Looking to the future of ESG with digital transformation

Environmental, social and corporate governance (ESG), is gaining popularity across the business landscape. With the news headlines filled with updates from COP26, organisations across the globe are under pressure to show how they intend to hit climate change targets. Not only is it important for businesses to consider their impact on the environment, but they also need to adopt an active role in taking care of their employees and wider society. Implementing a thorough ESG framework helps to create value for a business by giving the corporate company a face and holding enterprises accountable for their promises and newfound responsibilities.

ESG is not a new notion, and has grown significantly from just a PR tactic. Consumers are no longer willing to support companies that don’t prioritise ESG best practices. In fact, a recent survey from IBM uncovered that the COVID-19 pandemic has heightened customers’ focus on sustainability and their willingness to invest in a sustainable future.

Whilst ESG factors are becoming key considerations in an organisation’s digital transformation, many companies are falling into the common pitfall of ‘greenwashing’, a term that describes a marketing spin in which green PR is deceptively used to persuade the public that the company’s products, aims and policies are environmentally friendly. Changing digitally and utilising technology to help with this transformation will offer businesses a lifeline.

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The role of technology

Disruptive technologies are increasingly being used across business sectors to reevaluate corporate models and create entirely new solutions that shape the way companies do business and measure their ESG impact. For example, IoT is on hand to help to provide a cost-effective solution to the collection and reporting of ESG data. Metrics can be measured and collated with precision using IoT sensors, including carbon footprint, energy efficiency, water quality or usage, and waste management. Not only does this technology ensure the data collected is accurate and streamlined but it also helps track a businesses performance across key environmental, social and governance factors.

From helping to provide transparency over carbon emissions to leveraging satellite images, artificial intelligence also allows companies to collect and analyse more information than ever before when accounting for ESG risks and opportunities. Many companies are beginning to develop an AI-driven model for ESG analysis to create a standardised framework based on appropriate criteria and present the findings in an easy and digestible manner.

Driving change from the top

It’s clear that technology plays a vital role in setting environmental, social and corporate governance goals. Whilst CEOs and chief sustainability officers are involved in setting these objectives, it’s up to the technology team to ensure that these goals are actioned correctly in line with the business’s digital transformation strategy. Technology leaders need to be involved in the planning process as they are responsible for weaving ESG factors into the company’s long-term digital strategies.

Furthermore, there are a number of quick wins that CTOs can implement to improve the organisation’s overall ESG. The first involves making workloads more efficient as this significantly reduces costs and energy requirements, ultimately reducing the carbon footprint on each employee’s workload. They can also consider deploying workloads to regions with lower carbon intensity. In terms of product roadmap planning, technology leaders need to consider the societal impact as there may be opportunities for differentiation to meet evolving expectations from customers in each region. Finally, reinforcing and demonstrating why diversity, equity and inclusion is critical within a technology team. CTOs need to understand their gaps and continually monitor for areas for improvement.

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Creating a culture for transformation

Whilst technology leaders are the driving force behind an organisation’s ESG initiatives, it’s also vital to get employees on board with the digital transformation project. Teams are more likely to adopt new environmental, social and corporate governance practices if they understand the bigger picture of the company’s vision. This requires a mindset shift and it’s up to CTOs to help employees grasp what they’re trying to accomplish, as well as explain what the benefits will be to the business, its customers and wider stakeholder base. It’s also important to remember that ESG and technology strategies are now intertwined in today’s marketplace, so highlighting how these digital tools will help implement the company’s strategy will foster greater employee buy-in.

Digital transformation is all about changing the legacy systems within a company. One of the biggest barriers to adopting new strategies, both broadly and from an ESG perspective, is a lack of knowledge. Employees may feel concerned that they don’t understand the new tools, such as AI or IoT, or that these technologies will disrupt the processes that they have developed or worked with for a period of time. With this in mind, businesses should invest in training to help employees understand what resources are available, how best to use them and what steps they need to take to make the most of them now and in the future.

Bridging ESG and digital transformation

Now is the time for companies and technology to come together in planning a sustainable future. Successful ESG implementation is based strongly on strategy and having planned methods to transform the business. It’s critical for CTOs in the organisation to drive and support the process of digitally transforming their organisation. These leaders will also be responsible for ensuring that the wider team are on the same page with the environmental, social and corporate governance initiatives.

Written by Anna Mleczko, senior marketing specialist at Future Processing

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