written by Eugenio Ciamprone
Compared to a few years ago when sustainable and socially responsible investments used to call for a typically ethical field, nowadays sustainability is an indispensable feature for any company that aims at competing in the market and attracting investments.
Since in recent times sustainability has got to the top of the political agenda, especially in that of the European Union, with commitments to improve energy efficiency, reduce greenhouse gases and increase energy consumption from renewable sources to be achieved by 2030, companies have also converted their commitment in order to pursue the same objectives.
Through the 2018 Action Plan, the European Commission has created the conditions to promote sustainable growth and investments in sustainable projects by means of the integration of environmental, social and governance (ESG – Environmental, Social and corporate Governance) criteria. One of the main aspects related to achieving the objectives of the 2030 Agenda consists in monitoring the implementation of actions: how can we measure sustainability?
The European Union has established a classification system (Taxonomy) in order to provide companies and investors with a common language able to identify economic activities that can be considered environmentally sustainable. The system introduces KPIs and creates new benchmarks for sustainable investments that can allow comparison and measurement of the environmental footprint and transparency regarding the inclusion of ESG – Environmental, Social and corporate Governance – factors in business processes.
Therefore, companies need to have models for measuring sustainability and analyzing ESG performance, which can guarantee them growth while respecting the correct positioning regarding the objectives of the 2030 Agenda.
Measuring Corporate Sustainability
The control and monitoring of the results of the policies developed for the adoption of the sustainable development goals of the 2030 Agenda is entrusted to the High-level Political Forum on Sustainable Development (HLPF), which includes all the member States of the United Nations.
The Agenda defines 17 Sustainable Development Goals (SDGs) to be achieved by 2030, which represent a real compass for countries and companies. These objectives are in turn divided into 169 targets and 240 indicators that allow to measure and monitor constantly the actions aimed at achieving the objectives themselves.
The Sustainable Development Goals of the 2030 Agenda are the following:
- End poverty in all its forms everywhere;
- End hunger, achieve food securityand improved nutrition, and promote sustainable agriculture;
- Ensure healthy lives and promote well-being for all at all ages;
- Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all;
- Achieve gender equalityand empower all women and girls;
- Ensure availability and sustainable management of water and sanitation for all;
- Ensure access to affordable, reliable, sustainable and modern energy for all;
- Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all;
- Build resilient infrastructure, promote inclusive and sustainable industrialization, and foster innovation;
- Reduce income inequalitywithin and among countries;
- Make cities and human settlements inclusive, safe, resilient, and sustainable;
- Ensure sustainable consumption and production patterns;
- Take urgent action to combat climate changeand its impacts;
- Conserve and sustainably use the oceans, seas and marine resources for sustainable development;
- Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradationand halt biodiversity loss;
- Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels;
- Strengthen the means of implementation and revitalize the global partnership for sustainable development.
Therefore, in order to define itself as sustainable, a company must not only respond to environmental impact criteria, but also measure its economic and social impact.
A study carried out by the Bocconi University of Milan identified the indicators that can measure the sustainability of a company: the latter must first of all comply with national and international laws and standards regarding sustainability. It must also measure the consumption and quantity of the resources and raw materials used and the quantity of waste and emissions deriving from them. It must have clear ideas about the real and possible effects and impacts of its activity on the environment and society, and to do this, it must also know and monitor what is done outside corporate boundaries, from the procurement of raw materials, the product life cycle until its disposal.
Do suppliers use renewable energy sources? Can the product be recycled? How many CO2 emissions does transport involve? A company is therefore sustainable if it manages to create a sustainable system, also in the social context, from the impacts on the lives of its workers and the community to national and international relations.
Measuring sustainability with Alternative Data
In measuring the sustainability of a company, Artificial Intelligence can play a decisive role: being able to analyze both internal data within the company (like traditional data published by the company itself) and external “alternative” data (like those data generated by stakeholders on the web), it helps companies position themselves correctly with respect to sustainability objectives.
By means of data science and Alternative ESG the company can intercept the targets established in the political agenda and have a complete view of the real actions implemented and the actual results of the same in a context of sustainable development.