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The Critical Role of Technology in Enhancing ESG Performance

ByTecheconomy

May 7, 2022
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Read Time:3 Minute, 6 Second

More than just a line item in the annual report, ESG (environmental, social, and governance) has become a key differentiator at a time when customers expect organisations to be more responsible in how they do business.

According to PwC, ESG is about making a difference and creating sustained outcomes that drive value and fuel growth. But how can technology enable this, especially for local companies looking to embrace a new way of doing things now that lockdown regulations have become a thing of the past?

Of course, this is a global issue that is attracting significant investor interest. By November last year, $649 billion poured into ESG-focused funds worldwide, up from the $542 billion and $285 billion in 2020 and 2019, respectively.

But beyond providing a solid investment strategy, there are practical realities to consider for South African decision-makers around how best to leverage technology investments and become more socially aware.

Core to this is understanding how ESG data is collected and analysed. Companies are under pressure from consumers, regulators, and investors to optimise the use of this data. Unfortunately, there is no silver bullet strategic intervention that does so effectively.

McKinsey writes that the metrics guiding ESG are highly dependent on the industry in which the organisation operates. For instance, different things are important to a consumer goods producer and a software services provider. But regardless of this, everything comes down to maximising shareholder value while taking on a more sustainable and responsible approach to meeting societal demands.

Tech-driven

With the pandemic as catalyst, people have changed their views of sustainability. An IBM survey has found that 9 in 10 consumers cited COVID-19 as affecting their views on the environment more than widespread wildfires and other disasters de to weather events.

Closer to home, the recent flooding in KwaZulu Natal further drove this point home as record rainfalls resulted in a massive human disaster.

The IBM survey has shown how respondents worldwide are increasingly concerned about the global climate crisis with businesses across industries looking to take action to meet their customers’ and investors’ expectations while managing their own environmental goals.

Part of this entails the likes of building transparent supply chains or improving energy management to reduce carbon emissions and mitigate against the continued challenges caused by load shedding.

Thanks to rapidly evolving technology that makes artificial intelligence and machine learning more accessible, local businesses now have access to a wealth of cloud-based solutions that help assess their current ESG performance and identify specific areas where ESG targets can be achieved.

An example of this can be seen in the building sector. Technology can help predict the impact of construction at the earliest phases of design.

Furthermore, a data-driven approach to construction management can see companies use scheduling tools to reduce time, energy, and material waste throughout the process.

Cloud-enablement

This has resulted in local companies being able to incorporate ESG as a fundamental component of their business technology development. The rapid move towards digital transformation becomes an integrated delivery mechanism for ESG.

At a basic level, cloud-based architectures can improve sustainability by reducing the energy demands of traditional on-premises data centres. With many businesses embracing a distributed working environment, there is also a significant reduction in commuting and fewer people at the office resulting in less electricity and other resources being used.

Data virtualisation has become one of the most significant ways local businesses can reduce the energy costs of data transfer among multiple data sources. It also gives way to better data management technologies that create the enabling environment essential to support all facets of ESG through enhanced data analysis.

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