Committing to sustainability has gotten easier, as stakeholders, consumers and employees have prioritized the adoption of environmentally friendly goods, services and business practices.
But following through on those aspirations remains a challenge for most companies, particularly as inflation, high interest rates and general economic instability cuts into budgets.
“With economic slowdown we saw some of the large energy companies double down on their core business model rather than go any other route,” Abhijit Sunil, senior analyst at consulting firm Forrester, told CIO Dive.
“We also saw in the recent series of layoffs that sustainability teams were affected,” Sunil said. “But generally, they were affected in the same manner as other teams.”
ESG has emerged as a discrete business function, but only in some organizations. Only 3 in 10 organizations with a sustainability strategy have a sustainability leadership role, 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 mature and ESG gains align with business imperatives, Chris Talbott, Google Cloud sustainability lead, said during a virtual briefing about the report.
Turning ambition into action
The gap between enterprise ambitions and actions on sustainability 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 extends beyond improving energy and emissions performance within their own business unit,” Jonathan Wright, IBM’s global managing partner for sustainability services and global business transformation lines, told CIO Dive.
“As overseers of the organization’s technology infrastructure, CIOs can leverage their expertise to ensure the digital technology stack includes software that enables the accurate capture and management of ESG-related data,” said Wright.
The CIO can also support other functional units within the organization, providing enhanced data tools to analyze sustainability performance, Wright said.
AI, automation and analytics tools are among the new and emerging technologies that have eased the complex process of recording, reporting and reducing various types of emissions.
Efficiency gains tied to cloud migration are expected to reduce carbon emissions significantly, according to a 2020 Accenture-UNCG study. AI emissions tools were deployed by nearly three-quarters of 500 multinational companies surveyed by Accenture last year to measure and reduce their carbon footprint.
But AI and cloud leave an imprint as well.
While it varies by industry, an organization’s tech stack can enlarge its emissions profile, according to Forrester research. IT produces up to 46% of scope 1 and scope 2 emissions in the financial industry and only slightly less in the tech sector, the consulting firm found.
Scope 1 refers to greenhouse emissions tied directly to the enterprise and typically produced on premises. Indirect emissions produced by third-party providers on behalf of the enterprise, such as a power company or a cloud provider, are classified as scope 2.
A third category of emissions — scope 3 — encompasses carbon released through activities not otherwise classified, through sources not owned or controlled by the enterprise. These emissions, also referred to as value chain emissions, are the hardest to track, as they result from processing and transportation that takes place outside the purview of the enterprise.
A majority of companies — more than two-thirds — report scope 1 and 2 emissions annually, according to Forrester. Fewer than half — 40% — currently track scope 3 emissions.
Better data paves the way
Inadequate data for tracking carbon emissions and other key sustainability metrics is one of the top barriers to ESG progress, a recent IBM survey of 2,500 executives found.
“Data is the lifeblood of ESG,” IBM's Wright said.
IBM has prioritized sustainability as part of its hybrid cloud business strategy, collaborating with consulting firm EY to integrate tools that address the complexity of enterprise ESG data.
“Sustainability is a focus area for all businesses,” IBM CEO Arvind Krishna said during a Q1 2023 earnings call Wednesday. The EY partnership aims to “help companies operationalize decarbonization action plans.”
There’s reason for optimism, according to Forrester’s Sunil.
“We are measuring more metrics now that the tools are available,” Sunil said. “There are metrics that actually get into the supply chain and into 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 footprint of the enterprise, Sunil said.
The hyperscaler cloud providers, consulting firms and third-party vendors have all become founts 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 source renewable energy options for AWS data centers, a move that passes sustainability gains on to its cloud customers.
Microsoft enhanced Azure’s sustainability capabilities in January, adding features that track various types of scope 3 emissions and introducing a dedicated sustainability API.
Third-party vendors are contributing to the proliferation of ESG reporting tools in 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 solutions to manage ESG data,” Keeble said. “We want them to use Google Cloud products for managing this kind of data and we want to create a marketplace for third-party solutions.”
“The technology is there,” IBM’s Wright said. “We understand how to operationalize it and how to get data into the hands of the operators. But, like everything, it’s changing business that takes time.”