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Committing to sustainability has become easier, as stakeholders, consumers and employees prioritize the adoption of environmentally friendly products, services and business practices.
But keeping up with aspirations remains a challenge for most companies, especially when inflation, high interest rates and general economic instability cut into budgets.
“With the economy slowing down we’re seeing some of the big energy companies doubling down on their core business model rather than going down any other route,” Abhijit Sunil, senior analyst at consulting firm Forrester, told CIO Dive.
“We have also seen in the recent series of layoffs that the sustainability teams have been affected,” Sunil said. “But generally, they are affected in the same way as other teams.”
ESG has emerged as a discrete business function, but only in a few organizations. Only 3 in 10 organizations with a sustainability strategy have a leadership role in sustainability, Forrester found.
That said, most companies have at least one sustainability initiative in place, according to a Harris Poll survey of 1,500 business leaders commissioned by Google Cloud.
More will follow, as tools to achieve sustainability goals are mature and ESG gains align with business needs, Chris Talbott, head of sustainability at Google Cloud, said in a virtual brief part of the report.
Turning ambition into action
The gap between business ambitions and sustainability actions has less to do with motivation than with technological capabilities and their implementation. — the domain of the CIO.
“The CIO’s role in driving sustainable change goes beyond improving energy and emissions performance within their own business unit,” said Jonathan Wright, IBM’s global managing partner for sustainability services. and lines of business change in the world, told CIO Dive.
“As overseers of the organization’s technology infrastructure, CIOs can use their expertise to ensure that the digital technology stack includes software that enables accurate capture and management of ESG-related data, ” said Wright.
The CIO can also support other functional units within the organization, providing additional data tools to analyze sustainability, Wright said.
AI, automation and analytics tools are among the new and emerging technologies that ease the complex process of recording, reporting and reducing different types of emissions.
Efficiency improvements tied to cloud migration are expected to reduce carbon emissions, according to a 2020 Accenture-UNCG study. AI emissions tools have been deployed by nearly three-quarters of the 500 multinational companies Accenture surveyed last year to measure and reduce their carbon footprint.
But AI and cloud are also leaving an imprint.
While it varies by industry, an organization’s tech stack can boost its emissions profile, according to Forrester research. IT produces up to 46% of scope 1 and scope 2 emissions in the financial industry and less in the tech sector, the consulting firm found.
Scope 1 refers to greenhouse emissions that are directly tied to business and are typically produced on-site. Indirect emissions produced by third-party providers on behalf of the business, such as a power company or cloud provider, are classified as scope 2.
The third category of emissions — scope 3 — consists of carbon released through activities that are not classified, through sources that are not owned or controlled by the business. These emissions, also called value chain emissions, are the most difficult to track, because they are the result of processing and transportation that takes place outside the purpose of the business.
The majority of companies – more than two thirds – report a range of 1 and 2 emissions per year, according to Forrester. Less than half – 40% – currently track the range of 3 emissions.
Better data paves the way
Insufficient data for tracking carbon emissions and other key sustainability metrics is one of the main barriers to ESG progress, a recent IBM survey of 2,500 executives found. .
“Data is the lifeblood of ESG,” says IBM’s Wright.
IBM is leading sustainability as part of its hybrid cloud business strategy, partnering with consulting firm EY to integrate tools that address the complexity of business ESG data.
“Sustainability is a focus area for all businesses,” IBM CEO Arvind Krishna said in a Q1 2023 earnings call on Wednesday. The partnership with EY aims to “help companies implement decarbonization action plans.”
There is reason for optimism, according to Forrester’s Sunil.
“We are measuring a lot of metrics now that the tools are available,” Sunil said. “There are metrics that actually go into the supply chain and the carbon footprint of the IT estate and the digital stack.”
Ten years ago, IT emissions were a black box. Now, organizations can separate data center energy use from the overall business footprint, Sunil said.
Hyperscaler cloud providers, consulting firms and third-party vendors have been the source of innovation on the sustainability front.
As part of Amazon’s pledge to reach net-zero emissions by 2040, the company recently advanced its initiative to procure renewable energy options for AWS data centers, a move that passes the sustainability gains to the its cloud customers.
Microsoft improved Azure’s sustainability capabilities in January, adding features that track different types of scope 3 emissions and introducing a dedicated sustainability API.
Third-party vendors are contributing to the proliferation of ESG reporting tools in the public cloud, Justin Keeble, managing director for global sustainability at Google Cloud, said during the sustainability survey briefing.
“We have clients who are taking Google Cloud products like BigQuery and building their own ESG data management solutions,” Keeble said. “We want them to use Google Cloud products for managing this kind of data and we want to create a market for third-party solutions.”
“The technology is there,” IBM’s Wright said. “We understand how it operates and how to get the data into the hands of the operators. But, like everything, business transformation takes time.”