How a Digital Partner like Locuz Can Strengthen your ESG Strategy

Impactful missions have always been a part of the Locuz DNA; and now, given the looming climate emergency – we are eager to help. The growing prevalence of ESG presents a unique intersection of IT and Sustainability. By enabling access to data across the board, we can help companies excel in their sustainability missions. Read on to gauge our ESG approach and how we can help you do better.

ESG Foray

What is ESG?

ESG reporting is a distinct form of non-financial reporting – a holistic approach to evaluate company performance between three integral pillars: Environment, Social, and Governance. Although requirements around ESG reporting were primarily built to assess sustainability performance; these reports are starting to become central in corporate decision-making for the ability to drive insights by collating and centralizing operational data.

Figure 1: ESG Pillars

ESG adoption is a boon for companies striving for operational excellence. Reporting on ESG goes beyond compliance by essentially allowing organizations macro-visibility across their operations. This increased visibility helps aide organizations identify sub-optimal business processes; thereby, enabling them to:

• Effectively communicate sustainability commitments to stakeholders.
• Showcase performance against compliance requirements.
• Strategize around key risks and opportunities.
• Think long-term with improved decision-making.
• Build a stronger brand & reputation around their sustainability goals
• As a result of increased visibility; build business resilience and peak investor interest.

Why are companies working on ESG?

The ESG ecosystem around the globe is largely powered by two forces: Regulatory Drivers, and Market Drivers.

Regulatory Drivers

Governments have regulation set in place for companies to report on their ESG metrics. These regulations foster transparency and accountability within companies to keep their sustainability commitments in check. When companies report on ESG metrics – they give governments a macroscopic view of where the country stands against commitments made on a global stage. Data accessibility allow governments to build macro solutions to work toward sustainable development goals and mitigate climate change.

Market Drivers

Investors seek to invest in resilient companies that demonstrate strong ESG performance. Performance on ESG metrics form the basis for companies to be scored and ranked against their industry or sectoral peers. Companies with good ESG enjoy greater financial performance as a result of a more aware and resilient business, and an increased access to capital via ESG-themed funds. Financial benefits paired with more readily available talent, scope for innovation & efficiency, and a means to communicate sustainability advancements are all active market drivers for companies to conduct ESG reporting.

Figure 2: ESG Investing Ecosystem

ESG in India?

In India, the stock market regulator – SEBI (Securities and Exchange Board of India) mandated top 1000 companies by market capitalization to report on ESG from FY 2022-23. The mandate was supported by an indigenous framework called the BRSR (Business responsibility and sustainability report). Which has since evolved to two elements:

1. BRSR Core

2. BRSR Value Chain

BRSR core applies to all 1000 companies, but the top 250 companies have to provide assurance on BRSR Core data beginning from this year. The assurance requirement trickles down to the remaining 750 companies over the span of 3 years. Similarly, SEBI has instructed the top 250 companies to report on their Scope 3 emissions through the BRSR Value Chain addition from FY 2024-25.

Locuz Relevance

Setting some context before demonstrating Locuz capabilities on ESG reporting. Following below is why Scope 3 emissions are important to report on, and why SEBI(before any other regulator) has built specifically built around Scope 3 reporting.

The Carbon Accounting Niche

Carbon accounting, under the environmental pillar is a metric that measures GHG (Greenhouse Gas) emissions generated by a business. It usually takes the spotlight in sustainability conversations, as with ESG reporting, because of our enhanced understanding of the planetary impact, and the global push for emission reduction.

Before reducing emissions, the goal is to first identify emission sources. Since a business can have varied emission sources, identifying and accounting for all of them can be challenging. Which is why an order of classification is used in carbon accounting. Scopes 1, 2, & 3 identify and categorize emissions sources which make it easier for businesses to conduct ESG reporting and subsequently work on emissions reduction.

Source Ref: https://www.epa.gov/climateleadership/scope-1-and-scope-2-inventory-guidance

Figure 3: Representation of Scopes 1, 2 & 3

Scope 3 emissions are not produced by a company directly. Instead, these emissions are generated through their supply chain. Usually, by a partnering organization delivering value to the reporting business.

How can Locuz help?

ESG data spans across multiple metrics, business functions, measurement areas, and even value chain partners within Scope 3. The data complexity further increases with varying data types, integration abilities, and the frequency of data collection.

The nature of company-wide data reporting needs thorough planning and a C-suite level strategy execution to ensure meeting ESG reporting requirements, and derived strategic benefits.

Locuz can help build the right data infrastructure for ESG reporting. Equipped with resources and expertise, our team of data professionals is adept at building data models encompassing the process from collection and ingestion-to-pipelines-to-reporting. Our experience ensures standardized data quality, security and cost optimization throughout your digital infrastructure to enhance ESG reporting.

Figure 4: Locuz Data Capability

Locuz IP: GreenOps

Get started on building your IT Net Zero plan using our first ESG-based IP; built to estimate emissions of running on cloud. Built on the goal of ensuring customers can continue to rely on us with their new ESG responsibilities.

Locuz’s cloud expertise paired with data centre experience spanning 2 decades allows us to understand energy use in data centres better than most competitors. Which enhances our ability to build tools like GreenOps that accurately estimate cloud emissions.

Conclusion

ESG reporting is helping companies unlock capabilities lost between organizational siloes. Given the nascency of ESG adoption, building the right data infrastructure can be challenging. A Digital Partner like Locuz can help your organization execute the right strategy ensuring access to data, decision-making insights, and cost efficiency.

Get in touch with us to explore the right ESG data engineering for your organization!