Last week, I blogged about navigating corporate sustainability initiatives and finding business opportunities when you don’t have data. Today, let’s look at how you might be able to show executives the business value of sustainability without ROI. Yes, you read that right. An article from CFODive about a study by Gartner offers food for thought, albeit referring to a corporate function different from ESG/sustainability:
“while these organizations have expanded in scope, they have historically struggled to justify their budgets and investments. Because they’re typically chartered as a support function with budget allocated centrally, it’s very difficult to separate the direct value created by [the department] and the general value created by business initiatives. [The department] leaders frequently face a classic support function challenge: organizations know there is business value there, but it’s hard to prove it directly.”
The department referred to might be surprising – in-house data & analytics (D&A). This group is responsible for “ensuring data integrity and protection and establishing common data infrastructure” and is “frequently headed by a chief data officer or more recently, a chief data and analytics officer.” Clearly there are many parallels to sustainability here. With companies rushing to implement AI (sometimes as I wrote recently with questionable ROI), you might think D&A business value is obvious – but that function struggles with many challenges faced by ESG/sustainability departments.
Gartner’s study uncovered an unexpected and fascinating twist:
“the practice of creating an ROI model to justify D&A investments actually showed a significant negative impact on firm performance. We called this problem ‘death by ROI.’
… we found that focusing ROI calculations on individual D&A investments is a little bit like obsessing about the value of the professional basketball player’s left hand: It’s not about the hand, it’s about the whole. Because of the narrow ROI lens, these organizations are likely not seeing investments that have broader business benefits.”
Sustainability leaders, staff and advisors: Taking liberties with Hamlet – “To ROI, or not to ROI – that is the question.” I’ll explore that in Part 2.
Our members can learn more about the business value of sustainability/ESG here.
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