"Saving the Earth" should be a priority
Climate change will make Earth uninhabitable if emissions of greenhouse gases continue to rise at their current rate. Due to global warming, extreme weather events like droughts, hurricanes, floods, and wildfires are becoming more common and destructive. In light of the climate crisis and the growing importance of diversity, inclusion, and equality in the organization-businesses, regulators, investors, and other stakeholders are focusing on ESG (environmental, social, and governance).
A well-developed and purposeful ESG program can help an organization shape its future environmental and social impact, positively affecting the community and the company. So, how ESG is evaluated?
Setting environmental goals is the first step in greening your operations. These objectives will serve as a beacon as you make purchasing choices and look for new ways to reduce waste. When viewed through the lens of social impact, it is possible to design a program that does good for the community in the short and long term while fostering diversity and improving employees' health.
Lastly, if you have a good governance structure, you can increase diversity on your board, enhance your company's ethics, be more open with your stakeholders, and keep your most private data safe.
Not just that, investors evaluate a company's success based on factors beyond quarterly profits these days- So; environmental, social, and governance (ESG) metrics are growing as businesses realize the importance of long-term value creation for all stakeholders.
This significance of ESG has made many chief information officers (CIOs) include the development of sustainable IT as a central plank of their digital transformation strategies in response to directives from their boards of directors and chief executive officers (CEOs) and a special budget is maintained for it.
In 2020, Gartner conducted a comprehensive survey on this topic. Among the many findings, they revealed that it was expected that sustainable investment growth would increase by an average of 5.7% over the next three years.
Why Corporate Need ESG
It is impossible to separate environmental, social, and governance (ESG) factors from a company's bottom line. The term ESG is used to identify issues traditionally associated with sustainability or corporate responsibility, with a particular emphasis on the environment and broader society. Recent studies show that companies that excel in all three ESG factors outperform the market and create long-term value. And that's why businesses are taking a lot of initiatives to become carbon neutral, verify e-waste and focus on energy conservation, employee health and safety, and much more.
Additionally, ESG reporting allows organizations to be held accountable for their actions and foster positive change that aligns with frameworks like the United Nations' Sustainable Development Goals. A solid ESG performance has been shown to help corporates maintain stability through difficult times--attracting clients and stakeholders.
ESG is a big deal, especially in the manufacturing sector, here is why?
Importance of ESG on Industries
A recent analysis of industries with high average ESG Risk Ratings has identified the below five industries that require full-fledged planning on ESG.
1. Industrial conglomerate
3. Oil and Gas producers
4. Precious metals &
5. Diversified metals
The ESG risk rating of these industries are defined as MEIs (material ESG issues). Let's look at the key MEIs of these industries.
- Business Ethics: Legal or ethical misconduct can harm a company's finances and reputation, affecting its operations and market presence. Organizations need an ethical culture supported by programs, procedures, and governance to avoid these adverse outcomes to overcome.
- Carbon: Companies must manage their carbon risk, adopt low-carbon business models, or face increased regulatory and operational costs. So, heavy emitters use net-zero and science-based GHG emissions reduction targets to reduce their carbon impact and risks.
- Community Relations: Maintaining a company's social license to operate requires open and transparent community relations. Companies are under pressure to reduce their environmental impacts and support sustainable local development, as poor community relations can fuel opposition, interrupt production, and cost money.
- Emissions, effluents, and waste remain a concern across sectors and stakeholder groups, especially with stronger, broader regulations and greater enforcement. Companies must manage emissions, effluents, and debris to avoid pollution penalties.
- Health and Safety: Maintaining a safe and healthy work environment is vital for any company, whether its employees are stocking shelves, helping patients, or operating heavy machinery. Businesses must manage the elements of workplace health and safety they can control to minimize disruptions.
- Governance: Companies must ensure the quality and safety of their products and services and manage client responsibilities. They risk reputational, legal, and regulatory risks if they don't.
- Resources: Many industries use water as a resource. Responsible water use is essential for water-intensive industries' operations and stakeholder relations. Overextraction of freshwater resources can cause displacement and lead to regional and international conflict.
As you notice here, there are innumerable factors to evaluate a company's ESG, which is why it becomes a consequential responsibility of a CIO to adhere to sustainability objectives for a company in the face of the rising concerns mentioned above. This implores the fundamental question of how it could be attained. The answer is technology!
Technology for ESG
Leaders see technology as a way to address the challenges to accomplishing ESG, with about 89% of CEOs thinking their companies will thrive long-term if they use technology to drive sustainability.
Here are a few highlighted technologies that can ease your ESG track.
1. Green software
Green software, also called sustainable software, limits energy consumption and has a minimal environmental impact. Green software engineering considers software architecture, hardware, electricity markets, and climate change to reduce a company's carbon footprint.
Here is how green software development can aid in sustainability.
Developers can create user-friendly software with low carbon emissions.
Software components that have a low energy footprint are used in energy-saving applications.
Intensity measures carbon emissions per kilowatt-hour of electricity used. Companies should use as much renewable, low-carbon electricity as possible.
When companies develop and dispose of electronics, they release embodied carbon. This principle requires companies to build software that reduces carbon emissions from acquiring and disposing of electronic devices.
Energy proportionality is the relationship between a device's use and electricity consumption. A device's electricity conversion improves with use. This principle ensures high hardware utilization to maximize energy efficiency.
Data is sent and received across routers, switches, and servers. Each device uses electricity and contains carbon. Reducing the data size and network distance will reduce carbon emissions and increase software energy efficiency.
This involves shifting computing power demand to another time or region to match supply.
Optimization and measurement
Implementing long-term, consistent optimization strategies can boost software carbon efficiency.
Microsoft, Thoughtworks, Accenture, and GitHub, along with the Joint Development Foundation Projects LLC and The Linux Foundation, founded the Green Software Foundation in May 2021. This nonprofit organization aims to develop a network of "people, standards, tools, and best practices for green software." Most recently, VMware joined the Green Software Foundation in January 2022, and it is increasing the use of energy-efficient IT infrastructure to reduce the total amount of greenhouse gas emissions.
2. Artificial Intelligence
Machine learning can help with challenges, especially integrating ESG data into stable, comprehensive databases. Advances in natural language processing (NLP), deep learning, and machine learning ensemble techniques can make it possible to combine similar fields from different datasets, reducing noise while keeping most of the information and value. Given the large amount of unstructured data that is available on public companies over long periods and every day, it is possible to mine industry publications, regulatory filings, news, government studies, and social media to create a score for each of the ESG factors for a wide range of U.S. companies.
In addition, companies are investing heavily in technologies that will improve their ESG metrics. The IoT, AI, and machine learning (ML) have the potential to revolutionize ESG reporting in the future by automating manual processes and reducing the cost of complying with stakeholders. AI with metadata capabilities can read documents, analyze critical words, and save relevant data for reporting. Automation like this saves time and money while preserving the accuracy of reported ESG data.
How to achieve sustainability in IT -Advice for CIOs
Already, innovative CIOs are taking the lead with a new approach that synchronizes business with a digital transition to improve sustainability in IT. Here's a game plan to help you improve or start your IT's long-term viability despite the obstacles you'll inevitably encounter in developing more environmentally friendly procedures to achieve your ESG goals.
Once you have decided to consider the implementation of ESG into your business and are ready for the investments in technology and resources for it, follow these steps.
1. Find a competent head of sustainability
The IT department probably hasn't taken the helm of the sustainability strategy, but they have collaborated with the sustainability group. The IT department must prioritize sustainability by hiring a manager who understands the interplay between environmental responsibility and technological innovation. The ideal leader will serve as a conduit between the company's business operations and its information technology department, communicating IT's vision for how it can aid the company's efforts to become more sustainable and win over the business.
2. Examine your operational data
According to 56% of your peers polled by Forrester Consulting, the lack of in-house capabilities to measure, manage, or analyze sustainability data is a significant barrier to implementing carbon neutrality plans. And why does it even matter? To know this, you need to analyze operational data:
1. How many systems are you running on-premises?
2. For what period must these systems be used before they become obsolete and must be retired?
3. When turning off computers, servers, and storage arrays, what steps can be taken to lessen the environmental impact?
Like this, you can examine your data to arrive at conclusions that can help your ESG path more easily.
Numerous CIOs will attest that comparing and contrasting these metrics is a top priority. This benchmarking can be aided by working with the right technology partner.
3. Audit your supply chain
Making sure your IT supply chain is flexible and reliable isn't enough. It is essential to take a fresh look at the role that supply chain partners play in the success or failure of your sustainability initiatives. Check for these:
1. Are you working with suppliers who prioritize environmental responsibility in their business plans?
2. And are they planning for a future with zero carbon emissions?
Be sure you get proof of your audit—for which you'll need a high level of precision.
4. Fuse human and machine intelligence
Combining ML and AI allows CIOs to generate novel approaches to old problems. For example, predictive intelligence can foretell how a user's decisions will play out, allowing for more thoughtful deliberation.
With these new features, CIOs have more power. Most of the time, vital information is confidential as unstructured documents, flat files, or even manual reports. Artificial intelligence speeds up the processes of data ingestion, extraction, and classification. In addition, it helps us alter our habits by providing us with nudges in the right places at just the correct times, a skill we've honed to perfection in e-commerce. However, a human-in-the-loop approach is recommended to achieve optimal results with artificial intelligence.
5. Find a reliable partner
CIOs can't be expected to be experts in every field, so it's crucial to partner with a firm with both technical prowess and a serious commitment to environmental responsibility. People who know you well concur. Forrester Consulting found that 71 % of IT decision-makers agree they need a partner to help them reach their sustainability goals. The majority of businesses, for instance, require assistance with the environmentally responsible disposal of outdated, inefficient data center hardware. Thus, with the right collaborator, you'll get the information you need to confidently form and carry out your green initiatives.
6. Use ‘as-a-Service’ model
Most CIOs at organizations of any size deal with a great deal of complexity daily. They may have a few hundred or a few thousand software containers and applications running in a hybrid or multi-cloud environment. Consequently, businesses need to ask: how can we make our strategy more long-term?
Companies should begin by working to improve their infrastructure located on-site as their priority. In addition, they shouldn't build and use any additional infrastructure required to do the job. As a direct consequence of optimization, the machinery in the data center consumes less power. Businesses can also use subscription services and as-a-Service models for investments made on-premises. Service within the APEX portfolio offers such a service, allowing you to deploy infrastructure on-demand to private and public clouds, colocation facilities, and the edge – keeping data secure to ensure compliance and governance.
By switching to ‘as-a-Service’ model, you can right-size your infrastructure to devote more time and resources to achieving your goals rather than maintaining the underlying systems. It's a greener way to manage your company that could reduce wasteful energy use and electronic gadgets.
Do you know?
According to a survey by Forrester Consulting, over half of IaaS adopters anticipate their businesses will save money by 10% on adopting an as-a-Service model.
7. Develop a sustainable business framework
Top companies have a detailed strategy for cutting their carbon footprint. They are also spreading the word about this goal throughout the organization, as both steps are necessary to bring about the change. To make sustainability a prominent part of the business, as CIO, it is up to you to ensure that the program's goals are reasonable and applicable to the company's industry.
Time to transform
As you see, sustainability goals are no longer voluntary. Blending multiple technologies into one functional whole is the key to its success. Making environmentally responsible business practices a company-wide priority has never been easier than with the help of artificial intelligence, data-driven analysis and optimization, and built technologies like green software. Along with these technologies, blockchain enables trusted and standardized ESG data collection and reporting-helping investors verify quality, labor, and environmental certifications in real-time. This ultimately makes investors evaluate a company's ESG effortlessly and peek at its impact holistically- including the ecosystem of suppliers, subcontractors, distributors, and service providers and can be set to the same standard of transparency and audibility.
ESG parameters stand in for the quality and impact of a company's interactions with its various stakeholders within a complex ecological system in which the business operates. It's time for you, as chief information officers, to lead a company-wide transformation to capitalize on emerging technologies and create innovative answers to pressing ESG issues.