ThinkTWENTY20

By Gerald Trites, FCPA, FCA, CISA
Environmental, Social and Governance (ESG) Reporting has been in the spotlight for several years now. Although the terminology has largely moved to sustainability reporting, it still includes the Environmental, Social and Governmental elements. Much attention has been given to the environmental element and climate-related disclosures, but the others are important and still draw some attention from stakeholders. The social element is not widely understood, even though it has been part of the ESG disclosures from the beginning.

The Global Reporting Initiative (GRI), which has released the most comprehensive set of ESG standards so far, includes standards on Labor/Management Relations, Occupational Health and Safety, Training and Education, Diversity and Equal Opportunity, and Non-discrimination, among others with a social flavour.

These are important issues, and many of them relate to the issue of equality. It has been shown that inequality is at the root of most major social upheavals in history, as well as the social unrest currently evident in the US and some European countries. Thomas Piketty has focused on this issue effectively in his research, showing clearly how inequality has shown itself in the vast disparities in income among different groups, regions and countries, although as with anything else in current times, his work has been strongly politicized. Nevertheless, these issues of inequality must be dealt with, or eventually they will come back to bite us.

Inequality needs to be addressed by everyone, including individuals, governments, and companies, which brings us back to what companies can do about social issues.

It goes a lot further than disclosures, although ESG reporting is a start. It includes action on an ongoing basis. The concept of integrated reporting can be helpful. There is much talk in the Sustainability literature about integrated reporting needing integrated thinking, which integrates ESG into the ongoing strategy and management of an organization. This is a comprehensive idea, and, if fully thought through and implemented, can change the company and perhaps even the world.

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The predominant method of connecting with others to conduct business transactions is now through digital means. In most cases, the actual people connecting don’t know each other and are operating amid a complex web of technologies, many of which they do not understand. As with any business transaction, there must be a degree of trust in order for the transactions to take place successfully. And even for the business to remain viable.

The need for companies to address this situation strategically and operationally has led to the idea of Digital Trust. According to ISACA, “Digital trust is the confidence in the relationship and transactions among providers and consumers within an associated digital ecosystem. This includes the ability of people, organizations, process, information and technology to create and maintain a trustworthy digital world.”

It was stated in a recent ISACA survey (Available at https://www.isaca.org/digital-trust/state-of-digital-trust) that “the top three most important components of digital trust according to the survey respondents are security, data integrity and privacy, but only half (50 percent) of respondents agree that there is sufficient collaboration at their organization among professionals who work in these fields.” At the same time, “85 percent of respondents say that digital trust is extremely or very important to organizations today, and 63 percent say that digital trust is extremely or very relevant to their job role, only 66 percent say that their organization prioritizes digital trust in line with its level of importance.”

Clearly there is work to be done. It is generally agreed that the Directors and C-suite must drive the work. Then it must be carried out by a company wide network of people, including those responsible for security, data integrity and privacy. This in itself cuts across a broad swathe of company activity. But, as always, it’s important to note that digital trust must not be viewed as a technological activity but rather than one that must involve most elements of the organization.

Companies are generally taking the area of digital trust more seriously than in the past. Some take specific measures to measure their level of digital trust maturity, using outside reviews by experts and/or established security-based frameworks.

In this time of digital commerce, few business activities are more important.

According to Market Research Future, the value of the Web3 blockchain technology sector will exceed $6 trillion in 2023, and from 2023 to 2030, Web3 will expand at a CAGR of 44.6%.

It’s seems clear where Blockchain is on the hype cycle. We already went through the initial hype. Then for many, the collapse of cyber currencies this year has brought on a trough of disillusionment. However, after that we have in the Gartner Hype Cycle a period of enlightenment, which may be represented by the Web3 phenomenon as well as a host of other emerging applications of Blockchain. Finally, the new technology settles into a period of productivity, when the usefulness of it is established and it is used in a growing and vibrant new field. This also seems to be where Web3 is taking us.

The latest Newsletter from the Blockchain Council, available on linkedin, sets out the future of Web3 in more detail.