We need to talk about failure in digital sustainability system implementation
Sustainability data management systems can help mitigate risks from ESG, CSR, and EHS issues in businesses and their supply chains, as well as risks associated with data mismanagement and misstatement. However, implementation of the systems themselves may present inherent problems that need to be identified, managed and mitigated if companies are to invest and realise returns.
Sustainability data management systems are needed to reduce risk
The standard of sustainability reporting information systems is predicted to increase toward parity with that of financial reporting. The London Stock Exchange Group (LSEG) clearly sets out in a 2017 guide to ESG reporting1 the criteria necessary for investment-grade sustainability data (Figure 1). The report emphasises that data should be accurate, transparent, and conform with both internal organisational boundaries and recognised international standards such as those of the Global Reporting Initiative. All of this requires the design and implementation of powerful data management systems.
Figure 1: Characteristics of investment grade data from LSEG 2017.
Coro Strandberg, of Strandberg Consulting, points to a 2011 Ernst and Young survey of sustainability reporters2,3 that concluded the tools used to collect and process data for sustainability reports are ‘suboptimal’, with many companies relying on crude data collation tools such as Excel spreadsheets. The increasingly high standards required of sustainability data and professionals in charge of its use call for powerful data management solutions. This will reduce the risk of misstated data and the associated negative impact on credibility and reputation.
More to this, sustainability data management systems afford transparency with respect to the risks and challenges presented by sustainability issues including natural resource scarcity, energy and water security, GHG reduction commitments, as well as worker wellbeing and human rights. These complex, now ubiquitous business risks4 can be better managed using specialist software tools as opposed to spreadsheets, meaning just about any organisation can have a strong impetus to implement a sustainability data management system.
A 2017 report by NAEM5, the Association for EHS Management, found that most organisations that had purchased an EHS data management system were largely seeking tools to improve functional aspects consistent with the above LSEG guidance, including: improving compliance assurance (68%); collecting data for internal and external reporting (64%); and centralisation of data collection efforts (Figure 2). This was in addition to bolstering a number of core EHS management functions such as: improving ability to analyse data (78%); improving accountability and performance (62%); and improving incident reporting (61%).
Figure 2: Business objectives of firms that purchased EHS systems in the past, from NEAM 2017.
Implementation of new IT systems carries substantial risk of poor project performance
IT system implementation is essentially the process of getting a firm up and running with a new software facility, ensuring that the technology is absorbed smoothly into the company’s operations and does what it was intended to do. Simple criteria can be used to judge if an IT project has been successful. Firstly, did the project generate a return on investment? Secondly, have the desired system requirements set out at the beginning of the project been met? A 2009 International Data Corporation (IDC) report on Improving IT project outcomes6 found that 25 % of IT projects experience outright failure against these criteria, while 20-25 % do not produce ROI and up to 50 % of the projects require material rework to meet the desired system requirements.
IT projects typically fail for a multitude of reasons7. Commonly cited reasons include: poorly defined goals and outcomes; a lack of leadership from the company’s Top Management; failure of Top Managers to take and drive accountability for the project; insufficient communication between ‘tech’ and ‘non-tech’ interested parties; poor planning and timelines; a lack of user testing and/ or failure to properly respond to user feedback; and quite simply addressing the wrong issues.
There does not seem to be an abundant literature on the problems, successes and failures of IT system implementations specific to the sustainability reporting software market. Yet valuable insights can be gleaned from NEAM’s EHS & Sustainability Software Buyer’s Guide5.
The report indicates that firms newly investing in EHS systems significantly underestimated the costs of implementation. Those companies surveyed that had already gone through the process of implementation reported an average spend of US$245,214. These past purchasers were found to have budgeted on average only around half ($121,357) of the actual cost of system implementation. This indicates that overspend on the implementation phase of sustainability software projects is substantial (around 100 % on average!). Moreover, the report found that first-time buyers in the market for a new software system were found to have budgeted an average of $194,857, and therefore seem improperly prepared for the realised costs of implementation.
Regarding achievement of intended outcomes, the NEAM report found that 61 % of those survey respondents whom had implemented an EHS system in the past reported having ‘fully achieved’ (12%) or ‘mostly achieved’ (49%) their businesses objectives associated with the project (Figure 3). While a majority of respondents therefore had made successful ventures in this regard, some 39% of the respondents had obviously not been successful. For firms considering embarking on an implementation, the odds of translating investment in a new software system into realised business benefits seem about 5/3 – not the most appealing numbers!
Figure 3: Achievement of business objectives among past purchasers of EHS data management systems, from NEAM 2017.
What is clear is that there is a significant risk of project failure associated with the implementation of sustainability data management software. While I concede I am unlikely to have been exhaustive in my search, it does seem evident from the literature online that companies within the sustainability data management community are not talking about their failure. This is of course understandable – a reluctance of firms and practitioners to publicly disclose their failures is natural. Yet disclosure and critique of those risks is surely necessary both to drive the successful uptake of technology and realise the potential returns.
There are numerous tools on the market that help firms manage their CSR/ EHS/ ESG data and associated sustainability programmes. SustainIt provides an independent service, GoMarketWise to help select the right system for your specific business needs.
1. “Revealing the full picture: Your guide to ESG Reporting. Guidance for issuers on the integration of ESG into investor reporting and communication”, Feb 2017.
2. “Six growing trends in corporate sustainability” Ernst and Young/ GreenBiz, 2011 (also see the 2013 survey repeat).
3. “Sustainability Reporting Trends and Implications”. C. Strandberg, Strandberg Consulting. 2013.
4. “The Global Risks Report 2017” World Economic Forum, 2017.
5. “EHS & Sustainability Software Buyer’s Guide.” NAEM, 2017.
6. “Improving IT Project Outcomes by Systematically Managing and Hedging Risk”. J.C. Pucciarelli and D. Wiklund. International Data Corporation report, 2009.
7. “Are these the 7 real reasons why tech projects fail?” B. Marr. Forbes, Sept. 13, 2016.