The Link Between ESG and Your Digital Transformation Strategy
Updated: Oct 6, 2022
A data-driven approach to ESG can help your company achieve it’s sustainability goals.
How’s your digital transformation project going? Are you on track for Q4 and year-end?
Most savvy COO’s avoid the year-end rush by setting deadlines for these larger, multi-sprint projects earlier usually to coincide with the end of Q3 thus allow for snagging and process refinement in Q4.
But somewhere along the line, someone (usually a board member) asks about your ESG plan. Um, yes, and what about that?
Along with the dramatic rise in digital transformation initiatives following COVID, a few other pressing priorities emerged in 2022, these being: increased agility, risk management and delivery on Environment, Social and Governance imperatives. Following substantial surveys by PWC, Accenture, Coupa, and others, most cite digitalisation as the predominant focus of executives in all cases as it enables:
Faster and more agile customer value creation
Better operating performance and decreased risk exposure
Improved operating margins, and
Companies with a comprehensive ESG plan containing measurable targets for materially reducing carbon emissions while substantially increasing diversity and inclusion (at all levels) not only benefit from improved morale and higher NPS results but tend to see faster growth, 10-20% higher valuation, and 5-10% lower operating costs (McKinsey).
Yet despite these benefits, deficiencies in the ability for companies to access, measure and report on their carbon performance continues to hinder the ability for businesses to meet even the softest sustainability commitments.
Stakeholders and shareholders alike are growing impatient, many are no longer waiting - with good reason - as many G8 countries are pressing ahead with legislation mandating evidence-based sustainability disclosures - not to mention anti-greenwashing laws. Few CEO’s will view having an ESG strategy as a “nice to have” and instead see it as an imperative KPI for 2022/2023.
This is where digitalisation comes in. Data – and access to it – is key. As many companies take up reins to establish an ESG strategy, they admit that the destination is not the problem. Indeed, businesses can get started simply by mapping their targets in line with the UN Sustainable Development Goals and work back from there. Here's a snapshot of all 17 - start with 3 that are truly relevant to your organisation and go from there.
Richard Mattison, President of S&P Global shared in a recent Accenture survey, “we have the destination plotted but we don’t necessarily know what the route map is.” This is a problem many companies face, primarily because their digital transformation strategy is incomplete or deficient.
There is probably no greater test of a company’s digital maturity than when trying to access, measure and report on meaningful data capturing enterprise greenhouse gas emissions. Indeed, Deloitte’s famous Digital Maturity Model accurately recognises the five maturity verticals upon which a reliable ESG plan would depend.
Image Source: https://digitalleadership.com/blog/digital-maturity/
From Customers to technology to Organisation & Culture, your ESG strategy will be heavily reliant on all of these verticals to deliver viable reporting and effective ESG management.
Customer: 70% of consumers are willing to pay more for environmentally-friendly products. And many of those same people sit on boards, so Customer Trust & Perception will go a long way if your company has the means to communicate your ESG capabilities effectively.
Strategy: Nearly every item in this vertical will influence or be beneficiary of your ESG plan.
Technology: This is where the pedal meets the pavement. Data, delivery, governance, and integration with 3rd party ESG data processors, your travel operators, etc will all be key delivery chains to/from your ESG capabilities.
Operations: Just like the Technology vertical, agile and integrated operations determine where and how all of that good data goes and for what purpose.
Organisation & Culture: the anchor to the Customer vertical, your company’s ability to navigate, positively influence and mobilise your people is imperative to realising the prescribed environmental and social targets.
So what now? Well, it’s easy to become daunted. And statistically, the odds aren’t great with Forbes citing 68% of corporate projects fail, that 27% of IT projects overrunning on cost (with 1 in 6 blowing the budget by up to 200%), and 70% of projects delivered later than committed (HBR Survey).
Such scenarios have a way of derailing other aspects of the company performance, too. It can affect personal performance, morale, and bonus pay-outs, not to mention investor and board perceptions – and that’s before you’ve even published your ESG strategy. But executives are motivated to get the best results, fast, so be realistic, be aware, but don't be daunted.
Poor data (and the ability to store, measure and report on it) will undermine your company's ability to achieve environment and social diversity goals, and it will leave you in the shadow of any scrappy competitor already ahead of you. Don't let that stop you. Here’s a short task list to get you going:
Collaborate with your CIO/COO about your company’s digital transformation goals and highlight your ESG plan's deep dependency on its success.
Forge alliances with your CPO, Head of Facilities and Head of HR and start defining your company’s ESG framework
Identify an external mentor that has taken the path ahead of you (Schneider Electric just won the CIPS Excellence in Procurement Awards 2022 for the pioneering approach to influence the deeper carbon chain within their 1000+ top tier supplier network, for example)
Lobby for board support and resources as you may need to parachute in short-term expert help
Join some of the global sustainability groups to gain experience, get access to reporting tools, and tutorials. Here’s a truncated list of helpful sites:
- UNFCCC: www.unfccc.int
- Climate Disclosure Standards Board: www.cdsb.net
- Carbon Disclosure Project: www.cdp.net
- Carbon Trust: www.carbontrust.org
- International Framework Reporting Standards: www.ifrs.org
Need more information? Check out my blog: Your ESG Plan in 5 Steps
Kelli Wilks is Management Consultant at Spring CPO where she advises clients on ESG priorities, procurement transformation, negotiation strategies, and supplier performance.