Data-driven approach needed for ESG decisions: Aon

Businesses need a strategic, data-driven approach to benchmarking, coordination and governance to help them gain the insights they need to make better decisions around ESG, according to Aon. In a recent The One Brief insight, the broker said organisations can get a more complete picture of their own progress and where they stand in relation to peers by looking at ESG-related topics or risks at fixed points in time, along with real-time analysis of trends. And a focus on governance can help to determine the best way to discuss ESG across different business units, it said. Aon noted that many organisations are still working hard to find the best way to assess their ESG performance. It says changes in the economy, environment and political landscape have left many companies unsure of how to share their ESG progress with stakeholders – and how they can track their progress against competitors and other industries. Laura Wanlass, global head of ESG at Aon, said: “This idea that everybody else has ESG figured out isn’t true. Because of all the external variables and because this is cross-departmental and complex, everyone is always looking for how they can improve.” She added that companies need to do point-in-time data analysis but also monitor in real time to be thoroughly prepared and take a proactive approach to issues such as growing reputation risks among peers. “Identifying things that might not yet have impacted us yet, but that we can start to see trending for our industry – that’s a forward-looking way of using data to help inform strategy,” Wanlass said. She added that governance insights are also necessary – and sometimes overlooked. “You can’t do E and S without the G,” Wanlass said. “You have to start at the basics. Who’s going to own ESG within your firm? How are you going to work across the different business units? Before you do anything, it’s about governance.” Communication is vital for ESG, and ensuring messaging strategies are consistent across business units is critical, and companies that fail to do so could leave themselves exposed to reputation risk or litigation. “If marketing is in charge of the website and they’re not coordinating with legal on the ESG reports, or some business unit makes a commitment and it doesn’t tell corporate, you could quickly find yourself in trouble,” Wanlass explained. She noted that while large companies may have advantages in terms of resources, any company can take steps to improve its ESG performance. “It’s not that the largest companies are a better E, S and G risk than other companies – they disclose more. The current data environment reflects a disclosure bias at the moment,” said Wanlass, adding that this may change as ESG reporting regulations become more standardised. Wanlass concluded that organisations need to take an agile approach to ESG. Some companies are taking a ‘wait-and-see’ approach to disclosing more quantitative data until they have more clarity around the regulatory landscape, she said, though they can still use data internally to see where they can take action and make immediate improvements.

Data-driven approach needed for ESG decisions: Aon

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