possible, scaling from a single asset to a plant to an entire enterprise. This is particularly important because ESG reports are typically on a corporate level.
Now that the data is in one place, it must be sorted and formatted as necessary for the work at hand. Here, too, HUVR can help. Data on the system is free from siloes, so there is no chance multiple tranches of data will be seen without connecting them to other information—a minimum of surprises, and none due to unavailable data. In fact, HUVR is able to contextualize information and filter out unnecessary noise, ensuring analysts are only served the data they require.
With the data collected and filtered, those aforementioned shiny reports are tantalizingly close. All that remains is to analyze the information. Luckily, HUVR can help with this also. Through advanced analytics, HUVR can turn that data into actionable insights, moving beyond lifeless numbers. In the event action is required, you’ll know about it faster, as HUVR’s efficiency allows for more inspections to be performed. The platform also automates much of the reporting process, delivering the information you require in the format you require it in. What was once a massive effort to achieve is now a few keystrokes away.
When an investor looks at how a company is handling ESG, they want to see real effort; however, as pointed out before, most companies do not want to harm the environment. ESG is a force for good, because it discourages short-term thinking and stops a single firm from acting recklessly in the name of profits. The companies with strong environmental sustainability programs are rewarded with investment in the market and a world for the future.