As the sustainability regulatory landscape shifts towards greater accountability and transparency, companies of all sizes are increasingly recognizing the importance of integrating ESG factors into their operations. ESG regulations have increased by 155% in the past decade, with 1,255 ESG regulations introduced worldwide since 2011.
Not just as a matter of compliance, but as a strategic lever driving long-term success and resilience. To take action, companies need to rely on various tools, one of which is benchmarking. By comparing their sustainability performance against industry standards and best practices, organizations gain valuable insights into their sustainability initiatives, making it a driver for transformation.
Benchmarking serves multiple purposes: it helps measuring performance, identifying gaps and best-practices setting realistic goals, and ultimately, driving continuous improvement. However, the journey to effective sustainability benchmarking is paved with challenges. Particularly for smaller companies that may lack the resources and expertise of their larger counterparts.
Why Is Sustainability Benchmarking Important?
Measure Performance Effectively
Benchmarking allows organizations to measure their sustainability performance against industry peers, as well as identify their strengths and weaknesses.
Set Realistic and Achievable Goals
By assessing their current sustainability performance, companies can establish a clear baseline for their goals. This baseline provides a reference point from which to set meaningful and realistic goals, aligned with industry standards and expectations.
The results of benchmarking performance assessments help companies prioritize resource allocation efficiently, focusing on high-impact areas that drive significant sustainability improvements.
Enhance Transparency and Accountability
Benchmarking promotes transparency by providing stakeholders with clear metrics on companies’ sustainability performance, thereby increasing their accountability.
It helps investors assess how a company measures up against sustainability criteria, which can influence their confidence and investment decisions. Especially through due diligence processes. It can also help customers who are becoming more conscious of the sustainability practices of the brands they support. Benchmarking can be a factor in their decision-making process.
Drive Innovation and Competitive Advantage
Having a close look at peers’ practices is an efficient way to identify business opportunities. As a result, it fosters innovation through the adoption of new technologies and practices identified among peers’.
It can also be leveraged as a market differentiator and turned into a competitive advantage. When used to highlight operational inefficiencies, it leads to cost savings ultimately enhancing financial performance. An example would be if a company has significantly higher energy consumption than industry peers.
Challenges in Sustainability Benchmarking
1. Data Availability and Quality
One of the primary challenges in benchmarking is the lack of consistent, high-quality, and publicly available sustainability data. As specified in the IBM Sustainability report published in 2024, “only about four in 10 organizations can automatically source sustainability data”. Private companies often have less rigorous reporting practices compared to public companies, making it difficult to gather reliable data. Recent regulations such as the Corporate Sustainability Reporting Directive (CSRD) should allow medium-sized companies to overcome this issue. Yet, this challenge is particularly prominent for private equity firms and small companies.
2. Lack of Standardization in Frameworks
The sustainability landscape is characterized by a plethora of standards and frameworks, leading to inconsistencies in reporting and benchmarking practices due to different calculation methodologies for key data points like carbon emissions and employee turnover. This lack of standardization makes it almost impossible to compare companies on a like-for-like basis. Regulations such as CSRD or SFDR have paved the way for greater harmonization of reporting practices. Nonetheless, methodological choices often remain in the hands of individual companies.
3. Resource-Intensive Processes
Conducting comprehensive sustainability benchmarking requires significant human and financial resources. Expertise, time, and technology are just some of the resources a company should invest in.
4. Evolving Regulatory Landscape
Sustainability regulations and factors are continuously evolving. This makes it difficult for benchmarks to stay up to date.
How to Overcome Benchmarking Challenges with the Right Sustainability Software
Software as Service (SaaS) tools, such as Cority’s Sustainability software solutions, are essential for meeting benchmarking challenges as they allow for a streamlined process ensuring consistency and quality in sustainability data while saving resources. By centralizing data sustainability SaaS tools make it easier to manage and access ESG data from a single platform, enhancing data integrity and simplifying the benchmarking process. They also reduce manual effort and minimize the risk of human error in the collection and analytics process, as they help ensure data is consistently collected over entities and time. By providing real-time updates on data evolutions – such as through notifications – they also allow companies to easily track emerging discrepancies or trends.
Another key reason these tools help leverage benchmark capabilities is the integration of ready-to-use standardized sustainability frameworks (such as GRI, SASB, TCFD, and CSRD), which helps align companies’ benchmarking efforts with various standards and regulations. This addresses the issue of methodological variations between actors, simplifying the comparison of organizations’ performance. Coupled with maintaining metrics customization capabilities to fit specific industry needs and regulatory requirements, it ensures that the benchmarking process remains relevant and comprehensive.
Eventually, to optimize benchmarking capabilities, advanced analytics features – often integrated into SaaS tools – are essential. By relying on artificial intelligence, these tools can read vast amounts of sustainability data, identify patterns, trends, or anomalies, and provide deeper insights into future business opportunities.
Conclusion
Benchmarking not only aids in performance measurement and goal setting but also drives transparency, accountability, and value creation. Challenges such as data availability and quality, standardization, and resource needs must be addressed by companies to be in a position to take advantage of the benefits it brings. By leveraging the right ESG SaaS tool, organizations of all sizes can overcome these hurdles and effectively integrate sustainability factors into their activities, ultimately contributing to a more sustainable and resilient ecosystem.
