Why businesses should embrace tech to meet ESG targets

1 Mar 2023

Image: © Atchariya/Stock.adobe.com

Cameron MacQuarrie, head of customer transformation at ServiceNow, advises business leaders on how to meet environmental, social and governance (ESG) demands by harnessing technology to create a ‘more sustainable, equitable and ethical world’.

Environment, social and governance (ESG) programmes have rocketed up the list of business priorities in the past three years. The pandemic, conflict in Ukraine, stricter regulatory controls and the increasingly apparent effects of climate change have brought the issue to the fore. And, despite being a relatively new topic, organisations are under immense national and international pressure to do better.

The ‘Big Three’ ESG proposals

In 2022, as part of the IFRS, the International Sustainability Standards Board (ISSB) issued two exposure drafts on climate-related, governance and other sustainability disclosures.

Organisations are under immense national and international pressure to do better.

The European Union’s Corporate Sustainability Reporting Directive (CSRD) was enacted under the European Green Deal, which aims to transform the EU into a resource-efficient economy with net-zero emissions by 2050.

And the US Securities Exchange Commission (SEC) issued a lengthy draft proposing rules to enhance and standardise climate-related disclosures.

To combat greenwashing, each of these ‘Big Three’ proposals will require companies in Ireland to report extensively on ESG-related activities. A process that the Irish Auditing and Accounting Supervisory Authority (IAASA) is stringently overseeing. But it’s not just top-down pressures that are affecting Irish businesses.

Pressure to act

A 2022 ServiceNow survey, in association with ThoughtLab, revealed organisations in all industries and sectors – in Ireland and beyond – have felt pressure from a myriad of stakeholders, including rating agencies, senior management and boards, investors, customers, employees and the general public.

Strong ESG performance boosts business-critical outcomes, meaning it’s good for the environment, good for people and good for business.

Knowing how to relieve these pressures – and do it well – can be challenging. Ireland’s greenhouse gas (GHG) emissions actually rose 4.7pc in 2021.

Disciplines like ESG measurement and reporting are relatively new, so figuring them out can be daunting. But there’s an added incentive for organisations to make an effort: strong ESG performance also boosts business-critical outcomes, meaning it’s good for the environment, good for people and good for business.

Global consumers are almost five times more likely to trust and buy from companies with a strong ESG purpose. Moreover, most market leaders agree that ESG initiatives enable them to deliver better financial results (86pc) and attract and retain top talent (79pc).

But how do top-performing businesses overcome ESG challenges? That’s where tech can help.

Why businesses should embrace technology

Best practice playbooks are still being written. ESG is a monumental and evolving task, so no organisation has completely figured it out just yet. Progress is being made, however, and those performing best in terms of ESG-positive action and reporting say they rely on tech-enabled solutions.

Let’s take a look at how your business can benefit from the top three cited tech solutions:

1. Artificial intelligence

When it comes to finding the right ESG information to collect, analyse and report on, you’ll find that a lot of data is missing, incomplete or difficult to access as it’s stored in many different systems.

Suppose your business relies on complex global supply chains, for example. In that case, each supplier and supplier’s supplier must be rigorously examined– a monumental task that AI completes quickly and easily.

AI can gather massive amounts of data from disparate silos, then leverage that data to report a range of insights at the touch of a button.

AI is also good at avoiding distractions which is why most business leaders trust bots over humans to make ESG decisions.

Supply chain risk management is essential for meeting and managing your corporate disclosure regulations. AI can aid your company in monitoring cyber and geopolitical risks, financial viability, sanctioned countries and operational resilience.

You can vet multiple levels of supply chains and other critical relationships through relationship analysis. And ensure, for example, that raw materials haven’t come from a certain country or that parts weren’t manufactured by child labour.

2. Cloud computing

Cloud computing fits with AI tech in reducing siloed working practices. Although stored in distinct physical spaces, information is remotely accessible to a wide range of dispersed audiences. Cloud tech, therefore, encourages knowledge sharing.

By tapping into the vast amount of third-party ESG-related data in the cloud, for instance, with weather, air quality and satellite imagery, you can determine climate risk, align ESG disclosures and move to renewable energy sources.

When coupled with the Internet of Things (IoT) and edge computing, cloud-based systems facilitate data-driven ESG decisions in real time.

Technology can provide your organisations with the building blocks they need to meet ESG challenges.

Monitoring energy consumption, water use or waste materials regardless of volume, source or type is made possible by such technologies. Cloud-based predictive and prescriptive analytics also make leveraging sustainable methods and reacting to real-time changes easier.

Data centres are the essential hubs of cloud computing. While their size, number and outputs have grown exponentially, data centres are among the most energy-efficient buildings in the world.

Swapping from legacy systems that run on ecologically unfriendly sites and are powered by unsustainable energy sources to cloud computing provides a solid basis for your business to reduce its carbon footprint.

3. Digital enterprise platforms

Digital enterprise platforms harness the power of AI and cloud computing to deliver an integrated ESG solution. Such platforms act as operational command centres which bring strategy, governance and reporting together seamlessly across all business functions.

Project and portfolio management functions, tracking metrics such as costs and resources, can improve your efforts to build and maintain ESG blueprints in line with other business strategies.

Managing and reporting functions enable you to easily establish goals and KPIs and fully track performance, data auditing and disclosure reporting.

By integrating ESG considerations with effective enterprise-wide risk and compliance management, digital enterprise software frees up your people by giving a real-time view of ESG compliance and risk. Plus, the valuable insights help to enhance decision-making and business performance.

Technology for a sustainable world

Technology can provide your organisations with the building blocks they need to meet ESG challenges. It helps to innovate products and services which improve sustainability efforts. And it creates ecosystems that enable your business to contribute to a more sustainable, equitable and ethical world – and who doesn’t want that?

By Cameron MacQuarrie

Before joining ServiceNow as head of customer transformation in 2021, Cameron worked with multiple global corporations, including Cisco, ING, Barclays, and TEDx to innovate and evolve technologies and relationships with customers and stakeholders. Cameron is currently a member of the IFRS Foundation Technical Working Group on Climate Disclosures.

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