No Technology, No ESG: Riding the Green Wave of Change

February 29, 2024

ESG principles for businesses

The climate is changing and our planet has learned it the hard way. We can all see that. But we can also do something about it. As a matter of fact, we’re obliged to; in particular, businesses are.

The integration of Environmental, Social, and Governance (ESG) principles is now a top concern for companies worldwide. As regulatory frameworks become stricter and societal demands shift towards sustainability, businesses face growing pressure not just to disclose their ESG performance but also to actively pursue decarbonisation and ethical practices.

In this article, you’ll discover how ESG, with the support of technology, turn over a new leaf and contribute to a more sustainable world.

ESG Regulation: Planting the Seeds of Change

The impact of ESG on the environment

ESG regulations are pushing EU businesses to reveal their performance on environmental, social, and governance fronts and start greening up their operations. The EU has put in place a set of rules to make various sectors – like transportation, raw materials, and energy – more sustainable. It’s all about reducing CO2 emissions and fostering sustainability practices across diverse sectors.

The regulatory efforts of the EU, such as the European Green Deal implemented back in 2020, cover a bunch of areas like decarbonisation, greenwashing, supply chains, transition planning, and sustainable finance. The goal behind these regulations is to impact companies’ business and financial strategies, as well as operational frameworks, nudging leaders to step up and make sustainability a top priority.

What’s more, the EU has introduced specific directives and regulations on sustainability reporting and environmental impact disclosure. Take the Corporate Sustainability Reporting Directive (CSRD) for example. It mandates companies in the EU to divulge their sustainability efforts. On top of that, there’s talk about a Corporate Sustainability Due Diligence Directive, in light of which companies would have to own up to how their actions affect the planet.

As mentioned, ESG regulation is making headway throughout the EU, prompting businesses to meticulously evaluate and report their ESG performance. Yet, it’s vital to acknowledge that ESG is much more than just reporting; it encompasses a range of factors that affect an organisation’s environmental and social footprint. Whether it’s supply chain management or employee welfare – it all contributes to ESG outcomes.

The Role of Technology in ESG Initiatives

When it comes to ESG, reporting performance is just one facet of it. To fully grasp all the factors at play, companies need to revamp their processes and invest in new IT tools. Typically, they’ll bring in outside help from consultants and tech partners to boost their ESG reporting capabilities.

In order to ensure ongoing reporting on ESG factors, companies usually follow yearly reporting cycles that line up with the end of their fiscal year. It’s like following a roadmap: first, they decide what to include in the report; then, they follow the right rules, outline everything they’ll cover, gather and review all the data, publish the report, reflect on their performance, and finally, identify areas for improvement.

Putting resources into ESG reporting tools offers multiple benefits, including:

  • smoother data collection,
  • enhanced data accuracy,
  • streamlined audits,
  • promoting transparency within organisations.

When selecting ESG reporting software, companies should consider factors such as their size, emission management capabilities, customisation options, user-friendliness, compatibility with existing systems, and alignment with reporting standards like GRI and SASB.

Technology’s Impact on Carbon Footprint

Technology's impact on the environment

Harnessing technology is crucial for reaching ESG goals, especially given that today’s businesses rely heavily on technology and IT infrastructure. It’s safe to say that it’s the backbone of modern organisations. However, it’s worth pointing out that technology itself has a notable effect on carbon footprint.

As businesses digitise more, they’re leaving a bigger carbon footprint behind. Spending on IT infrastructure shot up by 34.4% from 2019 to the end of 2020. Digital technologies alone pump out about 350 to 400 megatons of carbon dioxide equivalent gases (CO2e), making up roughly 1% of all global greenhouse gas (GHG) emissions. Sadly, it looks like emissions from digital services and the tech industry’s CO2 output are only going to grow. And with AI technology becoming increasingly prevalent and energy-demanding, its environmental impact is only set to spike even more. Find more details here

Fortunately, where there’s bad news, good news usually follows. And it’s that there are a couple of ways to reduce technology’s impact and make it sustainable. What are they, then?

Cloud Services: A Sustainable Solution

One way to cut down on the technology’s carbon footprint is by shifting to cloud services (by the way, feel free to check out ours). Cloud computing gives you scalability, flexibility, and energy efficiency, allowing businesses to make the most of their resources while minimising environmental impact. In this article, a company named Duco has shown that by jumping on the cloud bandwagon, they significantly lowered their largest customers’ carbon emissions by 60-80%.

Consolidation and IT Integrations for Efficiency

Another approach to decrease technology’s impact on sustainability is to bring together IT services and systems integration. By streamlining processes and reusing existing software components, companies can cut waste and maximise efficiency. Not only does this help the environment, but it also enhances operational durability and agility.

Insurance Industry Commitment

There’s a particular player that occupies the forefront of sustainable finance and it’s the European insurance industry. It aligns its efforts with global initiatives – the UN’s Paris Agreements and the European Green Deal being two of them. With ambitious goals set to trim greenhouse gases by 55% by 2030 and reach a net-zero economy by 2050, insurers are actively integrating ESG considerations into their investment strategies and day-to-day operations. Head here for more details.

The insurance industry is pivotal in addressing climate change by compensating for damages caused by weather-related incidents and supporting the transition to greener economies. 

Additionally, insurers are placing more emphasis on impact underwriting, developing revolutionary insurance products that encourage people to take actions to help prevent and adapt to climate-related risks. They’re also dedicated to gathering and sharing more useful data on losses tied to climate in order to help raise awareness and be better prepared. Plus, as major investors, insurers help finance the shift towards sustainability.

The Emergence of Green Software

What’s gaining traction in the wake of climate change is green software, aka sustainable software. It’s aimed to limit energy consumption and environmental impact from design to implementation. By considering various aspects, such as software practices, architecture, hardware, data centre design, electricity markets, and climate change, green software engineering strives to slash greenhouse gas emissions and a company’s carbon footprint.

Here’s a snapshot of green software development’s primary principles:

  • Carbon Reduction: develop software that adds value while minimising carbon emissions.
  • Electricity Efficiency: design software with a focus on conserving energy.
  • Simplicity for Energy Savings: opt for simpler software designs to boost speed and reduce energy consumption.
  • Cost Savings: green applications use less energy, meaning they cut energy costs.
  • Brand Loyalty: consumers tend to be drawn to companies with sustainable practices and eco-friendly products.

Following green coding principles and building sustainability into software development is key for reducing the impact software systems have on the environment. Doing so not only helps companies contribute to a more sustainable future but also brings benefits like cost savings and giving brand reputation a notable boost.

Find more insights on sustainable software development in this article

Embracing Technology for a Sustainable Future: Conclusion

Facing the hurdles of ESG regulations and sustainability, businesses turn to technology to leverage it as a powerful asset. By adopting advanced IT solutions, embracing cloud services and focusing on green software, companies are poised to boost their ESG standings and drive positive impact on the planet and society.

As the path towards a greener future unfolds before us, creativity, mindful choices, and collaboration will be essential for paving the way to success.

And speaking of collaboration, you might want to consider a reliable technology partner to help you implement solutions towards a more sustainable future within your business. Good thing that here, at Shaped Thoughts, we know our way around technology. Hit us up and let’s discuss what you need.

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