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July 3, 2023

Data-Driven Sustainability Journey

4 Min. Read
Green wavy line and a green circle drawing on a human face profile created with lines on a gray background

Data is probably one of the most important issues of our century. As more and more data flow into our lives in many areas from marketing to operations, it is becoming increasingly important to make sense of it in a way that turns it into insights and action. Data collection and interpretation play and will continue to play a big role in the sustainability journey. However, there is a small bump in the road when it comes to sustainability: Everyone is a bit of a novice. 

All companies have a certain amount of archives and data gathering methods in the areas of sales figures, profitability ratios, raw material purchase prices, and so on. While collecting financial data for many mandatory tasks, from internal accounting to tax reporting, is considered a standard business process, the question of what data to collect and how to share it becomes an issue when it comes to carbon emissions or the environmental and social impact of suppliers.

From global conglomerates to SMEs, no company can afford not to track sustainability data. In addition to the popularity of the topic with the business community and customers, ever-increasing reporting standards and regulatory requirements are placing new responsibilities on everyone: Measure the environmental and social impact of your work and communicate the results in a meaningful and accurate way. When it comes to communication, data needs to be shared with two main audiences: The general public and stakeholders.

The Risks of Greenwashing: Communicating Sustainability to a Broader Audience

The term greenwashing can simply be explained as a way to cover up other faults or to make sustainability efforts appear more effective than they actually are. Companies may do this intentionally or unintentionally.

Blatant greenwashing: This can also be seen as a public relations ploy. One of the most famous cases was that of a well-known food brand that organized plastic collection events on beaches around the world in the 2000s and recycled only 10% of the plastic in its supply chain. Smiling young people collecting plastic containers on beaches undoubtedly made a great photo for the press, but it was unclear what happened to the collected plastic.

Green-washing with turning a blind eye: Sometimes, companies can engage in greenwashing while trying to highlight what they are doing well. For example, a beverage company may set a goal to recycle 50% of the plastic bottles it produces this year, and openly communicate this to the public, emphasizing the goal over and over again and building marketing strategies around it. However, when the end of the year comes and the goal is not met, there is no explanation on the billboards as to why this is the case. While not exactly lying, this game of hiding the truth leads to greenwashing. The seriousness of this situation, which has recently been on the rise, has particularly mobilized the European Union, which this year introduced new measures to ensure that companies avoid greenwashing.

Whatever the reasons, greenwashing poses a great risk not only to the public and the environment, but also to the companies that are the main actors in the issue. In particular, a wave of greenwashing that goes unnoticed poses risks for the future in many areas, especially for corporate reputation. A popular global solution is transparency, even radical transparency. It is becoming increasingly useful, even mandatory, to explicitly include in sustainability reports the questions: what were your targets, how much did you fail to achieve, why did you fail to achieve, what are you planning to do to get closer to the targets, .... However, answering these questions requires very good data and process tracking.

Here are some steps to take to avoid becoming an actor or even a victim of greenwashing:

  • Set realistic and specific sustainability goals in environmental, social, and governance (ESG) areas.
  • Determine the conditions and timeline for achieving these goals, focusing on the near term rather than long-term goals. 
  • Keep track of your performance data to evaluate how well you have achieved your initial goals. 
  • Periodically publish information on the progress made towards achieving these goals.

Collaborating with Key Stakeholders: Our Companions on the Sustainability Journey

In a globalized market, all companies, regardless of sector, have to work with and be accountable to various stakeholders. When it comes to sustainability, the situation is made more complex by increasingly stringent reporting standards and the expectations of various stakeholders, particularly investors, regarding sustainability. There is no doubt that it is valuable for all stakeholders to move towards sustainability goals, but it is also important to support these goals with shared strategies and measures of success. For example, when it comes to the carbon footprint of suppliers, verbalization of targets is unfortunately no longer sufficient for either SMEs or exporting companies. There is a need to set clear mutual targets and measure how much of these targets are achieved through data tracking. Failure to meet these targets now directly affects not only the supplier, but also the company itself and its accountability.

Regardless of the volume of production and exports, companies will need much smarter data collection methods going forward. Sustainability reporting standards introduced by the ISSB and the EU require partners at every step of the supply chain to report transparently with accurate data. Another new expectation that is starting to be heard in the market is for companies to have comparable data. Although there is no legal regulation on this issue yet, it is frequently voiced that funders and big players need a comparison mechanism and a standard measure when it comes to sustainability. The reporting criteria set forth by Turkey, the EU and global authorities such as the ISSB signal this standardization. In order to be ready for this change, it is important for companies and their stakeholders to start collecting data with the right metrics, use the data for performance measurement, and develop the necessary capacity to make sense of the data collected through methods such as visualization, progress tracking, and future prediction with artificial intelligence. 

On the one hand, it is necessary to take into account that in the near term, the data collected will start to be audited. In order for the collected data to be ready for audit, its accuracy must be confirmed. It is worth getting support from algorithms and machine learning in this regard. If the right infrastructures are established, companies can start conducting their own internal audits with the help of algorithms before the mandatory audit mechanisms are in place. 

To summarize, when it comes to sustainability data, we are leaving behind the era when everyone tried to create their own roadmap. In the coming days, companies will face pressure from both the public and regulators. In order to collect the right data on sustainability goals, to interpret the collected data correctly and not to make misleading claims, it is useful to start building systems now, to use these systems with business partners if possible, and to start making data meaningful by taking advantage of developments in technology.