Today, customers care about more than just products and services, a company's purpose, culture, and wider impact are increasingly important in purchasing decisions. This, alongside new regulations, means that focusing on the right environment, social, and governance (ESG) issues is becoming a priority for leaders across the retail sector.

ESG isn't a seasonal trend or passing fashion and it's no longer a box-ticking compliance exercise. Getting it wrong risks financial and reputational damage, and getting it right opens up opportunities for competitive differentiation and advantage.

When ESG is integrated effectively into a company's strategy, it provides a holistic view of a company's financial performance, environmental stewardship, and social responsibility. This integration allows companies to better manage their reputation, attract potential investors, and more accurately reflect the interests of their existing stakeholders.

With the fast-evolving regulatory landscape, and the potential impact of ESG on a company's performance, responsibility for ESG issues is rising to C-suite executives. All companies strive for profits, but today's investors and shareholders want to see sustainable and inclusive growth accompanying those profits. Executives that embrace ESG will tend to meet customer and stakeholder expectations.

The evolving legislative landscape

The Corporate Sustainability Reporting Directive (CSRD) requires companies operating in the EU to make disclosures on a wide range of sustainability-related issues such as climate change, biodiversity, and social issues. But the real change is to governance structures.

With less than a year before the first CSRD reporting period begins, it's important to prepare by focusing on key areas such as establishing a board-led governance structure, setting up a due diligence process across value chains, integrating ESG into corporate risk management systems, and considering short, medium, and long-term time horizons.

The only viable way to make sure this demand for transparency doesn't have a negative impact, either on existing resources or future success, is for retailers to understand what stakeholders think is important, and focus on that.

CSRD mandates a double materiality process and a third party to audit that process, traditional outsourced approaches are costly as well as time and resource-heavy whilst delivering variable data insights. With the clock running on the reporting timelines, using a data-driven software platform that has access to almost unlimited data sources, providing a robust and objective foundation on which to build a materiality analysis is the sensible approach.

Knowing what your stakeholders want helps you prioritize the ESG issues to work on, whilst it can look resource heavy and costly there are smart ways to work with data and technology that also create opportunities to differentiate themselves based on their approach to ESG.

With the CSRD in force since January 2023 retailers should already have preparations underway, specifically for the double materiality that CSRD mandates. If ESG isn't already a top-board priority, it should be.

LEARN HOW DATAMARAN CAN HELP YOU DELIVER A ROBUST DATA-DRIVEN APPROACH TO DOUBLE MATERIALITY FOR CSRD

Byline article to Datamaran