Four ways technology can contribute to business sustainability plans

To realize their ESG goals, financial services are embedding tech into ESG strategies across the stack – from client to infrastructure.

In brief

• Financial services businesses are facing growing pressure from their stakeholders to demonstrate real commitment to achieving their ESG ambitions.
• Businesses are using tech to help bring their internal corporate ESG commitments to life in a way that enhances sustainability credentials.

Financial services (FS) businesses are turning to technology to progress their environmental social governance (ESG) visions to reality by integrating tech into ESG strategies.

The Task Force on Climate-related Financial Disclosures requires improved disclosure about greenhouse gas emissions. Banks, insurance companies, asset managers and asset owners require detailed emissions disclosures to better understand their own emissions. This will help them evaluate how their loan, underwriting or investment activities could expose them to carbon-related assets.

While regulation has increased pressure to transform, so too has the commercial reality that FS businesses with stronger green credentials are more favourable to customers and potential employees. According to the 2020 EY Climate Change and Sustainability Investor Survey, 73% said they evaluate the physical risks of climate change when making investment decisions.

So how can you adopt technology in a way that helps drive ESG regulatory alignment, while improving efficiency and enhancing brand?

1. Align ESG objectives with business strategy

It is essential for the c-suite to develop a greater understanding of technology in relation to its delivery of ESG targets.

This starts with leaders being more ambitious in how they’re using IT as part of ESG activities. For example, how is the business using technology and data to help inform more sustainable business decisions? Is existing technology infrastructure sustainable?

Business leaders should invite IT leaders and architects to join their ESG strategy conversations. They should also empower these leaders to make decisions that will help create an IT infrastructure that contributes toward ESG progress.

In turn, IT leaders must better engage c-suite and board members in clearer conversations about how IT strategy can advance ESG and business progress; talking about data-center emissions alone is insufficient.

2. Evolve ESG roles and responsibilities

As companies engage in more sustainability efforts, the role of the Chief Sustainability Officer has become increasingly popular. These appointments reflect an underlying need for companies to achieve real ESG progress.

To avoid silos building between IT departments and others who perhaps have a greater ownership role of ESG, e.g., CSOs, there needs to be a culture of collaboration and data-sharing to advance ESG strategy and activities.

Department leaders need to share data in a way that recognizes progress toward a single corporate ESG vision and strategy with multiple inputters. This also involves CEOs agreeing how their business classifies the confidentiality of data – which may currently prevent it from being widely shared across the business.

For CIOs to contribute fully to the ESG challenge, they must be clear about what aspect of that challenge falls to them to manage and report on. They also need to ask themselves how they’re measuring ESG-related IT performance.

3.  Invest in a greener IT infrastructure

Business leaders need to consider the sustainability of their current and future IT infrastructure, mindful that technology cannot be part of the solution and part of the problem.

As IT teams become more embedded into the successful delivery of their organization’s ESG strategy, it’s critical that they consider ESG criteria in mapping out IT upgrades or change investments.

As the ESG agenda is becoming critical, modern technologies play an important role in reducing carbon emissions. Traditional data centers are responsible for 3% of global power consumption, which is why the UK government is encouraging organizations to migrate on-premises IT infrastructure to public cloud in a bid to work toward net-zero emissions as large cloud providers are accelerating their net zero roadmap.

In maximizing IT efficiency, organizations need to reflect on how cloud technology – and selecting third-party cloud providers – sits as part of their broader sustainability and business objectives, considering commercial opportunities from edge computing and AI.

Cloud hosting is a great example of an alternative technology that not only has clear advantages in enabling business transformation, but also unlocks broader carbon emission optimization.

However, simply migrating services to cloud or adopting cloud native solutions won’t achieve the target outcomes that organizations may expect. Optimization also requires organizational-level change, to embed new corporate culture and ways of working that puts the focus on consumption optimization at the center of technology solutions design.

The careful combination of technical capabilities, processes and skillset required to achieve this is what we call GreenOps and it is already the cornerstone for a greener use of technology.

4. Select sustainable data center providers

The proliferation of cloud demand in the metaverse – where how we work, meet, game, and socialize is cloud-based, has resulted in greater focus on the green credentials of cloud providers themselves.

Cloud, and the data centers that power it, have a critical role to play in reducing CO2 emissions globally: from helping to develop everything from a more power-effective centralized IT infrastructure, to providing the compute power necessary to underpin environmental mapping and intervention strategies.

However, many FS businesses have yet to make this transition. UK banks, for example, have less than 10% of their business infrastructure migrated onto public cloud [via ey.com UK].

For the data center industry achieving sustainability takes on a more intense and innovative path. In many ways, the most significant product that large tech companies can make greener is their own operations.

For example, all new Microsoft data centers are LEED Gold certified (Leadership in Energy & Environmental Design - the most widely used green building rating system in the world), and the company is committed to powering all of its data centers with 100% wind, solar, or hydropower energy by 2025. And innovation can go beyond making the operations themselves greener. Microsoft recently announced a commitment to build a new data center region in Southern Finland, where the waste heat produced in the data centers will be converted to district heating, serving Finland’s second largest city Espoo and neighbouring Kauniainen, and the municipality of Kirkkonummi.

As FS businesses continue investing in cloud adoption, the challenge is ensuring that they don’t just move the environmental challenge to the data center. The identification of ESG-driven requirements and the optimization of resources consumption is now as critical as any other regulatory requirement. And exactly how it happens for risk regulations on outsourced providers, ensuring that cloud providers are managing their own ESG strategy in their data centers is also key.

Conclusion

In a low-growth environment, boards and executives will likely want to position their companies to attract the growing number of investors with decarbonization preferences.

And, to maintain access to institutional capital, companies should start to pivot to low-carbon business models, carefully considering how technology can enable this.

Businesses must therefore challenge themselves:  what conversations are you having about ESG and do they involve your IT teams? When was the last time you spoke to your IT leader about ESG? Are you aware of your IT performance and reporting it as part of overall ESG metrics? Are your IT leaders connected to those parts of the business who are contributors to your overall ESG strategy? Have you mapped your ESG objectives to your technology strategy and change investments? Have you assessed how emerging technologies such as cloud can help meeting those objectives? Do you have IT standards and guidelines defined to driving resources consumption optimization as part of your operations?

This article is co-authored by Michael Wignall, Azure Business Lead, Microsoft UK.