Sustainability and ESG

Sustainability and environmental, social and governance (ESG) commitments are fast becoming a C-suite imperative. But are organizations going about it the right way? CIOs and their IT organizations play a key role in advancing ESG goals — in close collaboration with others — while serving as a catalyst for real enterprise change.

The call for an increased emphasis on sustainability and diversity issues comes from a variety of voices:

  • Investors believe strong ESG performance correlates to less risk and uncertainty, better regulatory compliance and the ability to drive long-term growth.
  • Employees are increasingly drawn to companies that emphasize ESG, particularly younger talent that values strong societal commitments and more inclusive cultures.
  • Customers want to do business with companies that are aligned with their principles, thus they are actively seeking out players making a difference on environmental and social issues.

According to the 2021 EY Global Institutional Investor Survey, 90% of investors attach a greater importance to a company’s ESG performance when it comes to investment strategy and decision-making. There is also tangible business value to be found in ESG initiatives, as companies craft new revenue streams from circular economies and reduce costs along with carbon emissions.

‘Overwhelmed into inaction’

While almost every company has some type of ESG program, many struggle to advance their agenda and make measurable progress. Leaders may underappreciate the magnitude of the problem they’re trying to address. “You can get overwhelmed into inaction,” says Lior Keet, Managing Director, Emerging Technology, ESG at Ernst & Young LLP. “It’s so big, they end up doing nothing.”

ESG is also a multidisciplinary problem, which requires coordination and alignment across the C-suite, board and employee base. Given the CIO’s mandate to work across business lines, they are well situated to marshal the enterprise around shared ESG goals, Keet says.

“The CIO is central to the ESG agenda from a technology and data standpoint,” he explains. “But no one person can lead the agenda in and of themselves. They have to work with others in the organization to make this happen.”

IT as a starting point

CIO leadership can help their organization address many of the core challenges impeding ESG initiatives, including the disconnect between ESG reporting and mainstream financial reporting. ESG commitments at their core are a data problem, and no one is better positioned than the CIO to orchestrate the access and governance of relevant data from both internal and external sources.

CIOs can also be standard agents for upholding diversity, equity and inclusion (DEI) principles as part of talent recruitment and retention strategies.

A variety of IT initiatives can also have a significant impact on achieving sustainability goals. Among them:

Invest in energy-efficient computing and storage infrastructure. Whether it’s making energy efficiency a core requirement for IT equipment purchases or rethinking the data center to run on nonrenewable energy sources, all technology buying decisions should take ESG objectives into account. For example, deploying flash technology instead of spinning disks for storage can improve power consumption rates, while Advanced RISC Machine processors have a considerably lower carbon footprint and require no cooling. In addition, leveraging artificial intelligence, machine learning and internet of things sensors in a data center setting can extrapolate weather data patterns to adjust data center cooling systems in response to the environment or improve a facility’s air flow, all resulting in better energy efficiency.

Move workloads to the cloud. Research shows that moving IT infrastructure from on-premises data centers to the cloud results in carbon emissions savings. In addition, hyperscalers like Microsoft Azure Cloud and Google Cloud have calculators and dashboards that provide transparency into the carbon impact of cloud usage, aiding in ESG reporting.

“It’s all about what IT can do to transition technology to reduce the footprint and use analytics to measure it,” Keet says.

Enable a flexible workplace. Working from home can significantly reduce carbon emissions and improve a company’s ESG position by cutting commute times and reducing energy output of in-office equipment. Research shows working from home reduces personal emissions by up to 80% in some cases.

Layer ESG into your data and analytics strategy

To measure change and accelerate ESG transformation, CIOs should collaborate with core stakeholders to define what to measure and the data sources required to deliver those metrics. Relevant data sources could include third-party supply chain partners to factor any indirect emissions that occur within the value chain into ESG calculations and reporting. CIOs then need to provide the systems and tools to ensure relevant data is captured and accessible for ESG reporting.

“CIOs need to build confidence in the data, especially that data coming from third parties,” Keet says. “It’s not just traditional integration and reporting. It’s thinking about using different types of technology, such as blockchain, to bring in external data sources.”

Dedicated resources and bridge-building

That’s a lot of ground to cover for a CIO that already has a full-time job. To accelerate the ESG journey, CIOs should consider designating someone within their organization to lead the charge, preferably backed up with a dedicated team. With those designated resources in place, the CIO can focus on building bridges across different functional areas, like human resources, procurement and supply chain, to keep the enterprise focused on achieving shared ESG goals.

Technology isn’t a cure-all for advancing ESG initiatives. But with the right planning and leadership, CIOs can rally their organization to advance ESG goals and create more sustainable ways of doing business.

Learn more about actions CIOs can take today to digitally transform their business.

The views expressed by the author are not necessarily those of Ernst & Young LLP or other members of the global EY organization.