DataBancDataBanc
Why Privacy is ESG

Why Privacy is ESG: 2023's Most Important ESG Differentiation

As ESG continues to drive conversation, decision-making, and differentiation in the marketplace, organizations who truly want to differentiate themselves may leverage privacy as an important tool in their ESG toolkit. Privacy, now more than ever, is a critical part of ESG. In 2023, if your organization isn't thinking about how to leverage privacy as part of your ESG framework, you could be falling behind.

For those new to the space, ESG stands for environmental, social, and governance; this refers to the three key factors that varied stakeholders consider when evaluating the sustainability, societal and ethical impact of a company. All of which come to impact privacy and data. Environmental factors often include a company's impact on the natural environment; social factors often include the company's impact on society; governance factors often refer to the company's leadership, transparency, and decision-making processes.

ESG factors are becoming increasingly important to varied stakeholders, as many look to align themselves with companies and brands who have specific ESG focuses. Further, many stakeholders believe that companies that maintain strong ESG practices may be better positioned to perform well over the long term, as they are more likely to be able to adapt to changing societal and regulatory expectations.

Before diving into how privacy intersects with ESG, what do we mean when we say privacy? We think about privacy as data privacy, which also means a lot of different things, but our focus centers around control of personal information. It is increasingly becoming not just an important issue, but one of the top issues consumers and other stakeholders may consider when evaluating a company's societal and ethical impact, especially in the digital-age.

While previously, privacy was not heavily discussed when thinking about ESG, not only is this poised to change, but that also makes it such a compelling and important tool for organizations who seek to be forward-thinking in their ESG outlook. In fact, organizations who seek to be true leaders in ESG should consider leveraging privacy-innovations, frameworks, and education to differentiate their ESG practices from competitors and other companies.

Now the interesting part: how does privacy and ESG intersect? Instead of more definitions and background, let's just talk illustrative examples: if a company has weak data privacy practices, it may be seen as lacking in terms of governance; poor data privacy practices can also have negative social impacts, such as facilitating the sale of personal data without individuals' consent; in addition, companies that prioritize privacy may be more likely to be seen as responsible and trustworthy by their stakeholders, which can be a positive factor in terms of governance and social responsibility. This is just a few ways that privacy can intersect with ESG.

What can an organization do about privacy and ESG if they seek to leverage this tool for helping its stakeholders? Well, there are a number of other ways that an organization can leverage privacy as part of its ESG practices:

  • Use privacy as a differentiator: an organization that is committed to privacy practices and helping to educate its stakeholders about the topic can use this as not only a benefit but a true differentiator in the marketplace. The most forward-thinking organizations can highlight their privacy practices/frameworks as a key benefit to customers and stakeholders. For organizations of all sizes, privacy-related design and approaches should underpin critical functions and features.
  • Engage with stakeholders on privacy issues: An organization can always demonstrate its commitment to ESG by engaging with stakeholders, such as customers and community members; this is even more true on privacy issues. Privacy impacts all of us, and it is a great opportunity to learn and discuss various perspectives, especially because it is such a nascent space in many ways. Instead of just an email notification about a privacy policy update, and organization can seek input from stakeholders along the way about its practices. Other ways organizations can engage with stakeholders includes participating in privacy-related industry events and initiatives, and collaborating with other organizations to advance privacy-related goals. Further, leading workshops and outreach efforts-internally can help as well.
  • Develop strong privacy policies and practices: An organization that is committed to protecting the privacy of its customers, employees, and other stakeholders can demonstrate its commitment to ESG through the development of strong privacy policies and practices. This can include things like implementing robust data protection measures, being transparent about how personal data is collected and used, and providing individuals with clear and easy-to-understand information about their privacy rights.
  • Promote privacy awareness: An organization can leverage privacy as part of its ESG practices by promoting awareness of privacy issues and encouraging internal stakeholders to be mindful of their own privacy as well as the privacy of others. Privacy by design doesn't just happen - it need to be the beginning of every discussion and privacy awareness can help with this. This awareness can be done through training and education programs.

Looking ahead, it is also possible that privacy could be integrated into ESG frameworks in an even more formal way, with specific metrics and standards being developed to measure a company's privacy practices. This could help to ensure that companies are held accountable for their privacy practices and that stakeholders have more transparent and consistent information about these practices when evaluating companies and making investment decisions.

Whichever path an organization chooses, it's increasingly clear that 2023 is shaping up to be the year of privacy. Organizations who seek to differentiate themselves may leverage privacy as part of their ESG framework, and organizations who are committed to ethical approaches, positive societal impact, and great governance, can no longer forget about privacy as a part of ESG.

And, if you lead ESG efforts within your organization, we are excited to discuss ways you can start to include privacy in these efforts. (Please email us at support@mydatabanc.com)

Bancy

DataBanc Editorial Staff

January 2, 2023

BackBack to the Blog