This article was co-authored by Katherine Kennedy, an Associate at Metis Strategy
Commitments to environmental, social, and governance (ESG) initiatives are table stakes for organizations today. Whether pledging to go carbon neutral, reevaluating supplier sustainability requirements, or enacting diversity, equity, and inclusion (DEI) initiatives, among other undertakings, following through on these promises can have real impact on a business’ future. A 2021 study by PwC’s Consumer Intelligence Series found that more than three-quarters of consumers and employees are more likely to buy from and/or work for a company that stands up for ESG issues, and 76% of consumers would discontinue relations with companies that treat employees, communities, and the environment poorly.
The ability to provide transparent, data-driven insights and measure progress toward ESG commitments makes the technology leader critical to the success of any ESG strategy. CIOs have a growing opportunity to set the tone for their organizations and play a fundamental part in defining ESG strategy enterprise-wide and adopting sustainability into their own digital transformation initiatives. Given the breadth of these initiatives, however, many leaders often don’t know where to start. The recommendations below can serve as useful first steps.
Step 1: Identify enterprise ESG goals that IT can deliver through digital transformation
Before evaluating how your digital transformation initiatives can drive ESG outcomes, it is important to first identify and understand the primary ESG goals at the enterprise level. Some organizations have established and communicated these goals to stakeholders, while others have goals that are loosely defined at best. After understanding the current state, think about which goals the technology function can drive. Common technology-led ESG goals include:
- Environmental: Lowering emissions using a combination of IoT, remote monitoring, and artificial intelligence and machine learning
- Social: Supporting DEI by establishing talent and supplier diversity programs and investing in solutions that promote health and well being
- Governance: Bolstering data security, maintaining regulatory compliance, and standardizing ESG reporting across the organization
Step 2: Weave ESG into the fabric of your digital strategy
With an understanding of enterprise ESG goals and ideas about where technology can play a role, it’s now time to align those goals with the organization’s digital roadmap. Doing so can ensure that the organization is driving the desired agility from its transformation program while simultaneously propelling ESG initiatives. Our clients typically look across four focus areas:
Digitized operations, experiences, and products
Digitizing operations, experiences, and products will not only save time and money, but also increase speed to insight by breaking down silos and making critical data more accessible. As part of the digitization process, technology organizations can enable the measuring and tracking of ESG metrics such as energy consumption, greenhouse gas emissions, and water usage.
For example, a client in the oil and gas sector recently equipped their U.S. production assets with sensors to generate digitized methane detection data and indicate methane leaks, allowing them to improve safety measures onsite and lower emissions. Across ESG initiatives, IT leaders can find areas to selectively deploy digital technologies like IoT devices to enable efficient, automated data collection and standard reporting.
Smarter operations through integrated data and analytics
The insights generated from the abundance of accessible data can become the foundation for advanced analytics like AI/ML, which in turn can generate data-driven predictions and recommendations that improve as the data volume expands. Analytics can be particularly useful to organizations as they look to partner with sustainability-minded suppliers and optimize supply chains. The ability to predict potential manufacturing flaws or upcoming supply issues will help technology leaders to more proactively fulfill requirements on environmental impact, safe working conditions, and product quality.
Create dedicated data privacy and security teams
Executing a successful digital strategy requires having the right people with the right skills working together across BUs and functions. Organizing resources into cross-functional, product-oriented teams can foster the agility needed to respond to changing customer needs while delivering value quickly by accelerating feedback loops and enhancements.
Product teams can further governance initiatives, particularly those that address heightened customer expectations for data privacy and security. Building a team of resources within your operating model dedicated to improving how employee and customer data is accessed, stored, and handled will credential your organization with your customers and increase their confidence in your ability to maintain their privacy and safeguard their personal data.
Cloud migration and enterprise architecture
As organizations revisit enterprise architecture as part of their digital transformation objectives, moving on-premise workloads to the cloud can boost speed and agility while simultaneously helping to achieve ESG goals.
By optimizing the use of fewer, highly utilized data servers, public cloud data centers use significantly less energy than private data centers, making migration to the cloud a much more environmentally friendly option. According to modeling performed by 451 Research, “moving applications from on-premise enterprise infrastructure to cloud services can potentially reduce the IT energy footprint by as much as 70-80%.”
Step 3: Get buy-in and build the business case for strategic ESG initiatives
After determining how digital strategy initiatives best support the organization’s ESG goals, socialize your ideas and recommendations across the organization and begin to generate buy-in from colleagues. It is important to communicate that many of these ideas cannot be brought to life by digital technologies and IT alone. Proactively discussing ESG opportunities with the other enabling functions can provide better understanding of which initiatives may be the most feasible to implement.
Once you’ve analyzed your digital transformation strategy with your ESG goals in mind and reached alignment with necessary partners and stakeholders, consider the trade-offs between value delivered to the enterprise and level of effort to implement to determine which initiatives to prioritize. Build a business case for those highest priority initiatives and begin to lay the digital foundations for the larger ESG strategy.
Like digital transformation, ESG initiatives impact all parts of the organization and require cross-functional connective tissue to execute. The CIO’s purview across business units and functions uniquely positions them to convene enterprise leadership to conceptualize, coordinate, and accelerate the ESG agenda. Seize this opportunity to cement your role in a topic of increasing strategic importance.