Key Takeaways:
- Reporting requirements for California SB 253 and SB 261 start in 2026, meaning the clock is ticking to set the stage and execute a plan.
- Materiality mapping must be conducted to identify which data points, and which suppliers, are required to report.
- AI-generated data may save time but can also face major pitfalls.
- Communication is key to gaining buy-in from suppliers.
- Powerful solutions like Avetta can automate data collection, ensure accuracy, and streamline sustainability reporting requirements.
Introduction
In our first blog, we introduced California’s SB 253 and SB 261, two bills requiring businesses to meet stringent ESG reporting standards. While the first step involves understanding these requirements and setting the stage for compliance, the execution phase is where the real work begins. With the calendar turning the page to 2025, we’re counting down the months until reporting for these bills is due.
Let’s take a look at how you can execute your ESG plans successfully.
Understanding the Execution Phase
Key Objectives
After setting the stage and preparing for reporting, it’s time to start translating ESG policies into actionable plans. The primary objectives when executing your plan include accurate measurement of ESG metrics and establishing effective communication channels with suppliers. Accurate data collection is paramount, as it forms the foundation of ESG reporting and compliance. Without precise data, companies risk falling short of regulatory requirements and facing potential legal and financial consequences. Additionally, companies could find their reported metrics oscillating wildly as data pathways become more refined and/or regulatory guardrails more defined.
Importance of Accurate Data Collection
Accurate data collection is not merely a compliance exercise; it’s a strategic necessity. Reliable data enables businesses to understand their environmental impact, social responsibilities, and governance practices. It also helps in identifying areas for improvement and tracking progress over time. Moreover, accurate data fosters transparency and trust with stakeholders, including investors, customers, and regulatory bodies. Many businesses also leverage this data to reduce waste and costs, improve operational efficiencies, and otherwise drive competitive advantage.
Leveraging Technology Partners for Plan Execution
Automating Supplier Assessments
One of the biggest challenges in executing an ESG plan is assessing the supply chain. The right partner simplifies this process by automating supplier assessments and taking this work off your team’s plate. Using such a platform, companies can manage their supplier lists, send out communications, and collect data efficiently. This automation reduces the administrative burden and ensures that data collection is consistent and timely. Given the complexity and variability of ESG risk throughout supply chains, it's critical to balance the nuances of customized due diligence with the risk of overburdening suppliers.
Customized Question Sets
Powerful platforms like Avetta offer customized question sets tailored to each supplier’s context. These questions are designed based on industry best practices and regulatory frameworks, ensuring that the data collected is relevant and comprehensive. By personalizing the assessment process, such platforms help companies gather precise data that aligns with their specific ESG objectives.
Streamlined Communication
Effective communication with suppliers is essential for successful ESG plan execution. Your partner supplier ESG platform should streamline this process by automating and centralizing communications, providing suppliers with clear instructions and timelines. This approach minimizes misunderstandings and increases supplier engagement, leading to higher response rates and more accurate data collection.
Addressing Challenges in ESG Reporting
Gaining Supplier Buy-in
One of the most significant challenges in ESG reporting is gaining buy-in from suppliers. Many suppliers, especially small and medium-sized businesses, may view ESG requirements as a burden. To overcome this, companies need to educate suppliers on the benefits of compliance. One way to manage this is to partner with a company like Avetta to gain access to specialized libraries of educational materials and training sessions designed to help suppliers understand the importance of ESG reporting and how it can enhance their competitive advantage - and even earn them new business. Given it's likely your suppliers need to report to multiple business connections, some platforms can lower this reporting burden with single completion sharing options.
Overcoming Data Collection Hurdles
Data collection can be challenging for some organizations when encountering hurdles such as poor data availability, gaps in capture, and resistance from suppliers. You can address these issues in several ways, primarily by offering a structured and supportive approach to data collection. It’s also important to use supply chain risk platforms to automate processes and provide clear guidance to help suppliers navigate the complexities of ESG reporting, ensuring that companies receive the data they need to comply with regulations. Tools that accelerate supply chain risk mapping across material issues and customize supplier due diligence accordingly can significantly reduce supplier reporting burdens by ensuring they only have to respond to questions directly relevant to their risk classification, category, and region.
Best Practices for Executing ESG Plans
Early Preparation
Preparation is key to successful ESG plan execution. Companies that start early have more time to understand their supply chain, identify material risks, and set up data collection processes. Early preparation also allows for a more measured approach, reducing the likelihood of errors and omissions. Having partnered with hundreds of global clients, Avetta has observed the challenges that arise with later pivots to ESG data management and the benefits of working earlier with suppliers to prepare for collection.
Supply Chain Materiality Mapping
Supply chain materiality mapping is an essential step in identifying which suppliers and data points are most relevant to a company’s ESG objectives. Supply chain risk platforms help companies conduct this specialized materiality mapping, streamlining the process and ensuring that resources are focused on the most critical areas. This targeted approach enhances the efficiency and effectiveness of ESG plan execution. Conducting full materiality mapping can take six to nine months, meaning the work needs to be started soon to meet SB 253 and SB 261’s reporting deadlines.
Balancing Data Collection Methods
Balancing direct data collection with AI estimations is crucial for accurate reporting. While AI can help fill data gaps, it’s essential to collect as much direct data as possible. A strong approach combines direct data collection with AI modeling, providing a comprehensive and accurate picture of a company’s ESG performance. While AI and data scraping offer tempting shot-term solutions to ESG data gathering, the risks of inaccurate, incomplete, and insufficient results make partnership models more efficient and cost-effective over time.
Avoiding Common ESG Reporting Pitfalls
Risks of Relying Solely on Data Estimations
Relying solely on data estimations can lead to inaccuracies and future corrections. Companies that depend too heavily on AI-generated data may find their initial numbers significantly off the mark as more direct, verifiable data becomes available. This can damage credibility, require extensive public corrections, and run the risk of not meeting reporting standard thresholds. Supply chain risk platforms help companies avoid these pitfalls by prioritizing direct data collection and using AI as a supplementary tool.
Strategies for Accuracy
Maintaining data accuracy is critical for successful ESG reporting. Companies should continuously refine their data collection processes, engage with suppliers regularly, and use the right technology platforms to ensure that data is collected, verified, and reported accurately. This proactive approach helps companies stay compliant and maintain trust with stakeholders.
Correlations Between Sustainability and Safety
To some, sustainability is seen as a chore or an additional responsibility on top of an already busy workload. Pressure to complete projects efficiently and timely can push sustainability down the priority list. Fortunately for safety and operations professionals, there is a strong connection between organizations with strong sustainability ties and positive safety and operational outcomes. A significant amount of ESG data overlaps with traditional safety metrics so it is critical to involve your safety leads and systems in any ESG reporting strategy.
Enhanced Supply Chain Resilience
Sustainability and safety are intrinsically linked, contributing to a more resilient supply chain. Companies that prioritize ESG initiatives often are more mature in safety practices, leading to fewer accidents and disruptions. This correlation underscores the importance of integrating sustainability into overall business operations and opportunities to improve efficiencies.
Integrated Practices
Integrated sustainability and safety practices create a culture of responsibility and risk management. Companies that excel in these areas are better prepared to handle challenges, maintain operational continuity, and build trust with stakeholders. Choosing a platform that can handle many forms of risk, including compliance and sustainability, helps foster a collaborative culture where health and safety, procurement, sustainability, and more, are all in alignment.
Importance of Partnering with Avetta
Time and Cost Efficiency
Partnering with Avetta offers significant time and cost efficiencies. By automating complex tasks and providing expert guidance, Avetta reduces the resources required for ESG compliance and can accelerate ESG supply chain program launches. Our team can handle supply chain materiality mapping for your company and eliminate months of busy work. This allows companies to focus on strategic initiatives rather than administrative tasks, saving time and money.
Ensuring Compliance and Data Assurance
Compliance with ESG regulations requires robust data assurance. Avetta’s platform provides third-party verification, ensuring that data is accurate and compliant with regulatory requirements. This assurance is critical for executing your sustainability plan, meeting legal obligations, and avoiding potential penalties.
Modular Data Engagement
Avetta’s approach to modular data engagement allows companies to meet minimum compliance requirements while also setting the stage for broader sustainability goals. By categorizing suppliers based on their data engagement levels, Avetta helps companies prioritize their efforts and achieve their ESG objectives more effectively. For companies with global supply chains across different regional ESG maturities, internally and externally, Avetta allows you to customize the level of due diligence, verification, and continuous improvement activities for suppliers to meet vendors where they are and also encourage strong sustainability performance.
Conclusion
Executing an ESG plan, like the one required to meet California’s SB 253 and SB 261, requires meticulous planning, accurate data collection, and effective supplier engagement. With mere months left to lay out your plan and begin executing upon it, there’s little time to waste if you haven’t already begun this exercise.
Fortunately for those who feel behind or struggling to find a strategic starting point, technology partners like Avetta can jump-start and streamline this process. The right platform offers the tools and support needed to navigate these challenges, ensuring compliance and fostering a culture of sustainability and safety. Avetta offers a suite of supply chain risk management solutions, including tools to help you holistically understand your emissions footprint and rapidly identify high risk suppliers to include in an ESG & Sustainability assessment.
In our next blog, we’ll Address the Risk and provide insightful feedback on how to best take action against supply chain sustainability risk. Share this infographic with colleagues who are also impacted by SB 253 and SB 261 reporting to help them on their journey.
Learn more about how Avetta can support your sustainability reporting efforts and ensure the resilience of your supply chain.