Utilities businesses around the world are facing unprecedented pressures that are forcing conventional business approaches to evolve.
As concerns around climate change and water scarcity continue to grow, sustainability across a wide range of dimensions is being brought to the forefront of the way utilities operate. Many of these dimensions are captured in the measures of environmental, social and governance (ESG), which collectively establish a “sustainability” framework for assessing a company’s performance in everything from greenhouse gas emissions to employee health and safety.
ESG reporting is transforming from being a ‘nice-to-have’ to a fundamental business need. Utilities are doubling-down on efforts to establish a comprehensive reporting methodology that takes into account the expectations of a number of stakeholders, including financial investors, regulators, customers and employees.
Meeting the ESG reporting and performance management challenge
The increased focus on sustainability performance – as represented by ESG – and the associated demand for high quality data, has grown faster than companies’ ability to provide it in a robust, automated, auditable way. Now, as customers, investors and regulators seek more transparency, current ESG reporting capabilities need to be assessed against their capability to deliver evolved requirements. For the most part, they fall short.
Reporting of operational performance, including ESG, tends to be reliant on manual processes and, as a result, reported data is often incomplete and not standardised. ESG performance, or the impact on ESG performance, can’t be integrated into investment decisions as it is not linked to financial data. This makes it challenging for the Board to steer the business as ESG data is not generally as available or trusted as financial data for investment decisions.
The lack of solutions that enable real time insight into ESG performance has in the past prevented utilities from experiencing the full benefits of better sustainability reporting and performance management. But now, with ESG becoming a boardroom issue, practical steps are being taken to update how sustainability reporting is carried out, based on an enterprise-grade platform which provides trusted data to stakeholders inside and outside businesses.
Benefits of improved ESG reporting
If utilities can transform how they report on ESG issues, the benefits they receive will extend to diverse areas of their operations. For example, credit rating agency S&P Global Ratings has found that ESG considerations are now a factor that lenders take into consideration when offering loan pricing.
Linking loans and other forms of finance to corporate sustainability performance (and carbon emissions in particular) is one recent innovation – but it will not be the last method investors use that requires advanced ESG data. This means that utilities need to ensure the platforms they use for ESG reporting are able to support a robust due diligence process that finance providers will undertake when testing achievement against contracted ESG targets.
Beyond this, ESG performance will also provide competitive advantages and unlock value creation. For example, through zero carbon energy or water provision, increased customer loyalty and differentiated pricing.
These kinds of developments are part of the future for the entire utilities industry. And they make new ESG technology decisions paramount for businesses that are serious about investment and prosperity, as well as sustainability.
Corporate Sustainability Reporting and Performance Management by SAP, allows you to understand and manage your environmental impact and report against a range of different ESG standards. To find out more about this, and how SAP’s capability can help, read our new white paper or check out our new eBook.