Traceability and Product Digitization: Advancing ESG Initiatives

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by Henrikke Sylte

ESG efforts – that is, environmental, social and governance programs and activities – are more than a growing concern for brands across industries. Implementing traceability and product digitization are key to advancing ESG initiatives in reportable ways. And none too soon. ESG is no longer just the concern of regulators and investors. Ever-wider groups of stakeholders vocally demand measurable results from corporate ESG initiatives. Consulting firm PWC confirms this trend, “…recent regulatory developments are forcing insurers to meet expectations with actions.”

ESG challenges: Pushing the agenda forward

ESG challenges focus on a corporation’s performance across three areas: environmental, social and governance. 

The measurement of environmental issues looks at a company’s impact on the environment. This is expressed through figures on carbon footprint, resource use and management and sustainability practices. The evaluation of social issues measures a company’s relationship with the community and people surrounding it. These focus on matters of diversity and inclusion, and labor practices.

Finally, governance evaluates business practices, including transparency, ethical practices, and accountability.

Advancing ESG initiatives is no longer a nice to have but instead are table stakes for investors, consumers, and regulators alike. According to McKinsey, companies perceived as responsible and sustainable enjoy tremendous financial success and positive reputations. “Thinking and acting on ESG in a proactive way has lately become even more pressing. Global sustainable investment now tops $30 trillion—up 68 percent since 2014 and tenfold since 2004. The acceleration has been driven by heightened social, governmental and consumer attention on the broader impact of corporations.” 

McKinsey findings continue, “…research finds that companies that pay attention to environmental, social and governance concerns do not experience a drag on value creation—in fact, quite the opposite. A strong ESG proposition correlates with higher equity returns…;…Better performance in ESG also corresponds with a reduction in downside risk.”

Knowing that these factors underpin companies’ desire to implement these efforts, it’s critical to understand how organizations can tangibly introduce and advance ESG initiatives.

Innovation in advancing ESG initiatives: Traceability, product digitization and connected products

Companies facing the convergence of challenges posed by climate change, social inequalities, and ethical governance are increasingly turning to innovative solutions to drive change. Traceability, product digitization and connected products lead the way.

Tracking environmental factors

One of the primary benefits of traceability and product digitization is the ability to understand and measure environmental responsibility with greater granularity. These technologies enable companies to track and monitor their supply chains with greater precision. By extension, they can identify areas of inefficiency, reduce waste, and optimize resource utilization. For example, tracing the origins of raw materials, tracking the environmental impact of shipping and distribution, and understanding how to manage and account for post-production waste. Having this insight can also help companies identify harmful practices in order to take corrective action.

Improving the social in ESG

Traceability and product digitization enable transparent tracking of products and their components. Companies can ensure that their supply chains are free from unethical labor practices, human rights violations, and exploitative conditions.

By providing consumers – who increasingly demand this kind of information – with data about the provenance of products and the conditions under which they were produced, companies can build trust and foster responsible consumption. This transparency empowers consumers to make ethical choices and identify businesses that prioritize social responsibility.

Achieving compliance and good governance

Effective governance is a fundamental component of ESG. Traceability and product digitization help companies enhance their governance structures, making them more transparent, efficient, and accountable.

Digitization can automate compliance checks, ensuring that companies adhere to relevant regulations and standards. This reduces the risk of governance-related issues, such as fines and legal disputes, which can harm a company’s reputation and financial stability.

Evolving to advance ESG

Advancing ESG efforts means evolving the technology used to help companies adapt to changing circumstances and demands. Traceability and product digitization create the foundation for connected products and the ability to tap into a wealth of real-time data for better reporting and overall decision-making.

Data-driven decision-making

While data is the driving force behind verifiable ESG claims, data also fuels broader decision-making. Introducing and expanding traceability and product digitization opens the door to a wealth of data generation. All of this data can be analyzed to gain insights into a company’s ESG performance, as well as efficiency gains through supply chain data, consumer understanding and engagement and much more. 

From an ESG perspective, this data-driven approach enables meaningful ESG goals and progress measurements. From a broader business perspective, insight-filled data (not just data for data’s sake) powers multiple use cases across the organization in addition to meeting ESG requirements.

Advancing with and beyond ESG

In a world increasingly focused on ESG, there is no escaping the value of focusing on environmental, social and governance initiatives. With traceability and product digitization, ESG advances are just one aspect of what companies can do and achieve. As businesses continue to embrace ESG traceability and product digitization form a core component of these strategies. Get in touch with us to learn more about how.

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