The ESG data conundrum

The effective use of ESG data can accelerate profitability and growth.

ESG: It's all about the data. Some think ESG is necessary to manage 21st century risks, while others say it merely obstructs business. However, the companies we surveyed saw effective use of ESG data as a way to accelerate profitability and growth.

They told us that operationalizing ESG data and profitability don't have to be at odds. Top-performing companies don’t make trade-offs between sustainability, social responsibility, good governance, and shareholder value; they achieve all these outcomes at once. 

When ESG data is viewed as a vehicle for driving business value, it generates insights that create opportunities and boost performance. But only a few companies have reached this level. Rather than strategically harnessing ESG data—using it as a tool for identifying opportunities to innovate and improve—many organizations are narrowly focused on meeting immediate compliance demands. To deliver better business results, business leaders need to see ESG trans­parency through a new lens.

“ESG data and capability leaders are 43% more likely to outperform on profitability—and 52% more likely to say ESG efforts have a huge impact on profitability.

And the need for change is urgent: consumers are increasingly skeptical of ESG claims. Only 20% of consumers say they trust the statements companies make about environmental sustainability, down from half just two years ago.

Consumer trust in corporate sustainability statements has plummeted

What’s causing this decline? A lack of progress is partly to blame. Our survey found that, while 95% of organi­zations have developed operational ESG propositions, only 10% have made significant progress toward their goals. Executives name inadequate data as the greatest obstacle—even more of a hurdle than regulatory barriers and inconsistent standards.

This might be why 6 in 10 executives say they make tradeoffs between financial and ESG objectives. Without the ability to access, analyze, and understand ESG data, they can’t accurately predict which plans will both improve outcomes and deliver high ROI. This demonstrates that executives need to think more broadly about ESG. They must prioritize transparency, break down barriers to ESG data—and funnel key insights back into the organization.

“72% of executives say ESG needs to be a higher priority in their organization.

ESG is more than compliance and reporting. Business leaders that elevate its role can drive engagement, inspire innovation, improve operations—and unify ecosystem partners around shared strategic goals.

Download the report to discover the four pillars of success that let ESG data and capability leadersimprove performance and drive transformational, sustainable growth.

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Additional content

Meet the authors

Arun Biswas

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, Managing Partner, Strategic Sales and Sustainability Consulting, APAC, IBM Consulting

Elisabeth Goos

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, Partner, Market Leader Sustainability Services, EMEA and DACH, IBM Consulting

Jacob Dencik, Ph.D

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, Chief Economist and Global Sustainability Research Leader, IBM Institute for Business Value

Originally published 28 April 2023