Tech firms must align on ambitious ESG standards
With the debate surrounding environmental, social, and governance (ESG) principles persisting, one of the few unanimous conclusions is that all of us – from governments and policymakers to NGOs, citizens, and businesses – have a critical role to play.
The recent COP28 Summit has bolstered my sense of collective action. We’ve just endured one of the most challenging years on record, with smoke-filled air turning the skies of Manhattan deep orange, and scenes of destruction causing devastation across Greece, Haiti, and Libya. The effects are being felt ever closer to home, with the UK Health Security Agency recently warning that the climate crisis could cause 10,000 extra UK deaths every year by 2050. As such, milestone targets to triple the use of renewables and double energy efficiency by 2030 are welcome, even if question marks linger over how this will be financed.
The creative solutions we need are already here
But these words must turn into meaningful action. Until then, humanity desperately needs creative, ambitious, and systemic action to tackle the crisis. This is where technology can play a key role. Businesses of all sizes are pooling time, resources, and leadership efforts into exploring digital-first solutions to pressing environmental challenges. Renowned for its rapid pace of innovation and abundant creativity, the technology sector has consistently led the way in championing sustainable development. IoT sensors and blockchain, for example, enable more transparent supply chains in agriculture and reduce carbon footprints in logistics, supporting ESG efforts by ensuring responsible sourcing and reducing environmental impact. Artificial intelligence alone could reduce global greenhouse gas emissions by 4% by 2030 through enhanced industry transparency, data analytics, and resource efficiency.
President, Tech Mahindra.
Despite the progress made by the technology sector, implementing successful ESG programs is not easy. With each passing day, the ESG landscape is growing more complex, given the shifting global goals, increasing regulations, and consistent requests for relevant ESG disclosures. UK’s financial watchdog has urged enterprises that rate other businesses’ sustainability efforts to consider a new voluntary code of conduct. While some organizations face challenges in getting the required start, others tend to delay the process as integrating ESG considerations needs revamping many business operations.
Mobilizing the technology sector
The complexity of the ESG landscape is no excuse for technology firms to delay meaningful action and waiting on the side-lines while complexity continues to increase is not an option. With the sector’s immense influence, resources, and technical capabilities, technology firms have both an obligation and an opportunity to lead the way. Failure to act responsibly risks losing the trust of stakeholders and regulators. Proactive leadership can spur innovation, reinforce social licenses to operate, attract top talent, and unlock efficiencies. Technology leaders must view this complexity as an opportunity for differentiation.
Moreover, the challenge of relevant ESG disclosures underscores the need for global alignment on reporting standards. The current lack of consistency in reporting frameworks allows for a degree of opacity, enabling some organizations to engage in greenwashing. While international bodies may eventually coordinate standards, the tech sector need not wait. Instead, tech businesses should collectively establish and commit to transparent, rigorous, and globally consistent ESG reporting standards.
Technology firms are best positioned to understand appropriate metrics and data collection mechanisms for the sector. By self-regulating and holding each other accountable to centralized standards, they can pre-emptively address rising stakeholder expectations and build trust in a way that is more reflective of their actual impacts. Shared IT infrastructure and data pools could ease adoption burdens for smaller firms. And agreed KPIs and measurement protocols will better highlight leaders and laggards – spurring on competition and a drive to improve.
Establishing aligned ESG reporting is only the first step. Standards must translate into action. Once consistent transparency and accountability mechanisms are in place, firms can be compelled to improve continually. Failures to meet centralized expectations can be exposed, penalized, and deterred. Enhancing standardized KPIs will also progressively expand the scope and rigor expected of tech-led sustainability initiatives.
Technology innovations are acting as a catalyst for the evolution of ESG commitments, moving sustainability from a corporate buzzword to a core business strategy. By embracing these solutions, the future of ESG holds bright promise, provided that comprehensive measures are taken at the right moment. Over recent years, enterprises have become increasingly cognizant of their roles in embracing favorable practices, and investors will continue to place heightened importance on ESG metrics.
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With the debate surrounding environmental, social, and governance (ESG) principles persisting, one of the few unanimous conclusions is that all of us – from governments and policymakers to NGOs, citizens, and businesses – have a critical role to play. The recent COP28 Summit has bolstered my sense of collective action.…
