Data is the lifeblood of businesses.
Without it, making even the simplest decision would be a matter of guesswork. This data could be factual information (such as measurements or statistics), may be stored on paper or in someone’s head, to be used as a basis for reasoning or in digital form; or could be held in bits and bytes, ready for transmission and processing.
We all know the importance of accurate data in the successful deployment and use of any business system, and there is clear understanding of the need for cleansing and maintaining these core pieces of information. Financial balances and stock holdings are intrinsically dependent on data accuracy – ensuring that materials are only bought as needed, that product is sold for the correct price, and that revenue and expenditure are recognised correctly.
We also understand that we have a duty to maintain ethical records, protecting personal data and all that is required by GDPR regulations. So companies have created policies around the protection of employee records, customer data, banking information, etc.
But there is a third element to consider – data authenticity, where the data reported is genuine, true and trustworthy.
The business world is changing – the need for proven compliance is increasing, from regulators and other stakeholders. Therefore, companies are receiving more demands for information, with increasing complexity due to the number of data sources involved.
Taking ESG reporting as an example, historically, compliance has been lightly regulated, allowing companies to report with little in the way of benchmarking or validation. But this is now changing! ESG data will soon be looked at with more rigour and with a requirement for transparency.
Companies can establish transparency and trust by managing and reporting on their ESG data. This accountability also reassures investors, employees and customers that the company takes its responsibilities seriously.
Certain institutions such as retailers, banks, insurers and asset managers have been reporting their ESG metrics for several years, some of them mandatory under listing rules and others voluntarily under other reporting frameworks. This has been mainly focused on carbon measures and other environmental impacts, but ESG is expanding the scope, depth and validity of the information required, on an exponential scale.
However, there is still much controversy regarding reporting, due to weak regulatory oversight, subjective criteria and a lack of transparency. Hence the need for data authenticity.
Authentic data is trustworthy, quantitative or qualitative information collected from real-life events and transactions. By way of contrast, inauthentic data may be presented to demonstrate a particular pattern or result, by its manipulation, to force a specific result or interpretation. Authenticity requires that data is accurate and honest, in the spirit of which it is intended, reflecting the actions that are the origin of the results.
Data authentication is the process of confirming data’s origin and integrity. It consists of two elements – authenticating that the required data is coming from the correct entity and then validating the integrity of that data. Integrity can be seen as being true to required external principles, whereas authenticity, is additionally, about being true to what we believe in.
With advancing technology, tools to manipulate data are becoming easily available, both within the business and externally. Combining this with a lack of transparency over where the information (stored as data) is being held, it is more difficult to verify a claim and ultimately be able to reliably state that data is trustworthy.
Clearly, data can be altered maliciously, but the focus here is not about rogue employees or professional hackers. Instead, it is about providing data consumers with the confidence that the values provided are both accurate and robust. For data to be authentic it has to be provable that it hasn’t been corrupted since its creation. Any solution needs to ensure that the data is indeed what it portrays itself to be, meaning that no party has purposefully or accidentally changed what has been reported or documented.
Trust is essential
Returning to ESG requirements. Whilst the information continues to be collected directly by the companies themselves, who may have their own agenda, this may lead to some sort of bias. Reporting on figures that suit their purposes or by paying lip service to reporting requirements, whilst continuing to run the business their way – is not authentic!
In a continuously digitised and globalised world, trust has been increasingly hard to nurture and has fast become a threatened commodity. However, trust is the essential foundation on which all human contact and institutional interactions are based. It is a crucial value in international affairs and a complex interpersonal and organisational construct, embedded in all areas of society, from individuals’ relationships with each other to the global political system.
At its core, trust is centred on the reliability of an assertion about someone or something; an indisputable, verifiable claim being true.
Ethical businesses need to stand up and be counted!
If you want to know more about data authenticity, then please get in touch.