20: The intersection of ESG and data

Anna-Marie Slot:

Hello, and welcome to our latest episode in 30 for Net Zero 30. I'm Anna-Marie Slot, Global ESG and sustainability partner at Ashurst. And today we're joined in person by Suranjan Som who heads up banking and capital markets for Hitachi in Europe. It's an interesting title. Could you maybe today, give us a little background. What is Hitachi doing in banking and capital markets? What is your role there and how have you come to join Hitachi?

Suranjan Som:

Absolutely. So thank you very much for having me here today. Hitachi's been in the banking space for quite a while and we have a financial services business globally that's worth over $11 billion. And we are working in probably about top 44 of the top 50 banks in the world in that space. And my role is primarily to bring together the expertise of the wider Hitachi group and the expertise that we have within the technology functions of Hitachi and looking at how we can bring those two things together and help the banking industry out, whether it's around managing their internal systems and processes or optimising how they run their businesses today, make them more efficient from a point of view of managing their capital better, but also making them more sustainable going forward. So that's where I am today.

Anna-Marie:

Excellent. It's a really interesting space, right? Because you don't really think about all of the back office and everything that goes into being a bank. Right. But it's an organisation just like every other organisation. I know you and I spoke at COP up in Glasgow, what was not that many months ago, but feels like a really long time ago. Further, to that conversation, what are you seeing? Are you seeing a shift in people's conversations about sustainability? Are you seeing that coming into your interactions with your clients more often?

Suranjan:

Well, absolutely. Yes. And I would probably say there are several drivers to this, especially post COVID, sustainability has become a very important part of everyone's agenda. You're seeing chief sustainability officers being appointed in boards across the industry and especially within banking itself. And one of the reasons for that I would say is in terms of how the market's kind of been driven in this space, initially, you've had the global organisations, the global consortia, who's been looking at sustainability and how ESG can be driven. That's kind of almost pushed the governments to get into action. And some of them have.

Following on from the governments, then we're seeing several agencies of change. Now at the end of that spectrum, I would say, it's the consumer and the end user himself or herself who is saying, I will not buy this unless this is sustainable. Of course, that's probably the biggest driver there. But then also in the middle of this, I would say a big agency of change is the financial services institutions, which primarily the reason for them being important here is they're holding onto something which represents a lot of power in this overall equation. They hold onto the money that's driving the industries, that's driving the consumer behaviour and so on.

So if you look at how banking impacts sustainability today, on the one hand, they have a position where they're financing sustainable projects and sustainable initiatives at more favourable rates and favourable terms. On the other hand, they're also acting as that agency, which is attracting capital from investors who would like to invest in sustainable projects, in sustainable bonds and so on. So I would say because of that interesting position they have in that overall power equation within the economy, they can be a major driver to making organisations and corporations more sustainable going forward if they're not doing it by themselves anyway.

Anna-Marie:

Yeah. No, exactly. And it is that role of finance that I think really came out in COP in Glasgow in a way that maybe didn't come out in the previous COPs around what the finance sector and Glasgow Financial Alliance for Net Zero (GFANZ) and all of those initiatives, how does that deliver on the commitments that are being made by the governments and by businesses. Do you think, I mean, in light of that, you're talking to people every day around these issues. Is there a specific action, a specific thing that needs to happen here in the next kind of two to three years that you think to really accelerate delivery of the conversations that started and have been put out there in the world, but are at this point conversations?

Suranjan:

So one thing I would say, which is probably the weakest link right now in terms of being sustainable, or rather proving that you're sustainable is the availability of information and the availability of data. So if people can solve that weakest link, you'll have a much better view of where they are and where they need to be. If you can't measure it, you can't manage it as they say.

So Hitachi itself, for instance, has a number of initiatives out there in place, which is looking at how can we make this entire kind of lineage of information more transparent and trusted across not just within organisations, but across the value chain of the organisations. Whether you're a bank, whether you're a manufacturer, whether you are in the energy space, we are trying to put in place the right kind of, and I'll use the word infrastructure in the broader sense of the term, but the right kind of platforms in place so that they can ingest information around how they're using the well, how they're using energy, how they're controlling their emissions. How they're behaving with their supply chain, in terms of the suppliers, in terms of the vendors that they interact with. How do you pull all that information together, ensure that that information is not tamped with, and then be able to aggregate that information, view it in a easily understandable way. And also inform the rest of the value chain and their customers and other stakeholders that each organisation is doing the right thing in the right way and taking the right actions.

Anna-Marie:

Yeah. No, definitely. I think you have that problem, right? You have too much data and you have not enough data. And then you have the integrity of being able to interpret what it is that you can say off of what you have. And I think that's where Hitachi's technology side is really fascinating in terms of how you are looking at that challenge.

Suranjan:

Absolutely. And as they say, one should drink one's own champagne, and I'm not going to kind of go into other ways of describing that. But yeah, I mean, at Hitachi ourselves, we represent a conglomerate of 900 different companies and we ourselves have a pledge to be net zero by 2030. And we also have a pledge to be able to be net zero for the entire value chain that we're operating in by 2050. That's obviously a massively tall claim to make, but in order for us to kind of achieve that, some of the things that we are talking about to our customers, we're actually implementing some of those things ourselves within our group companies. So, yeah, we were trying to lead by example and put these things into practice and practical implementation.

Anna-Marie:

Yeah, yeah, yeah. And I think having both those sides is really useful, right, for when you talk to your clients about that, because you understand how difficult it is. I mean, to have a net zero commitment is good and that we should all be there, but then to deliver on the data behind where you are and where you need to be going, I think is a challenge that a lot of companies are trying to face to figure out, where do I even start on that?

Suranjan:

Absolutely. So whether you're looking internally within an organisation where people are trying to, let's say decarbonize their data centres, which is a very interesting problem solve, and we're doing a lot of stuff in that space, but also more mundane things like monitoring your energy usage and ensuring that you're using more renewable energy than kind of other forms of energy and so on, kind of looking at it internally. But then also, integrating external information, especially if you're a bank and or if you're an asset manager who's issuing green bonds, figuring out the ESG metrics associated with all the constituents of those bonds. Problem is as you said, it's more of a problem of too much data out there because now you've got dozens of data providers who can actually provide you information about those constituent, those companies or organisations for whom you're holding positions, but then each of them are collecting thousands of different metrics and using lots of different methodologies to kind of calculate those metrics as well.

So being able to kind of integrate all of that together, harmonise that information, being able to come up with a consistent way of measuring the information, that itself is a challenge. And yeah, and again, we have our teams in Japan kind of focusing on that space, along with some of our developing, we call them developing partners or co-creation partners within the banking space. But yeah, again, it's not a journey that we have completed. It's a journey we're on. And again, I think the rest of the industry is kind of moving in that direction as well.

Anna-Marie:

So yeah, so data, I think is where, especially the skillset with your background, with Hitachi's background, I think it is that pain point right now for clients understanding what data they need, how to get to it. I know you're working with people all the time. Could you just kind of walk us through maybe on a no name's basis, some of the experiences that you've had with clients around those challenges?

Suranjan:

Yeah. So if you think of Hitachi's expertise in data, we are probably one of the few organisations in the world where data is in our DNA. So that's all the way from us building storage solutions for data, so literally hardware on which you store data to software solutions that allow you to manage that information, manage the data, bring it in together, integrate that, create data models that allow you to analyse that information in a much easier way. And then be able to visualise that information, especially for business audiences or other stakeholders who are not necessarily technical, for them to be able to easily visualise and analyse information from a single pane of glass. That's what we do very well. And then of course, when we overlay that with our services capabilities, our experience of actually helping customers in this space, that kind of takes you through that entire value chain of managing data.

So from our core consulting and delivery perspective, we have individuals who are working closely with our customers, understanding what their data requirements are. So, especially in a sustainability related scenario, it's sitting down with the stakeholders within our customers, understanding what their data requirements are, understanding where that information comes from, what kind of additional information needs to be gathered. Because as I mentioned just a little while ago, there could be lots of internal information you might need to capture around picking up information from sensors. Some of those sensors might not actually even be in place. So putting those sensors in, in the first place, capturing that information and bringing it all together. But also sometimes it's about bringing in external information because someone's already done the hard work and figured out what, and just as an example, what Coca-Cola's ESG rankings are and how they break down into individual specific data points.

So there is a task out there of being able to pull in that information from external data providers, building interfaces to such organisations and just to name a few, you've got Bloomberg out there, Thomson Reuters out there, Refinitiv out there and so on. And of course, MSCI and GRN and so on. So being able to build those interfaces, pull that information together from those places. And then once you've got all of that together, as I've just mentioned a while back, it's also about adding the context of the organisation on top of that data, because that data by itself doesn't actually mean much until you've actually brought it in and integrated it with the context of what it means within your organisation. And what it means to measure that information within your organisation, as well as within your peers and benchmarking that information.

And then of course, as I said, it's also about consuming that information in a way that's easily understandable, that's available at the right time to the right people with the right information. So it, and this is what we would do with most of our customers, especially in this sustainability space. We would take them through that entire end to end journey of ingesting information, assimilating that information, and consuming that information so that they can take the right decisions towards a sustainable future.

Anna-Marie:

And I think that, I mean, the key there, right, is for each company is to really think about what's material in that company, right? Because those determinants will be different. And so you could spend your life tracking data, but what you really need is actionable, useful data that you can do something with. And that is material to the operations of what you're doing, which is, I think, where a lot of companies just say, oh, this is this gigantic universe of E, S, and G. I don't even know where to start. But I think it is really that focus on trying to figure out, okay, what do I know, what's important to me? And then how do I go and take what I know in a way and make it digestible and useful and actionable. So I always ask everybody, this is your work world, how about your home space? What are you doing yourself around any kind of commitments to net zero? Are you changing any behaviour patterns in your own life?

Suranjan:

I'm definitely trying to. So myself moved over to a hybrid vehicle in the last six months, didn't go fully electric as yet, because I still need to be fully convinced about the range anxiety issues that fully electric vehicles give you, but gone far enough, but in the next six months or maybe in the next year or so, we might go fully electric as well. Looking at installing solar panels at my place, travelling more by kind of energy efficient means of transport as, and when practical and possible. And especially if you're living in London, you're on public transport most of the time, which is especially the tube, is probably one of the most nonpolluting forms of transport that you can find. So trying to do all of those things. Trying to switch off your devices and especially your light at home, if you're not using it. Wear warm clothes at home instead of turning the heating on unnecessarily. So yeah. Trying to do as much as we can at a personal level.

Anna-Marie:

No. Excellent, excellent. The aggregation of lots of different things, small things together still becomes big. Great. So I guess as a final takeaway, if you could get people listening to have one action or to think about one thing, either in their work life, kind of questions to ask internally as they're looking at their own company, or other than that, can be anything whatsoever, what would be your kind of key takeaway for people?

Suranjan:

So, one thing I would say is whenever you're doing something, whether you're buying something or using something, one should think of the impact that has on your environment around you. Something that I would always say, and used to say this kind of 10, 15 years ago, but probably is much more relevant now than ever is we should all remember that we didn't inherit this world from our ancestors. We actually borrowed it from our children and grandchildren. So we should do everything to make sure that it carries on and it sustains.

Anna-Marie:

Yeah. Excellent. An excellent frame to think about as people walk away from this session. So thank you so much for your time today. Really enjoyed having you on this 20th episode of our 30 for Net Zero 30. So looking forward to 10 more and thanks for your time.

Suranjan:

Thank you, Anna-Marie. Thank you very much for inviting me here today.