How will climate change affect your business model and practices in the coming years?
It might sound like too much of an open-ended question, but it’s one that businesses are expected to answer with increased certainty.
New rules that have just come into force will require firms to disclose climate-related financial information and there are potentially large penalties that will be issued to those who don’t. So now, more than ever, is a time to take both data and the environment very seriously.
Firstly, let’s look at the new law itself. It’s a UK-wide mandatory enforcement of Taskforce on Climate-related Financial Disclosures (TCFD) recommendations, first launched at COP21 in 2015. It requires over 1,300 of the largest UK-registered companies and financial institutions to disclose climate-related financial information.
Among the list of companies this law applies to is the country’s largest traded companies, banks, and insurers, as well as private companies with over 500 employees and £500 million in turnover. The government says that this legislation will ‘ensure businesses consider the risks and opportunities they face as a result of climate change and encourage them to set out their emission reduction plans and sustainability credentials.’
As the rules are mandatory, they’re important for businesses to be aware of, particularly because of the fines that could be as high as £50,000 if the requirements aren’t met. It’s a task that relies heavily on a company’s ability to be confident with data, and this is the bit where complications arise. Many organisations lack the time and skills to adequately collect, analyse, and share the huge amounts of data they have. And because the data pertains to sustainability, which is an area outside of most companies’ core business activity, it requires firms to smarten up. They need to gain the most value from their data. They should also use it to look for opportunities to become more efficient with the planet’s resources.
Insights to change
I often find that companies respond better to the carrot rather than the stick, so long as they see clearly what the carrot is. As such, I think whether the new rules apply to your business or not, it’s important to have a strong stance on the environment.
According to a McKinsey survey, 58% of respondents said their organisations’ CEOs treat the management of external engagement as a top three or top priority on their agendas. C-suites are focusing more on stakeholder engagement, and stakeholders are noticing, which is good to see. At a time when stakeholders’ views can make or break a company and they now have access to tools and information that could expose businesses’ sustainability scores, data is essential to validating sustainability and helping organisations set benchmarks for progress.
If companies and global communities are to make a positive impact on the planet, they should begin by developing a strategy that prioritises being more transparent and data driven. Companies should view data as an essential tool that allows them to analyse and measure their environmental impact.
For example, at Hitachi Vantara we understood our supply chain sustainability could be improved so at our logistics distribution centre in the Netherlands, we sought to install facilities that reused rainwater. We looked towards data and introduced water usage monitoring to determine how water was used, to detect leakage, and measure showers that use as little as 9 litres of water per minute. These solutions save nearly 500,000 litres of drinking water annually.
Finding the value
With new legislation now in place and a greater need to prioritise sustainability, there’s a real opportunity to put new processes in place that allow your business to lead from the front. Here are some of the considerations to think about when looking to extract the value from your data.
Define use cases – The first step is to decide how you want to use your climate data. Will it be for reporting purposes only or will you want to set goals for your business to work towards? The data you’ll need will be different for each.
Establish data collection methods – In order to view and act on your data, you first need to collect it. Organisations must use their people, processes and technology to expand data visibility, and from there clean and integrate data, and finally catalogue it so it can be easily found.
Extract the insights – This is the key bit where analytics are applied so that you’re able to make sense of the data, rather than it just existing on a spreadsheet. Think about the technology and infrastructure you’ll need to do this to make sure you reach your goals as quickly as possible.
Upskill staff – Who will be responsible for interpreting the data? Will it fall within the remit of someone already in the business? If so, do they already know how to use the data as the basis for action within the company? Data champions with the right skills aren’t easy to come by, so it might be necessary to invest in upskilling staff or investing in tools that make this job accessible.
Set data governance structures – Be sure not to fall at the final hurdle if you are already collecting the data you need. Amid the evolving legal and regulatory obligations, it’s vital to have the accompanying data governance structure in place so that the data is managed, stored and handled in the correct way.
The new rules will have hurried along many companies to be more open about their environmental impact. But what next? The journey is ongoing and meeting legislation is just part of it. The climate crisis cannot be ignored and so businesses should use data in a powerful way to understand their current impact and see where they can do their bit to reduce their emissions.
About the Author
Dr Agne Moore is Data Scientist and Senior Customer Success Manager at Hitachi Vantara. Hitachi Vantara, a wholly-owned subsidiary of Hitachi, Ltd., guides our customers from what’s now to what’s next by solving their digital challenges. Working alongside each customer, we apply our unmatched industrial and digital capabilities to their data and applications to benefit both business and society. More than 80% of the Fortune 100 trust Hitachi Vantara to help them develop new revenue streams, unlock competitive advantages, lower costs, enhance customer experiences, and deliver social and environmental value.
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