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Are We Paralysing CSOs Through ESG Metric Overload?

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AI ethics analyst Tess Buckley examines how new technology can be applied to streamline ESG regulatory compliance.

The overwhelming number of ESG disclosures unnecessarily burdens Chief Sustainability Officers (CSOs), potentially hindering their pursuit of meaningful change. We believe this causes paralysis of ESG changes that stems from a need for more regulation and standardisation in ESG, further complicated by diverse stakeholder priorities. The burden of ESG disclosure necessitates exploring innovative solutions to alleviate the complexity of ESG disclosures. These solutions are pivotal in assisting Chief Sustainability Officers (CSOs), enabling them to effectively drive ESG advancements within their respective companies.

Careful consideration is essential for addressing each ESG factor in response to disclosure requests. The multitude of topics can often feel overwhelming for dedicated sustainability professionals. In conversations with over 30 Chief Sustainability Officers (CSOs), EthicsAnswer uncovered a common challenge: These experts are inundated with up to 50 annual ESG disclosure requests, each containing at least 50 questions. This raises a vital question: Are the demands for extensive ESG disclosures inadvertently hindering companies from enacting substantial change aligned with ESG principles?

A glaring obstacle emerges from many different disclosure frameworks across the sustainability landscape. Many ESG surveys flooding companies each impose unique criteria on companies’ responses, compounding the complex task for CSOs to transparently communicate their organisations’ ESG practices.

ESG encompasses everything from greenhouse gas emissions and political engagement to diversity endeavours. The intensive nature of this field with many factors necessitates that more than 50% of CSOs’ time be dedicated to analysing and addressing ESG disclosures—a resource allocation fundamental to making informed decisions. Yet, CSOs increasingly express a shared frustration: their efforts could be more efficiently channelled into advancing ESG initiatives, instead of predominantly focusing on documenting changes already in place.

The challenge further amplifies the dissonance among stakeholders’ divergent ESG values. As stakeholders’ expectations vary widely, businesses are often caught in a dilemma of prioritising and pleasing a myriad of conflicting ESG values. The expansive scope of ESG topics, diverse questions, and lack of standardised regulation can collectively contribute to ESG paralysis.

In 2021, the Harvard Business School’s Robert Kaplan and Karthik Ramanna embarked on an industry analysis to address the question: “How to Fix ESG Reporting?” Their study explored novel approaches, rooted in sound accounting practices, that hold the potential to mitigate the measurement challenges ingrained in the current reporting norms. However, it’s important to note that their research primarily introduces an alternative evaluation method for ESG metrics, rather than delving into the pressing need for a comprehensive solution that could help ESG professionals navigate the intricate landscape of already existing considerations and metrics within the ESG domain.

We believe the solution lies in alleviating the burden of ESG disclosure requests to avoid the ESG paralysis that these demands might inadvertently drive. While regulation and frameworks are often touted as the magic answers, the reality is with varying priorities, this will likely never come to fruition. Instead, focusing on the need to find and share information repeatedly and instantly to ensure CSOs can focus on ESG strategy and change and not report on already made changes.

The author is AI Ethics Senior Analyst at EthicsAnswer.

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