The Impact of Analytics on the Triple Bottom Line
The Analytics Impact Index (Aii) is a global benchmark to help executives understand their company’s relative analytics capabilities and impact.
In 2021, analytics maturity has held consistent with past years. There is room for improvement when it comes to use of analytics in the environmental, social, and governance (ESG) domain. The Analytics Impact Index (Aii) is a global benchmark to help executives understand their company’s relative analytics capabilities and impact. Launched in 2018, the Index is a collaboration between Melbourne Business School, one of the world’s top business schools, and Kearney, a leading global management consulting firm. The Aii provides an objective annual benchmark of return of analytics as a proportion of total profit. In our latest study, we widened the lens to also explore how analytics contributes to environmental, social, and governance (ESG) performance. Why? Pressures are mounting for companies to be accountable for far more than generating a profit. Increasingly, they are expected to deliver on a “triple bottom line” that also includes their social and environmental impacts.
A recent Kearney study has shown that in Australia, 37 percent of CEOs in the past five years (up from 10 percent in the previous five years) have moved on due to non-financial performance reasons. Environmental sustainability has become a key feature of many long-term strategies, as shareholders push organizations to address the ongoing threats of climate change (COP26), pollution, and biodiversity. In addition to financial performance, leaders today need to ask themselves: What is our overall effect on the planet, and how can we better support global ecosystems? How can we improve diversity, equity, and inclusion within our organization? How can we better report and manage risk?
Analytics, in conjunction with other Industry 4.0 technologies, is a core driver of present-day efforts to support all dimensions of the triple bottom line. With the right implementation of analytics and digital technologies, firms can enable new efficiencies throughout new production methods or an optimized supply chain. For example, companies can use data-based insights to assess supplier performance trends to then provide visibility into supplier gover[1]nance. Companies can also utilize analytics to optimize their distribution network, enabling them to minimize environmental impact caused by transportation.
In 2021, we assessed more than 330 companies and found that overall analytics maturity is declining, which is in contrast to previous years which saw steady increases, given the strong correlation between analytics maturity and profitability. However, we also found that analytics’ contributions to the ESG components of the triple bottom line are nascent. In this year’s Analytics Impact Index, along with the usual analyses of profit impact of analytics, we consider the value of addressing the triple bottom line through analytics and explore opportunities that organizations might pursue.