Environmental, social, and governance measurement and reporting for waste management companies is complicated. Data solutions are required.
By Amber Howard
The focus on environmental, social, and governance (ESG) continues to grow and evolve rapidly, as many investors are making it clear that they expect the companies they hold to embed ESG into their overall company strategy, and to be more rigorous and transparent with their ESG reporting. In fact, 79 percent of investors now consider ESG risks and opportunities as significant factors in investment making, according to a PwC Global Investor Survey.
With the current push for sustainability changing the way businesses view and manage risks, companies around the world are increasingly focused on managing their waste. However, sustainable waste management is not a core business competency, and many organizations lack the expertise and staff to implement effective programs. As a result, most companies are adopting a partnership model for waste management with a focus on aligning their waste management practices with their sustainability goals to protect the environment and solve difficult waste disposal challenges before they impact financial performance.
That model has resulted in the need for waste management companies to not only find safe, cost-effective, secure, reliable, and environmentally conscious disposal solutions for their clients, but also to help them manage, measure, and report on their sustainable waste management efforts in alignment with the complex and ever-changing ESG reporting world.
ESG Reporting Landscape
The fractured ESG reporting landscape impacts organizations across all sectors and industries. Some estimates suggest there are more than 180 global ESG-related corporate disclosure regulations, and Ernst & Young estimates there are more than 600 ESG frameworks and standards globally. Some are specific to certain industries or countries, while others are more universally applicable.
To meet regulatory requirements and provide voluntary disclosures, companies must devote a significant amount of time and resources to measuring, tracking, and reporting ESG metrics. Yet, given the inconsistencies and lack of uniformity, these efforts overall have not produced the level of consistent, comprehensive, and comparable information that investors need.
Most current voluntary reporting standards were originally designed to complement traditional financial reporting and were developed to support diverse types of stakeholders through their divergent focus areas and definitions of materiality. For example, the Sustainability Accounting Standards Board (SASB) places a strong emphasis on ESG issues that are projected to have a significant fiscal impact, as the standards were designed with investors in mind. The Global Reporting Initiative (GRI), on the other hand, was designed to make sustainability reporting as simple and transparent as possible for businesses, while the CDP (formerly the Carbon Disclosure Project) uses a question-and-answer platform that is a popular format for disclosures requested by investors.
And that is just a few of the many existing voluntary frameworks and standards, each with their own approach. While significant recent developments, like the creation of the International Sustainability Standards Board (ISSB), provide some much-needed hope for the harmonization of ESG reporting standards, it is a significant undertaking that will take time to complete.
Waste management companies are in a particularly difficult position to navigate this complex landscape, as they serve a broad and diverse group of clients, each with an ESG program and disclosure approach that is as unique as their industry, sector, and company. Waste management companies are therefore tasked with measuring and tracking their own ESG performance, and with helping their multi-sectoral clients do the same, which requires them to understand and navigate the continually evolving standards and guidance for all sectors. For example, the key performance indicators or “material topics” for a semiconductor manufacturer are quite different from those of a consumer goods or pharmaceutical company.
At the core of this challenge is data. Waste management companies need the ability to measure, track, and report relevant ESG metrics to each client based on their individual requirements and preferences, which requires the capability to connect, manage, and run customized workflows and calculations using a variety of methods with a significant amount of data that is traditionally siloed in legacy systems.
ESG-Related Waste Management Challenges
The complexity of waste-specific ESG solutions and related metrics is also a significant challenge. For example, the waste sector is highly focused on reducing landfill gas, which is a natural byproduct of the decomposition of organic material in landfills. It is composed of roughly 50 percent methane, which is a potent greenhouse gas (GHG). To help reduce landfill gas, waste management companies are implementing innovative solutions like diverting organics to treatment options and creating waste-to-energy facilities.
However, it is difficult to effectively measure and track the environmental benefits of their efforts and then provide that data to their clients. For example, companies currently rely on models and other U.S. EPA emission factors to estimate fugitive landfill emissions from their waste-to-energy facilities. The current equation is based on the amount of gas collected at the landfill. As a result, when a company captures more gas, their GHG estimation increases.
So, despite the benefits of capturing landfill gas and turning it into renewable energy, which helps reduce the lifecycle GHG emissions of waste, their Scope 1 emissions increase from the operation of waste-to-energy facilities, which is counterintuitive for stakeholders, including investors. As a result, many of the large waste management companies are exploring ways to better measure, and therefore manage, fugitive landfill emissions. Doing that successfully not only requires capital-intensive technology solutions, but also the ability to bring all the necessary data together and easily compare results across different methodologies and approaches.
Data Challenges and Solutions
The bottom line is that companies, including those in the waste management sector, cannot productively manage and communicate their ESG initiatives and stories to investors and the public if they cannot measure their progress, which requires the ability to access, analyze, and track their data in real time, and automatically calculate relevant metrics for many different reporting standards and frameworks. This challenge is particularly acute and complex for waste management companies who are dealing with complicated issues that require unique and disparate methods for calculating and tracking metrics for each of their diverse clients, spanning many geographies and sectors.
Using a unified data model (UDM) platform is a solution to these challenges. It allows waste management companies to connect operational level data automatically from any source system to run analytical workflows and calculations based on specific requirements, all in one place. With customized visualizations that update in real time and the ability to create workspaces and unique workflows for each client, waste management companies can create a universal view for the entire organization and meet the needs of their clients. The model allows everyone to identify valuable insights that drive better decisions. The platform also helps waste management companies and their clients efficiently and reliably meet regulatory requirements, calculate voluntary reporting metrics across any standard or framework, and respond to investor requests.
The Bottom Line
When waste management companies use a UDM that delivers actionable, accurate operational-level ESG data in real time, they can better understand and strategically communicate how their waste management practices and operational processes affect the environment and their sustainability goals, and they can help their clients do the same. That provides companies with a significant competitive advantage within the waste management industry. | WA
Amber Howard is Datagration’s Senior Vice President of ESG. In this role, Amber is responsible for spearheading the company’s ESG efforts, platform enhancements, and engagements. She is focused on helping companies create business value by managing risks and opportunities related to a variety of sustainability and ESG topics through data-driven analysis and insights using Datagration’s unified data model. She can be reached at [email protected].
References
• www.ey.com/en_gl/public-policy/what-to-watch-as-global-esg-reporting-standards-take-shape
• www.sasb.org
• www.globalreporting.org
• www.cdp.net/en/1
• www.ifrs.org/groups/international-sustainability-standards-board/