Organizations dedicated to their role in the global movement toward sustainability have put responsible environmental, social, and governance (ESG) practices at the forefront. Deloitte’s Rikki Stancich and Andrew Wood describe how to use Workday Adaptive Planning to assess ESG metrics, determine improvement goals, and report progress.
Corporate accountability is more important now than ever. Investors and consumers alike are holding companies responsible when it comes to the effects their operations have on workers and the planet, placing increasing emphasis on companies’ environmental, social, and governance (ESG) practices.
ESG may not quite be a household term, but its growing importance over the last decade is visible from every angle. Social media campaigns call out companies with poor labor practices. New laws set standards for diversity on corporate boards.
Not only is it crucial from a public relations standpoint for executives to take ESG issues seriously, it’s financially imperative that they take demonstrative action and report on their results. The sea change is clear in the data. In 2009, just 16% of investors considered ESG factors in their investment decisions, according to Gartner. In 2020, that number was over 85%. And companies with a high rating on ESG and corporate social responsibility factors have a lower cost of capital in terms of both debt and equity, according to Stefan Ball, a senior solution marketing manager for the office of the CFO at Workday.
In a webinar with Rikki Stancich, director, climate and sustainability, at Deloitte New Zealand, and Andrew Wood, associate director, consulting, at Deloitte, Ball explained how Workday can help companies capture ESG metrics, set improvement goals, and seamlessly report on the progress of their initiatives.
As a best-in-class, cloud-based financial management and human resources suite, Workday centralizes the data required for analyzing ESG data, tracking initiatives, and operationalizing sustainability into core finance and human resources (HR) processes, said Ball.
“Traditionally emissions abatement has been viewed as a cost to business, but the reality is—and what the economic modeling is telling us—is that the cost of inaction is far higher.”
Rikki Stancich
Director, Climate and Sustainability
Deloitte New Zealand
“Bringing that all together with external data through our extended analytics capabilities provides a robust central repository for tracking and reporting on ESG performance,” he said. With access to the same trove of data, HR, sustainability, and operations teams can work together and in parallel toward these goals.
Take, for example, a company’s greenhouse gas emissions. Those aren’t limited to what comes out of a factory smokestack; they also include metrics such as emissions that result from employees commuting to work. Workday’s survey functionality makes it easy to solicit commuter data from employees, such as how often they come into the office, how they get there, and how far away they live. From there, sustainability managers can calculate emissions arising from commutes and look for ways to minimize it—for example, arranging ride-sharing options in commuter hot spots.
Spend data in Workday can also be used to estimate scope 3 emissions, or those linked to the supply chain. Accessing this financial information directly, instead of asking finance to periodically compile it and send it to sustainability teams offline, can make it much easier to perform these calculations.
But having the data is only the beginning.
Workday’s data visualization tools allow leaders to see and explore a wealth of data across all three ESG categories. Using third-party ratings, sustainability efforts, and procurement data, decision-makers can view supplier rankings on environmental stewardship, then switch to rankings for women- or minority-ownership status, providing insight into their social contributions. On the governance front, HR representatives can conduct data-privacy and anti-corruption training, or visualize where in the recruiting process they’re having the most—or least—success attracting diverse talent.
To demonstrate how the data can be used, Stancich and Wood outlined how Deloitte is employing Workday Adaptive Planning to execute emissions reduction modeling. The company’s efforts reflect not only a corporate commitment to sustainability, but also an understanding that ESG is a bottom-line issue.
Deloitte is in the process of releasing a series of global economic analysis reports that analyze the business cost of inaction on climate change and the potential economic gains to be had from transitioning to a net carbon-neutral economy, Stancich said.
“The reports all open on the premise that traditionally emissions abatement has been viewed as a cost to business, but the reality is—and what the economic modeling is telling us—is that the cost of inaction is far higher,” she added.
Extreme weather, floods, droughts, crop failures, and other fallouts from the climate crisis all result in economic loss. “Aggressive decarbonization not only shields us from increasing economic losses, it in fact presents extraordinary opportunities for economic growth,” Stancich said.
Stancich cited some common questions that companies may have about how to make that happen, including:
To answer these questions, Deloitte developed an integrated carbon emissions planning model, allowing companies to set a series of time-bound targets toward carbon neutrality and to model pathways to get there.
Workday Adaptive Planning provides dashboards that “quantify the emissions impact of your decisions and your investments, and it shows how these interact with your balance sheet,” Stancich explained.
A key reason Deloitte chose to build in Workday was its collaborative functionality, Wood said. “Using Workday Adaptive Planning, we can actually bring it into the whole business process—particularly because there are a lot of financial implications of what different climate-reduction strategies we’re going to take,” he added. “To be able to link those into the financials is really powerful.”
Wood used the tool to demonstrate the emissions impacts of transitioning a fleet of company vehicles from fossil fuels to electric as their leases expire. Pulling in a standard lease operating schedule used in financial planning, he swiftly drilled down vehicle use metrics based on type of vehicle (combustion engine, hybrid, or electric), fuel type (gas versus diesel), and annual mileage to estimate scope 1 emissions for fuel. Looking out as older cars are replaced by efficient electric cars, the executive dashboard showed emissions ticking downward into the green.
Not only is it crucial from a public relations standpoint for executives to take ESG issues seriously, it’s financially imperative that they take demonstrative action and report on their results.
Emissions totals bounced up and down as he modeled out other sustainability-related plans, including downsizing the main office, reducing office waste, and the decrease in commuting and increase in household electricity use resulting from employees working remotely.
Because Workday Adaptive Planning can link seamlessly to Microsoft Excel, Word, and PowerPoint with OfficeConnect, Wood was able to instantly update monthly profit and loss statements with the new models. “It’s all integrated,” he said. “Hit ‘refresh,’ and it’s all ready to go.”
Watch the video for more information about how Workday can help organizations develop ESG efforts, identify areas for improvement, and measure results.
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