Data in the ESG world

Over the course of this project, I came to realize the importance of data-driven decision making, especially in the context of a fast-paced and high stakes environment. Our group’s project goal is to design and build a decision-making tool that can help our client - a fast-growing startup - to assess growth opportunities efficiently and intelligently. Through conversations with our client, it quickly became clear that the ability to evaluate opportunities effectively can lead to a competitive advantage. 

Startups operate in a world where time is scarce, resources are limited and the margin for error is slim. Decisions have to be made fast and there just isn’t any luxury of prolonged deliberation. The consequences of these decisions, however, can have a profound impact on the business. For our client, a B2B company with a promising mycelium technology for food manufacturers, evaluating growth opportunities is a complex task. Each potential partnership requires a web of considerations. It’s not just about whether a prospective partner is interested in the product but also about whether the opportunity makes sense from a technological, operational and regulatory point of view. All these factors influence whether or not a new growth opportunity is worth pursuing. This complexity is what motivated our team to create a tool that brings structure and clarity to their decision-making process. Our client can’t afford to evaluate each opportunity anew, as it would require too much of their valuable time and resources. What they need is a streamlined framework that breaks down complex decisions into more manageable parts. That is why we have decided to build a Multi Criteria Decision Analysis model on Excel. This model calculates an overall score of a growth opportunity, highlights red flags across categories and provides an automated summary report. Our client can simply put in the data and get a high-level assessment of the opportunity.

While building this tool on Excel, I thought about how many decisions we make in life. Some are bigger than others, but research suggests that an average adult makes around 33,000 decisions per day, with many more factors influencing these decisions. A lot of times, I would argue, we make biased decisions based on a gut feeling. Even if we try to stay objective, it seems to be part of our psychology to ignore one or more red flags when we get excited about an aspect in particular. This reminded me of a book I read a couple of years ago called Thinking, Fast and Slow by Daniel Kahneman. He divides decision making into two systems: the automatic, quick and intuitive System 1 and the deliberate, effortful and analytical System 2. He describes how, most of the time, humans make decisions in System 1, even if they believe to be in System 2. He talks about cognitive biases, overconfidence and his prospect theory and explains the difference between the experiencing self and the remembering self. It becomes clear that our choices are often not based on what we actually experience, but rather on how we remember those experiences. Our reality is inevitably shaped by the lens perception. According to Kahneman’s book, high-stakes decisions like negotiations, investments or career moves should be made in System 2 in order to avoid acting on instinct alone. While I am sure that certain decisions in life can only be made based on a gut feeling, business decisions shouldn’t. This is where a data-driven decision making tool like ours can really make a difference.