The Tech of ESG

Sustainability and ESG (Environmental, social, and corporate governance) have become critical components of business strategy as we move into the post-pandemic era. “As climate change action becomes increasingly urgent, it’s no surprise that investment in cleantech is soaring. However, the level of growth is still remarkable,” says Adam Simmonds, investment research analyst at GovGrant.

Also, research from ABN AMRO, which focuses on smaller enterprises, suggests investing in sustainability technology is advantageous, with an average 11% increase in ESG performance that reduces risk by 3.5%. However, the study’s author, Professor David Veredas, concluded: “The biggest obstacle for SMEs to invest in improving sustainability is capital. This situation is more prominent among less resilient SMEs with high credit risk and has resulted in greenwashing, whereby companies share disinformation regarding their ESG practices.”

Businesses are looking to technology to help them better understand how ESG can be supported across their organisations. The latest Tech Trends report from Deloitte makes this abundantly clear.

Nick Smith, a Deloitte technology strategy and transformation partner, explains: “Over the next 18 to 24 months, we see automation as key to enhancing operations and empowering teams to overcome challenges. With this in mind, technology leaders are responsible for delivering inclusive experiences and achieving important sustainability goals.”   

And business leaders are also re-evaluating business processes with IBM (for Celonis), finding that more than half (53%) of surveyed CSCOs (Chief Supply Chain Officers) say their digital supply chain transformation will be the most significant area of competitive advantage in the next three years. Nearly three-fourths (74%) of surveyed CSCOs say hybrid cloud integration is crucial to accelerating and enabling the digital transformation of supply chains, also recognising the critical role that hybrid cloud, AI, process mining and execution management play in helping them overcome the disruptions they’ve faced over the last two years.

“The  Confluence of post-COVID-19 challenges, inflation and supply issues, security, and sustainability has led to the most complex operating environment in modern business. This has forced organisations to rethink and rebuild their supply chains to be more agile, efficient, and sustainable,” said Jonathan Wright, managing partner, Finance and Supply Chain Transformation, IBM Consulting. “Technology and data-fueled automation and intelligence are key to not only evaluate current workflows and inefficiencies, but in identifying new opportunities as well.

Cleantech expansion

UK companies now attract 18% of Europe’s total investment in cleantech. With over half of the total investment in cleantech going to energy-related companies, the UK is a key driver for the future of global environmental and sustainable energy sources.

A recent report has revealed the UK to be a leading nation in cleantech, in a year that was a record-high year for investment in cleantech globally. £134 billion was injected into the sector in 2021 – 4.4% higher than the previous record year of 2018.

Nick Jackson, finance transformation leader at Oracle, also stated: “It’s time to turn climate ambitions into action, and technology can aid human efforts in helping businesses become more sustainable. According to Oracle’s No Planet B study, 3-in-4 (76%) UK respondents believe businesses would make more progress towards sustainability with the help of AI. Almost half (47%) believe bots will succeed where businesses have failed with sustainability and societal goals. Humans and machines must collaborate in harmony when implementing successful ESG initiatives.”

Jason Knights, MD of Ground Control, also asks: “I think the biggest problem when using technology is understanding where to start – the raft of technologies being directed toward delivering sustainability strategies is complex and ranges from smart meters to satellite communications, and everything in between. The ESG strategy of one business might also be very different from another due to how they operate, and so it’s also important to be focused on the most important issues facing that business. Is this really reducing the businesses direct Scope 1 carbon emissions? Or should they focus on Scope 3 emissions such as employee transport or the use of products from suppliers, that often make up a greater proportion of emissions?”

And Alex Smith, co-founder and partner of The Sustainability Group and FuturePlus, tells Silicon UK that investment and consumer demand are now the key drivers for change: “ESG factors in every way. As businesses return, finding that the capital they need depends on a solid commitment to ESG and sustainable growth. Venture capital and private equity funds insist that ESG is built into corporate strategies and not just peripheral to mainstream business considerations.”

Sustainable futures

It is also clear to businesses that communicating their ESG credentials is vital. According to Amido research, environmentally responsible brands have an increasingly competitive edge, with 70% of UK consumers assessing sustainability before purchasing. “Sustainability continues to play an increasing role in purchasing decisions, as consumers seek to do their bit by buying from socially responsible brands,” comments Steve Jones, engagement director at Amido.

Gen Z (38%) and millennials (35%) are more focused on retailers having a responsible or sustainable approach to the technology they use in comparison to those aged over 55 (27%). In contrast, over 55s see sustainable manufacturing and packaging (44%) as more of a concern than the younger age groups (35%).

In addition, under a fifth (15%) of Brits say they would be happy to part with personal data if this were to offset waste potentially incurred alongside their purchases, regardless of what this could entail, rising to almost a quarter (23%) of millennials. This suggests that despite the improved understanding and protection consumers may hold over their data, many would still be willing to trade it if it would lead to an associated sustainable benefit.

Jones concluded: “Organisations now have the opportunity to assess what changes they can make to contribute towards a more sustainable planet, whether that involves adapting manufacturing processes, improving supply chain efficiency, or switching to more sustainable tech. Those that are successful will reap the rewards through nurtured customer loyalty, increased sales, and the satisfaction of bringing meaningful change to the world.”

Also, The Sustainability Group’s Alex Smith commented: “The Edelman Trust Barometer 2022 shows that the public believes businesses are not doing enough to address societal problems related to climate change, economic inequality, workforce reskilling and more. We know that people are willing to pay more for brands that are doing the right thing. Consumers and investors such as BlackRock and NSW demand that organisations be accountable if they wish to receive finance in the future.”

Smith concluded: “But we must understand that ESG can be a minefield to communicate, therefore organisations and brands have to make their sustainability achievements and ambitions as clear, concise and easy to understand as possible. If we want to positively impact our environment, climate, society, and address diversity, then we need tools like ours that can make this achievable in an affordable and accessible way.”

And Christy Kulasingam, business strategist and Founder of Radbourne Consulting, concludes: “The skeleton key that unlocks most ESG strategies is data. High-quality data, analytics, and reporting are key. This is not always possible with legacy systems or piecemeal historical reporting. Data powers maturity and materiality assessments, reporting on sustainability goals, and key performance indicators that help track and adjust business strategies.”

COP26 threw a spotlight onto many businesses’ environmental credentials or lack thereof. In its wake, enterprise leaders are re-focusing on how ESG can be supported and the digital tools that will allow them to achieve their goals.

Bob Bailkoski, CEO, Logicalis.

How critical is a strategic approach to sustainability to post-pandemic business success?

“ESG and sustainability took a backseat during the pandemic, with business leaders consumed by ensuring their businesses could survive remote working and lockdowns. However, as we look to the future and at post-pandemic business, environmental and economic resiliency are non-negotiable.

“There has been a noticeable shift in attitudes towards ESG, and business leaders are beginning to see that sustainability must be thought about from a strategic perspective. A 2022 CEO survey from EY found that 82% of respondents now view ESG as a core value driver for their business. At Logicalis, we are focusing tremendously on ESG this year and aiming to be carbon neutral by 2025.

“Undoubtedly, placing sustainability at the core of business values will ensure enterprises attract and retain top talent, cement stakeholder trust, and boost innovation. If strategically planned, businesses will reap these benefits alongside making a genuine difference to the environment.”

What are the challenges business leaders face in developing an integrated sustainability plan?

“Although many business leaders understand the need to measure the ESG impact on their business and customers, many find it challenging to implement the appropriate actions. According to Deloitte’s 2022 CxO Sustainability Report, 30% of CxOs said one of their top obstacles to driving sustainable efforts was difficulty measuring environmental impact. In addition, developing an integrated sustainability plan is impossible without a clear direction and set goals.

“Thinking about initiatives from an outcome-orientated approach is vital to sustainability success. Establishing sustainability benchmarks will guide business leaders to the actions they need to take to reduce their business’ impact on the environment or be able to guide their customers through that same journey.

“Finally, a person dedicated to progressing and developing a sustainability strategy and related initiatives has been vital.”

Is visible ESG now a critical commercial imperative and a marketplace differentiator?

“Customers and prospective employees are looking to join businesses that care about them and the socio-economic issues that plague the world. But, having visible ESG strategies is just the first step. Next, leaders must integrate those philosophies into the core of the business and ensure it is threaded through every facet of their operation. This increases the likelihood of attracting and retaining top talent, being at the forefront of innovation and building trust with customers and partners. Once this has been achieved, the focus can be placed on commercial gain.  

“A key sustainability target for Logicalis is to significantly reduce our carbon emissions and environmental impact in recognition of our role as a responsible business and our imperative to do the right thing. Alongside this, we are also investing in solutions that will enable our customers to gain visibility and reduce their carbon impact.”

Can any tools help businesses create and deploy their sustainability strategy?

“Interestingly, we are spending much time on this at the moment. But, of course, Cloud-based solutions allow for better resource efficiency and optimal energy usage due to the easy scalability of available technology. By taking advantage of their cloud-based infrastructure, businesses can reduce hardware and increase the energy efficiency of their IT and workplace services. This digitalisation and dematerialisation of a business’s core IT solutions will measurably reduce its carbon footprint and allow technology to become a pivotal contributor to sustainability initiatives.

“At Logicalis, we are taking things to the next level for our customers by building a sustainability impact measure into each of our global managed services, the same digital platform that delivers a service score to customers on their user experience, security posture, etc. can now also provide a clear metric of the carbon impact, and even more importantly, it will provide recommendations to reduce this over time.”

How important has data become to developing and maintaining a high level of sustainability?

“Data and subsequent insights are what will drive change. Being able to identify problem areas and target high-impact sustainability initiatives will provide an added level of credibility to businesses and enable them to demonstrate progress. Data can also be vital to monitor for gaps in ESG strategies over time and allow businesses to work to fill these.  This also makes maintaining high standards easier, as businesses need to make limited amendments, usually when the business grows or is forced to adapt to other external factors.”

For tech companies, in particular, their sustainability credentials under scrutiny by their customers because of e-waste and product recyclability?

“Yes. E-waste is one of the most significant environmental problems the world is facing now, and tech companies are the ones who can make the most crucial difference in tackling the impact e-waste has.

“Quantifying and understanding a business’s e-waste stream along with its associated costs is the best starting point. Once this is established, tech companies can map out the best strategies to reduce, reuse or recycle their products. Initiatives such as the Right to Repair can help reduce a business’s e-waste by extending the longevity of their products. For tech companies, it is imperative that they take ownership of their e-waste and initiate methods such as company recycling to combat the problem. the problem.”

How has the pandemic shown businesses that sustainable supply chains are the foundation onto which the future of their enterprises will be built?

“The pandemic spurred many businesses into making their supply chains more sustainable instead of just falling back onto the basics of supply and demand. Results from the Sustainable Procurement Barometer found that most firms remained committed to integrating sustainability into their supply chains or even increasing that commitment despite their challenges in the pandemic.

“These sustainable supply chains help companies improve their resilience as well as reduce risk. This is largely because companies who consider suppliers’ issues such as their environmental impact and records on human and labour rights are fundamentally doing something for the common good. This mitigation of risk is what builds a strong foundation for enterprises to thrive.”

Are there any sustainability trends you can identify that will impact businesses?

“The trend that we see more frequently is customer-driven concerns around the environment. Business leaders are more concerned about their impact on the planet than ever, and these concerns extend to if their technology is either contributing to or offsetting carbon emissions. 

“This proactivity and heightened awareness of the environment is pushing change and causing businesses to take note of their impact on the globe. However, simply supporting ESG and sustainability initiatives is no longer enough; leaders must demonstrate that they are making conscious strides to lower emissions.

“We are at a stage where action needs to be taken. It is too late for just words; businesses need plans to lower emissions and reduce their impact on the environment. As business leaders, we need to rethink modern responsible business practices and work with partners and customers to make these a reality.”