Five Things Boards Should Do Now for "E" of ESG

Gartner data shows that social responsibility and ESG mentions in top business priorities have almost doubled yearly. Reflecting on Larry Fink's letter, the time has come for every board member and C-Suite to keep up with new ESG demands and provide necessary oversight for the corporation's long-term success.

The great resignation and increased remote work have compelled businesses to bolster spending on labor-related ESG measures and data privacy and governance.

Different businesses are in different maturity cycles in terms of ESG imperatives. They even differ among these three pillars -"E," "S," and "G." E in the "ESG" refers to the company's performance in preventing and managing environmental risks and growing the business through the circular economy and clean technology.

This article will focus on the five recommendations for the "E" pillar.

1. Modernization.

• Your modernization initiatives ride on distributed cloud environments. The need for data center capacity continues to grow. Ensure your infrastructure provider provides metrics on energy efficiency, green buildings, energy intensity, MWh/cabinets, and power usage effectiveness.
• As you infuse AI to change and grow your business you must be aware of AI models and the type of technology you use from energy conservation standpoint. ?Energy demands of models are high, and it is a point of concern.
• Seek measurements on cost takeout, data center footprint usage, reuse, energy efficiency, and supply chain visibility.
• Infuse investments into your data fabric portfolio as part of modernization imperatives. Leverage data and analytical tools effectively so that stakeholders can closely monitor ESG impacts.

2. Products and business model differentiation.

• Have a sustainable-first product strategy. Lower resource consumption and end-to-end sustainable processes should be your mantra. It should extend across these three levers -organic innovation, adjacent innovation, and disruptive innovation.
• Digital transformation is not enough. Be the leader in societal transformation by driving sustainable-first product culture.
• Be a?leader in renewables procurement. ESG-related factors have material impacts on shareholder risk/returns. Understanding the material impacts in the context of shareholders and other stakeholders is the key.

3. Blockchain.

• Blockchain has a huge potential for the planet. For example, customers can now track their products' supply chain and carbon footprint using IBM Blockchain technology on IBM LinuxONE.
• Infuse investments in blockchain technology for high-value use cases -tokenization of carbon offset credits.?
• While ESG reporting has not been mandated yet, be the leader in your industry by infusing capital to leverage transformative technologies like blockchain.

4. Talent, Strategy, Culture, Ecosystem, and Board.

• With the great resignation, ensure ESG is treated as a strategic imperative if you need to attract talent. It is a value driver, including the reputational benefits.
• Ensure ESG is at the heart of business and strategy. Proactively identify material issues associated with environment and stakeholder expectations.
• Refresh the board to ensure your board members have expertise in the "Environment" pillar. And the accountability should extend to senior management. You will execute it successfully only when it is tied to executive compensation.
• In a hyper-connected world, you need futuristic board members who can find material issues promptly. Your net-zero commitments must be based on science.
• A competent board will rethink the business model. They will look holistically across all drivers -procurement, distribution, investors, business partners, and customers.
• Make boardroom diversity a priority -Refresh the board with the societal transformation expertise to connect the dots between Environmental issues and business strategy.
• Establish ESG Committee and/or Board mandate to manage resource consumption.
• Your ecosystem matters. Stay close to your big institutional investors and understand their "Environment" imperatives. Without their support, no activist can force their way onto your board.

5. Climate Change, Disclosures, GHG targets, Flood Risk, Resource consumption including water management.

• Treat the climate crisis as both a threat and an opportunity. Start with materiality assessment as "Environment" pillar impacts vary by the firm's nature and industry. Drive "E" pillar themes that are most likely to impact the business.
• Your strategy must adapt to the vast shift in the business landscape resulting from climate change.
• Collaborate with the ESG Activists. ESG activism will accelerate on climate topics (e.g., climate objective, 'Say on Climate'). A vital space that no board must ignore.

Stay ahead of the game by collaborating with organizations like Just Capital, CECP, Higher Ambition Leadership Alliance, Nasdaq Center for Board Excellence and Engine No. 1 -Khwaja Shaik, CTO, IBM

• Seek measurements on cost takeout, data center footprint usage, reuse, energy efficiency, supply chain visibility, and digitization through ESG dashboards and ESG APIs.
• Demand efficient ESG data management processes. Review committee charters to ensure effective alignment of Data Fabric initiatives with the "E" pillar of ESG.
• If you are a global firm, ensure appropriate alignment with various regulatory standards in the ESG space.

Question:?What other ways boards should do now??Please share your thoughts in the comments section below.

For professional insights into complex issues, join the?conversation by tweeting?Khwaja?at?@Khwaja_Shaik?or?connecting with him on?LinkedIn.

ABOUT KHWAJA SHAIK

KHWAJA SHAIK?is the award-winning C-level Global IT Executive with 25+ years of technology, industry, and board leadership with?GE, IBM, Bank of America & PwC. He was recognized globally for turning visionary thinking into breakthrough growth.?As one of?IBM’s CTOs, Khwaja counsels CEOs, Boards, and Startups on corporate strategy, digital transformation, AI, Cybersecurity, ESG, and culture shifts to unlock performance.

Using his innovative mindset, he saved $1.1 billion per year for Bank of America by transforming the Global IT Operating model and future-proofed business by mitigating risk and infusing new?fintech. Khwaja has 20 years of experience in the highly?regulated banking and financial services?industry.?

In addition, as a Big5 thought leader at?PwC, he incubated new businesses, reshaped business and?platform operating models— digitized end-to-end business processes to capture value, and protected firms from?cyberattacks?through AI & the cloud.

Khwaja has a history of leading over $10B digital business transformations by scaling Agile practices for cost optimization, revenue-generation, and societal transformation imperatives. It includes digital business optimization and using digital business models to capture profitable growth, customer lifetime value & competitive advantage to Fortune 500 firms.

Khwaja transformed the Omnichannel customer experience by delivering world's largest next-gen Contact Center platform as part of BAC's M&A (CFC, MBNA, Fleet etc.) by replacing aging telephony system with VoIP. Contact Center platform serves 1 billion calls, 500K interactions annually and 300 million outbound calls annually to support multichannel strategy

In 2016, Khwaja was among the most exceptional IBMers appointed with the rare distinction of IBM Academy of Technology member. In 2020, Khwaja was recognized as IBM’s senior inventor and top 100 technical leaders driving technology ethics and data stewardship, providing the direction of IBM on societal transformation with responsible innovation that matters.

Service to others has been a part of Khwaja’s purpose. Khwaja promotes economic equity, social responsibility, diversity, and inclusion for the prosperity of all -the reinvention of education through innovative programs such as Open P-TECH. Due to his holistic stakeholder engagement in the industry, partner ecosystem, and ?community, Khwaja received several service awards from IBM, Bank of America, University of North Florida, Indo US Chamber of Commerce of Northeast Florida, and 2022 ORBIE Awards FloridaCIO Finalist.

Khwaja serves on the boards of directors of the?Museum of Science & History, UNF School of?Computing Advisory Board,?TECt,?MIT?CIO Forum,?Interfaith Center of Northeast Florida,?and McKinsey Executive Panel.

Khwaja regularly writes on?LinkedIn,?Twitter?and regularly?interviewed?for?industry insights?or cited in the?news,?Thought Leadership POVs. He is a frequent international speaker at elite universities, including IIT Hyderabad, CIO IT & Security Forum, MHI Supply Chain Conference, and JAX Chamber IT Council.

Khwaja is a Fellow of Herndon Board Institute, sponsored by NASDAQ and Atlanta Life. Khwaja holds an MBA and a bachelor’s degree in Engineering. Khwaja lived on three continents, experienced three different cultures, reads too much, doesn’t do enough gardening, married for over 22 years, and has two boys.

?More details on Khwaja’s career and thought leadership activities could be found via?Linkedin,?Khwajashaik.com?or follow him on Twitter @Khwaja_Shaik

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