SUSTAINABILITY FOCUS 18

Some things just work best in pairs. Socks, cheese and wine, TV detectives – the list goes on. One lesser known, but equally complementary coupling, is digital transformation and environmental, social and corporate governance (ESG).

In particular, digitalisation plays a key role in helping organisations to improve their environmental performance. Putting the planet at the heart of digital transformation roadmaps can help companies to reduce waste, enable smart energy consumption and collect data that allows companies to monitor, measure, analyse and ultimately improve the environmental impact of day-to-day operations.

For this reason, the World Economic Forum (WEF) sees digital transformation as an “immense opportunity” to decarbonise the global economy. The European Union is seemingly in agreement. It names digitalisation and environmental sustainability as the two key transitions needed to create a successful post-Coronavirus future, which is why both are embodied by the NextGenerationEU and long-term EU budget.

However, the international push to marry sustainability and digital transformation is not yet mirrored in the business world. In fact, most businesses are falling behind the curve. It’s not for want of change: after all, recent research commissioned by Ricoh Europe reveals that 67% of business leaders believe corporations have a responsibility to respond proactively to global challenges such as climate change. However, only 34% see technology as an enabler of sustainable business practices.

There’s no denying that feeding sustainability strategies into efforts towards digitalisation can help organisations improve their ESG performance. So why is there a disconnect?

Businesses need to stop viewing ESG initiatives as ‘nice to haves’

Sadly, corporate social responsibility initiatives are still viewed by some as ‘nice to have, but not essential’. They tend to be the first victim of budget cuts and the reshuffling of business priorities. But they shouldn’t. With the introduction of ESG frameworks and last year’s COP26 Summit focusing global attention on climate change, priorities are starting to shift.

Most businesses are beginning to recognise the importance of environmental sustainability for their customers and employees. In fact, two-thirds of businesses agree that being environmentally sustainable is a competitive advantage in their market. Despite that, only 27% of organisations have set long-term sustainability goals of any kind.

Issues like climate change have shifted our understanding of what a successful business model looks like. How company assets are valued has changed, too. Investment in environmental initiatives should no longer be viewed as a sacrifice, but instead an opportunity to get a return on investment. Companies that fail to keep up with the times truly risk missing a huge opportunity to secure and improve future business performance.

Technology holds the key to reducing environmental impact

For those leaders who have not yet created a sustainability roadmap, trying to weave one together with pre-existing digitalisation plans may sound labyrinthine. Yet often, all that is required is a change of mindset.

A lot of the time, businesses are already embracing technological solutions that not only make life a whole lot easier for employees and leaders alike, but also have the capacity to reduce a company’s environmental impact. For example, almost half of leaders have introduced cloud technology (45%), hybrid working (45%), and big data (42%) solutions. These deployments share a number of commonalities – not least the ability to improve energy efficiency while capturing data relevant for ESG reporting.

The problem in part, then, seems to be one of awareness. Leaders don’t know exactly how digital transformation and sustainability initiatives go hand-in-hand. Thankfully, there is no shortage of prompts to learn more, which over time will help to reduce this barrier. For instance, the EU is spearheading a global drive with a range of regulations and initiatives. This includes the European Green Deal and the Corporate Sustainability Reporting Directive, which will require organisations with over 500 employees to disclose their non-financial information, effective from FY23 onwards.

Digital transformation will be vital for these new reporting requirements because it makes the collection and reporting of data a much more straightforward task. But the same principle also applies to environmental performance. Understanding and measuring your environmental impact is made a lot easier when you have the digital processes and systems in place. But to my earlier point, you must have goals and a framework for success in the first instance.

Locating the resources for sustainable transformation

Business leaders are starting to understand that they need to do more to improve ESG performance and reporting. But even for those leaders that recognise the cost efficiency of integrating digital transformation and sustainability plans, finding the resources needed for change can feel like swimming against the tide.

With the pandemic impacting economic performance and business priorities, leaders are finding it difficult to pin down budget for sustainable investment. The ever-increasing volume of legislative requirements and environmental obligations also makes knowing exactly where to invest, and when, almost impossible without external guidance.

However, there is light at the end of the tunnel. Funding and assets designed to help businesses kickstart their sustainable transformation journey already exist. On a Europe-wide level, umbrella programmes such as InvestEU, which aims to give an additional boost to investment, innovation, and job creations between 2021-27, are guiding the way forward for businesses. Alongside the European Green Deal, this programme is designed to help the European economy recover from the pandemic and transform the EU into a modern, resource-efficient, and competitive economic bloc.

Other programmes are more explicitly targeted at supporting the digital transition: the Digital Europe strategic funding programme, for instance, focuses on bringing digital technology to businesses, citizens, and public administrations across the continent.

Over time, more resources will become available to businesses of every size. Those seeking to make a green, digital transition will find it easier to locate funding – and those businesses that don’t make full use of the resources already available to them will risk falling behind.

Filling the green innovation gap

Bringing green growth together with digitalisation ambitions is no longer a new concept. The beneficial impact of technology on environmental performance has been well documented for some years now.

Moving forward, it will not pay off to treat business and ESG success as mutually exclusive goals. Making our businesses greener and our society more digital are two of the top challenges of our generation. Achieving both means considering them in tandem. After all, amazing things can happen when natural pairings come together for the greater good.