Corporate executives and boards want their organisations to do their part — or at least be perceived as doing their part to help.
Adopting ESG principles and publishing related data is a way to demonstrate to stakeholders (investors, customers, employees, regulators) that your business’ actions align with your values and theirs.
Companies that have embraced ESG principles enjoy higher revenues, stronger profits growth, better customer retention and greater access to finance, according to new research by Moore Global, the global accounting, audit, and advisory network.
An effective ESG strategy can also drive cost savings through improved process efficiencies and waste reduction. Additionally, businesses with a focus on ESG tend to be better at identifying and managing risk. As a result, they are both better protected against external shocks and more resilient in recovering from them.
The Role of Information Technology
In the broadest sense, sustainable IT refers to efforts to ensure a positive impact on the environment regarding the production, use, and disposal of technology. Organisations that are not looking at the sustainability of their IT operations as part of their overall ESG strategy, are missing a trick.
According to research by a team at Lancaster University in collaboration with Small World Consulting Ltd, information and communications technology is responsible for global greenhouse gas emissions of between 2.1% and 3.9%.
To put this into context, compare that with:
- Aviation – 1.9%
- Cement – 3%
- Chemicals – 2.2%
- Shipping – 1.7%
If you are responsible for ESG policy at a financial or professional services organisation what is going to make a bigger impact than reducing the emissions from your IT?
“Sustainable IT is an umbrella term that describes an environment-focused approach to the design, use, and disposal of computer hardware and software applications and the design of accompanying business processes,” says Matthew Bradley, sustainability director at IT services provider Capgemini.
“The term also extends to activities such as responsible mining of the rare metals used to develop IT hardware, water conservation, and the application of circular economy principles across the technology lifecycle,” Bradley says.
What are the Impacts from IT?
There has been a significant increase in electricity needed to power digital technologies, including artificial intelligence AI, machine learning ML systems, cloud computing infrastructures that require more computing power and storage.
For many organisations, the cloud is a growing part of their infrastructure.
And while the shift to cloud services is often touted to reduce data centre energy consumption, the vast infrastructure of the giant public cloud service providers need to be powered, as do private and hybrid clouds operated by organisations. Where and how is that power being generated?
Networks and communications systems, including all the networks that enable remote users to gain access to corporate systems, are also part of the sustainability picture.
The emergence of edge computing and the Internet of Things has expanded demand for connectivity.
Then there are all the end-user devices, including desktop computers, laptops, smartphones, tablets, and others, and the applications they run to support the business — not to mention a host of peripherals such as monitors, keyboards, printers, and more.
Potential Approaches to Mitigate Impact
Sustainable IT practices might include looking at data centre energy consumption as well as enabling technologies such as software that facilitates more sustainable business practices through the functionality and insights that it delivers.
However, the impact of these types of approach will depend on the location of a business’ operations. In the UK, for example, the grid has decarbonised rapidly in the past couple of decades, with about two thirds of electricity now being generated from nuclear or renewable energy.
For UK based assets, lower energy devices and more efficient coding and software will deliver only limited benefits.
Compare this to somewhere like India that relies heavily on coal for electricity generation. Reducing both consumption and reliance on fossil fuels will have a much greater impact.
Effective carbon reduction strategies need to consider the fact that the lion’s share of emissions from IT originate from equipment manufacture, not from its use. Displacing the embodied scope 3 CO2 emissions from laptop and desktop equipment by elongating replacement life–cycles delivers far more in terms of CO2 abatement than energy efficiency does.
Research by Justin Sutton-Parker from the University of Warwick found that replacing an existing computer with a much more energy efficient one can never compensate for the emissions generated in the manufacture of the new device.
A key challenge facing organisations implementing sustainable IT practices is a need for greater understanding of the environmental impact of the digital world.
Other challenges include determining which solutions will have the most material impact on sustainability and identifying metrics to track the impact of sustainability investments in terms of value for money.
Implementing sustainable IT practices can lead to significant benefits for organisations.
With sustainable IT, enterprises can create a more resilient business by offsetting ESG risks and from an operational standpoint they can offset energy, weather, supply chain, and other potential impacts.
Another benefit is enhanced reputation – having a sustainable IT strategy in place can improve a company’s standing with customers, employees, and business partners. And then there are the cost savings that can come from migrating to energy efficient solutions, which in turn improves financial performance.
The biggest benefits both in cost savings and environmental impact accrue from sustainable procurement policies. These favour strategies to extend the replacement lifecycle of IT equipment to enable investment and embodied CO2 emissions to be spread over a greater number of years. The potential savings is both surprising and entirely logical.
A simple example: a company spends £1m on their computers. They replace them every 4 years.
Over a period of 8 years, they will have spent £2m and will be gearing up to spending a further £1m (ignoring inflation) of spend on new equipment.
Keeping those computers for 8 years will free up £1m for investment in other activities.
One of the best things a company can do when launching or renewing a sustainable IT initiative is to evaluate what it has in place in terms of IT infrastructure and determine where improvements can be made.
Thinking outside of the ‘sustainable’ box and seeking advice from experts could give your business the edge – contact details below:
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