Digitizing ESG: how to reach sustainability targets with the power of digital

Digital technologies are playing a pivotal role in the shift to sustainability, and more organizations are starting to sit up and take notice as new advances reveal climate impact solutions that were not previously possible. What’s more, there are many compelling use cases across the entire value chain, as we discussed last time. In fact, the World Economic Forum has predicted that digital solutions could reduce overall carbon emissions by 15 percent by 2030.

However, despite the clear case for sustainability and for digital’s role in driving it forward, this has not necessarily trickled down into the function with the greatest impact on organizations’ digital capabilities: the technology function. A recent poll by Software AG found that although 95 percent of IT decision-makers say that sustainability is either a top or high priority, 84 percent will prioritize commercial objectives over sustainability-related ones when times are tough. Interestingly, 83 percent of the same leaders stated an intent to invest more in technology, with 69 percent willing to divert resources from other areas into digital transformation.

There’s really no time to lose. For one thing, 62 percent of CIOs are already involved in their organizations’ sustainability agenda, and by 2025, three out of four CTOs will be tasked with directly contributing to their specific goals. However, more importantly, technology and IT functions also need to mitigate their own impact on the environment.

Digital needs to green itself

The carbon accounting firm Greenly has put the impact of digital technologies at almost five percent of global emissions, and as demand for computing power and data traffic continue to spiral, the sector looks set to exert an even greater drain on global resources in the future.

• Electricity. Digital infrastructure is notoriously power hungry, as a lot of electricity is required for the constant stream of calculations running in servers, powering up storage drives, using network devices, and keeping power provision and cooling systems in operation. Data centers alone are estimated to be responsible for up to three percent of global electricity consumption.
• Water. Data centers also generate copious amounts of heat and so use large amounts of water in their cooling systems. To put this in context, a typical data center uses as much water per day as a town of 30,000-50,000 residents. This presents a challenge for many local water supplies and increases the risk of drought in sensitive areas.
• Materials. Many critical raw materials such as lithium, cobalt, and copper are used in the production of various technologies and associated equipment. With production stretched to its limits, resources can be scarce, with unsustainable mining practices and high energy consumption adding to their negative impact on the environment. More circular business models are needed, but less than one fifth of electronic waste is currently recycled.

Making digital and sustainability a winning combination

To date, we’ve found that organizations tend to focus on sustainability as a general concern, and have yet to tackle digital’s role in addressing it. What’s stopping them from joining the dots between these two critical corporate enablers?

One major concern is cost. Taking action to embed digital technologies with the specific aim of improving your organization’s sustainability credentials doesn’t come cheap. However, the benefits of acting now and putting the investment in upfront will pay dividends in the long run as operational efficiencies and new sources of revenue kick in. Additionally, the cost of doing nothing will only ramp up as customers and employees prefer to do business with and work for more sustainability friendly organizations, financing becomes more expensive, and a greater array of regulations and legal requirements make non-compliance a non-starter (see figure 3).

It also seems that many leaders are struggling to understand how to use the one (digital) in the pursuit of the other (sustainability). Common questions that we come across with our clients include:

• Which technologies can be used in the pursuit of sustainability, and how will they help organizations deliver on their sustainability goals?
• How to ensure they get the right data along all ESG dimensions, then standardize, measure and report on this?
• How to guarantee compliance with an ever-increasing array of legal requirements and regulations, such as the forthcoming European Supply Chain Act, and the EU’s General Data Protection Regulation (GDPR)?
• How to address greenhouse gas emissions effectively when data traffic (and the energy required to produce, store, and transfer it) is rising inexorably?

By digging into our clients’ value chains, business models, and enablers, and using tools such as our Sustainability Chessboard, we have helped answer the right questions to set them on the path to success. We can do the same for you:

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Digital and sustainability can be a winning combination for your business. Interested to know more? Why not take part in our Digital ESG Health Index to see how your organization stacks up. Or contact one of our authors to find the right starting point: Dieter Gerdemann , Sabine Spittler , René Ceipek, PhD , Tim Biermann , Matthias Piehozki , Veronika Bitter and Luca Serratore