Measurable Environmental, Social and Business Governance (ESG) metrics are becoming increasingly important as stakeholders demand more transparency and accountability from companies regarding their ESG practices. Stakeholders need better access and understanding of ESG benchmarks to make informed investment and other decisions. Companies also need to use appropriate tools and resources to document their ESG strategies and publish accurate, consistent and reliable ESG reports. Unfortunately, there remains a significant disparity between the stakeholders and corporations ability to develop, utilize and transfer this information.
“Digital inequity” refers to the negative impacts on the ability to use information due to technology resource limitations. Often applied to individuals and specific populations that demonstrate significant, “… differences in the material, cultural and cognitive resources required to make good use of information and communication technology,” it also pertains to a company’s difficulty with obtaining, integrating and disseminating digitally available data.
It is clear that this digital inequity is one of the key factors contributing to challenges in bridging the gap between stakeholders and companies. According to the Harvard Law School Forum on Corporate Governance ESG Global Study 2022, global investors say their number one challenge when implementing ESG investments is lack of consistency between different ESG rating provider scores (25%). Difficulties accessing ESG information and data are now seen as the second-biggest challenge (24%), followed by difficulties monitoring and measuring the performance of ESG investments (21%). The entire panel of implementation challenges with the percentage comparisons across Europe, North America and Asia-Pacific is shown in the infographic below.
Disparities in societies, wherein not everyone has the same levels of access to digital resources that are required to convey, read, listen and process information, play a crucial role in informed decision making and reciprocal engagement. Digital inequity plays a significant role in the lack of ESG knowledge, particularly among low-income groups and minority communities. Companies rely heavily on digital platforms to engage with stakeholders, and this often deepens the gap because not all of these platforms used by companies to publish and circulate their ESG reports are available to every population. This limits the stakeholders, particularly in vulnerable communities, from making analytical evaluations, providing timely feedback or communicating their concerns.
Similarly, not all companies and asset managers have access to the sophisticated tools required to measure and document their ESG metrics and create comprehensive reports. Consequently, the quality of reports available to the public may vary widely. This poses an additional challenge to stakeholders that wish to reliably and accurately learn about a company’s ESG practices.
Companies can address this digital inequity by:
- Ensuring that they publish their ESG reports in a variety of formats, including non-digital media, to provide a more equitable reach
- Providing a more active voice to the stakeholders in ESG conversations by engaging them in real-time meetings, increasing transparency in discussions and allocating greater resources for ESG strategy and reporting tools
- Investing in non-marketing public outreach efforts and sponsorship of public ESG focused efforts including support of The Global Business Coalition for Education’s blueprint that emphasizes positioning education at the core of ESG designed to yield significant benefits for investors and the companies.
- Promoting (without greenwashing) their ESG-best practices
- Upgrading their internal digital resources to better obtain and assimilate appropriate ESG metrics and other data
- Supporting efforts to eliminate digital inequities within different populations.
As the ESG reporting and evaluation system evolves, it is incumbent on corporations to assure that they can effectively digest, integrate and communicate this information to assure the continued financial health of their organization and the society within which they operate.