Three factors influencing the development of sustainability data management technology in 2024
by Frederik Steensgaard, CEO and Co-Founder, BeCause

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Want Better ESG Outcomes? Get Your Data in Line

Regardless of sector, no company can afford to ignore sustainability today; the commercial, moral, and regulatory mandates are just too significant – and potentially costly. Despite this, many companies struggle to advance sustainability within their operations, resulting in tepid actions that amount to little more than greenwashing or worse, greenhushing. Why? In most cases, organizations have a data problem.  

Specifically, they lack reliable and trustworthy data about their environmental and social impacts and the tools to translate them into the meaningful insights required to convince decision-makers to pursue transformative projects. The adage,” You can’t manage and innovate what you can’t measure,” has never been more accurate when it comes to sustainability data.

Technology that can help a company harness its own sustainability data and communicate sustainability metrics across stakeholders is indispensable. More than any other sustainability innovation, it can catalyze better ESG outcomes, enabling companies to identify strengths and weaknesses and optimize costs, asset utilization, and energy performance.

What is currently influencing the development and direction of this technology? Below are three factors that will have the greatest impact on how corporations collect, coordinate, communicate, and, in general, manage their sustainability data. ‍‍

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‍Artificial Intelligence Elevates Sustainability Data Management

Could we write about technology innovation in 2024 without referencing artificial intelligence? No. While AI permeates nearly every discussion about the future of business operations, its promise is immense in efficiently managing sustainability data.  

For many industries, as is the case in the tourism, hospitality, and travel sectors, where we focus our efforts, sustainability data exists in siloes and is governed by outdated manual-led and error-prone processes. A sustainability data management platform upends the current and fragmented approach to data collection, analysis and distribution by serving as a centralized hub where all sustainability data enters and exits.

Instead of having bits and pieces of valuable information between stakeholders’ inboxes and other disconnected places, the platform acts as the single source of truth. It allows sustainability managers to leverage big data analytics to get buy-in on sustainability projects internally with shareholders and customers.  

AI is the layer that helps interpret and apply this data across stakeholders and workflows without putting the onus on human resources to map this data. For instance, say a company collects metrics on their direct and indirect water usage and needs to use this data for many purposes, such as applying for voluntary certifications, complying with mandatory sustainability reporting frameworks, sharing with a supplier working on water conservation implementation, etc.  

Unfortunately, these pieces of critical data can rarely be used in their current state due to different input requirements and requests, making it impossible for companies to upcycle their data effectively.  

AI eliminates this impediment, allowing sustainability managers to do more with less effort, time, and money. AI, coupled with machine learning, can also identify gaps in the data collection to make targeted suggestions that help companies set ambitious internal benchmarks and better meet external requirements.  ‍

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Regulatory Compliance Forces the Issue

2024 is already evolving as a watershed for sustainability disclosure legislation. In March 2024, nearly two years after they were initially released, the United States Securities and Exchange Commission finally ruled in favor of climate change reporting regulations for publicly listed companies, while in the European Union, large enterprises are preparing to release their first reports on their sustainability-related activities under the EU’s Corporate Social Responsibility Directive. New Zealand, Australia, and Canada all have similar reporting rules, either on the table or approved.  

Of course, this exercise won’t directly push companies to become more sustainable, but it does force them to undertake a more thorough analysis of their activities, which is a potential game-changer. The most rigorous reporting rules will require companies to report on both their direct and indirect footprints, a process called double materiality. This means that sustainability data management platforms must do more than collect a company’s data and be able to output audit-ready reports.  

These platforms must also be comprehensive communication vehicles for all sustainability metrics that affect and are affected by the company. For instance, under double materiality, a hotel reporting on its energy consumption would have to detail how its energy-intensive operations, such as heating and cooling, contribute to greenhouse gas emissions and, therefore, global climate change while also accounting for how climate-related risks due to extreme weather events could disrupt their operations, damage their property, impact guest safety and their capacity to deliver goods.  

Some business leaders aren’t quite cheering the introduction of mandatory sustainability reporting, saying the activity, which elevates sustainability to financial reporting status, will cost too much. Indeed, the American rule, which doesn’t include Scope 3 emissions reporting (emissions that a company is indirectly responsible for), is already being challenged in court. Whether that challenge is successful is, nonetheless, almost beside the point because companies operating in the United States and Europe will already have to determine how much greenhouse gases they emit and how climate change could hurt their businesses.  

Just like technology advancements significantly reshaped the landscape of financial reporting by driving down costs and making it easier to collect, distribute, and publish audit-ready reports—think automated accounting software, data analysis and management, and digital dashboards—innovations like sustainability data management platforms can do the same for sustainability reporting.  

According to Reuters, this is already happening. Investment in these platforms, along with investment in sustainability risk management solutions and emissions management solutions, is seeing exponential growth and will be the focus of corporate sustainable tech expenditures by 2026, underscoring the critical role that sustainability disclosure rules play in promoting sustainability-focused actions.  ‍

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Investor Demand for Sustainable Options Grows

While not directly tied to sustainability data management, venture capital investments in climate technology as a proportion of overall startup investments have continued to rise despite 2023’s challenging funding environment.  

Further, investors (including individuals) are increasingly incorporating ESG factors into their investment decisions and demanding more transparency and disclosure from companies on sustainability issues. A Principles for Responsible Investment (PRI) survey found that 80% of investors consider ESG factors in their investment decision-making process. In contrast, according to Morgan Stanley, 54% anticipate boosting allocations to sustainable investments next year. Last year, ESG mutual funds and ETFs rose by 53% to $2.7 trillion, reinforcing that doing good for the planet is also good business.

Companies without efficient sustainability data management technology, however, risk being left behind. With mounting sustainability disclosure rules, the investment environment has the most potential to help push the adoption and development of modern sustainability data management platforms.  

When it comes to sustainable technology, we admit that data management might not seem like the most glamorous innovation. However, without an efficient and cost-effective way to understand and predict the impact of a business’s activities on the planet, it can be difficult for companies to find the resources required to invest in initiatives that will lessen their carbon footprint and satisfy their stakeholders. In this case, sustainability data management technology is the horse pulling the cart, and that’s a role we are very happy to play.