I was once asked how much time and effort should be spent trying to increase ESG data accuracy. My response? If you make sustainability professionals become accountants, they will quit.
Don’t get me wrong: I love working with data. Data and disclosure are critically important at a certain level of detail. Companies and governments need to understand their impact and track goals with a degree of accuracy if we hope to address climate change or tackle issues ranging from human rights to biodiversity. And evolving disclosure standards and regulations are driving increased transparency to support these efforts.
But the key words here are “a certain level of detail.” Beyond a certain point, number-crunching becomes purely accounting and has little to do with sustainability. More granular data, analysis and disclosure may fail to create change, even becoming counterproductive: If we’re in a car heading toward a cliff at high speed, we should be trying to turn around, not figuring out whether we’re going 80 miles an hour or 90.
The desire for data is increasing
The sustainability world is expanding its demand for more detailed data, which requires time and labor to gather, manage and disclose. This demand for data is even more heightened by the increase in more stringent reporting regulations. Companies also need data to support their corporate sustainability claims, avoid accusations of greenwashing, and prove they are taking tangible steps toward their targets.
More data requirements mean companies will need more sustainability professionals to calculate those emissions numbers, trace supply chains and count waste streams. Corporate sustainability professionals — smart, passionate, hardworking people committed to making a difference in the world — are increasingly incentivized to focus on data and disclosures (that is, accounting). But all this data doesn’t necessarily drive progress.
And we have a greater number and diversity of sustainability-related career options than ever before. So, we face a growing job market outpacing the supply of experienced professionals. It’s an employee’s market — force them into a role they are aren’t inspired by and they will easily jump ship. In a world with urgent demands for action on a range of issues, sustainability professionals (and probably a lot of accountants, too) should consider whether this trend toward accounting aligns with our passions and drive for impact.
The tradeoff can be real action and results
Improving data in the service of sustainability is a laudable ideal. There are people with a passion for data integrity and analysis, and to the extent that these contribute to beneficial outcomes, improved data can be incredibly valuable.
But there are too many cases where data collection, management, improvement and disclosure have a tenuous connection to progress — this is where we may be studying the speedometer while hurtling toward the cliff.
Product lifecycle assessment data, supply chain greenhouse gas figures, the number of people affected by a supply chain human rights initiative or corporate philanthropy project and many other points are useful estimates of environmental and social impact. But these numbers are all based on models that have various (and sometimes quite high) degrees of uncertainty. We should remember that all models are wrong, but some are useful — and that decreasing uncertainty doesn’t necessarily make a model more useful, while it may incur significant tradeoffs. Here are a couple of tradeoff cases to consider:
Tradeoffs between analysis and action: There’s often a labor tradeoff between gathering data and acting on it. With a limited labor pool, everyone who is working on gathering data is missing an opportunity to work on making actual change. In many cases, existing data is enough to act on.
Too much time can be spent arguing over the right way to slice the data that doesn’t result in materially better outcomes.
For example, if a company is confident that between 70 percent and 85 percent of its 2022 supply chain greenhouse gas emissions come from manufacturing steel, then how much time, effort and money should be spent narrowing that uncertainty by engaging with suppliers, consultants and software?
Those resources might be better spent using the data it already has to work with product developers, suppliers, industry, researchers or governments to establish new designs, contracts, standards, studies and policies to incentivize emissions reductions. These actions may be unnecessarily delayed if the immediate focus is instead on pursuing better data.
Competing analyses: There can be competition between different forms of data collection and analysis, with various and sometimes incompatible methods of measurement and reporting. Too much time can be spent arguing over the right way to slice the data that doesn’t result in materially better outcomes.
For example, suppose a company only cares to track the emissions from suppliers that can be allocated directly to their purchasing (rather than suppliers’ overall emissions). This situation could motivate those companies to game the system and adopt accounting methods that minimize their company-specific allocations — even if it simply means moving numbers in a spreadsheet to shift the alleged responsibility for emissions onto others, without resulting in real-world reductions.
In both of these cases, sustainability professionals face a choice between working toward actual results or just playing with numbers that are divorced from impact.
What’s the path forward?
There is an argument that rather than turning sustainability professionals into accountants to address these data demands, we simply need more accountants to manage sustainability data. But we face talent shortages in accounting as well as younger generations seek jobs with more purpose. Links to sustainability may actually be an opportunity to attract more people to that profession. But I suspect that people are interested in real-world progress regardless of whether they’re accountants or sustainability professionals. Simply having more accountants doesn’t alter the tradeoffs outlined above: It won’t make the work any more impactful.
The link between accounting and sustainability has never been more important or in demand. This creates tremendous opportunities for professionals in both fields, but it also creates risks that time will be poorly spent on insignificant data-chasing exercises. Those considering their career options — as well as those trying to attract, retain and develop sustainability professionals — need to consider the actual impact of data and disclosure and do their best to ensure that they result in changes that are meaningful.