From Compliance to Capability: On the Role of Data and Technology in Environment, Social, and Governance

Abstract

The importance of Environment, Social, and Governance (ESG) considerations for businesses has evolved from compliance to a strategic imperative. This shift is driven by increased investor scrutiny, reputation and brand value impact, talent attraction, innovation stimulation, community relations, and global regulatory requirements. At the same time, the ESG regulations and policies, related technological landscape, and market trends are continuously changing. It is, therefore no longer tenable for firms to stick to a minimalistic approach of ESG regulatory box-ticking ‘compliance’; instead, it is becoming increasingly critical to develop ESG ‘capabilities’ that help firms to seamlessly and proactively adapt themselves to the changing environment and even turning it into new (strategic) opportunities rather than reluctantly reacting to change, being operationally and organizationally overwhelmed, and disrupted, often with inadequate response and poor adoption as result. Many studies show that data and technology can be powerful enablers of such capability. The evidence is, however, unstructured and dispersed. In response, this study consolidates existing research and presents a comprehensive conceptual framework, bridging the fragmented landscape of ESG data and the technology literature. It offers practical guidance for firms, helping them lay holistic data and technology foundations for ESG and advance toward higher maturity levels in their ESG capability.