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The impact of a lack of ESG data governance on sustainability progress in manufacturing

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The rising influence of Environmental, Social, and Governance (ESG) expectations are starting to become more and more critical with every passing day for industries, inclusive of manufacturing, but there is a silver lining. It has been suggested by Forbes that ESG-focused activities can be “a golden opportunity to improve your business by adopting best practices that contribute value” but these new strategies also add another significant layer of complexity to manufacturing businesses during an already disruptive time. In relation to sustainability efforts, how important is ESG data governance?

ESG data management’s role in sustainable manufacturing

The practice of managing and applying ESG-related information effectively, ESG data governance, is increasingly opening vital pathways for manufacturers to lead them towards ensuring their operations are sustainability-friendly. With ESG data governance, eco-production methods can be unearthed and can be actioned, which will inform investor decisions, guide compliance with regulations, and set targets for corporate social responsibility.

The top 5 risks that arise without proper ESG data governance

Enterprises and the broader manufacturing industry face significant risks without proper ESG data governance. Failure to meet ESG objectives, particularly in governance benchmarks, exposes companies to heightened operational and financial risks, worsens issues like “greenwashing” and compromising long-term sustainability. Additionally, inadequate ESG data governance practices can exacerbate environmental harm, contributing to pollution and resource depletion. These challenges are further compounded by compromised data quality, hindering efforts to address environmental and social impacts effectively.

The recent case of a manufacturer fined US $1.5 million for child labour violations underscores the critical need for robust ESG data governance in mitigating social issues and governance challenges, ensuring ethical business practices and long-term viability. Below are some of the associated risks associated with inadequate ESG data management practices.

Infographic titled "The top 5 risks of lacking ESG data governance," detailing risks: 1) Reputational damage, 2) Increased operational and financial risks, 3) Environmental harm, 4) Compromised data quality, 5) Social and governance challenges.

 

Overcoming risks to future-proof their ESG data governance practices

Manufacturers certainly have a lot on their plate, but they can future-proof their ESG data Governance practices by embracing cutting-edge tools, such as to sustainability maturity assessments, one example being the COSIRI framework, which can also augment accuracy and accountability with a universal framework and tools to aid manufacturers across sectors and of different sizes integrate operational sustainability.

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