Businesses with a greater sustainability performance across ESG indices perform financially better than their peers.
Becoming a truly sustainable business has become a top priority for many executives. And with good reason. Just as digital transformation pushed organisations to strengthen their operating models with technology at heart, now every business needs to address the subject matter of sustainability, and technology is again taking centre stage.
Beyond the great promise of protecting people and the planet, and science telling us that sustainability is a goal of fundamental importance to every person alive today and every generation to follow, there is a growing body of evidence indicating that adopting sustainable practices through the use of technology and adoption of circular economy principles will create business value for long-term prosperity.
Technology and sustainability are two concepts that are typically viewed as conflicting notions. However, the reality is that technology and sustainability are not mutually exclusive, and in fact, they can be powerful allies in creating a more sustainable future. As organisations head towards these goals, technology acts as a vital enabler across their most strategic sectors.
Businesses with a greater sustainability performance across environmental, social, and governance (ESG) indices perform financially better than their peers.
There is no doubt that various technologies such as AI, Cloud and IoT play a major role in reducing carbon emissions and tackling climate change. Among these technologies, AI is a particularly powerful tool that can help make significant progress towards achieving sustainability goals. By leveraging the power of AI in energy optimisation, transportation, carbon capture and storage, renewable energy and agriculture one can make significant progress towards a more sustainable future. Nevertheless, it is important to ensure that the use of AI is ethical and responsible, and that it is aligned with business values and goals.
Consider tech giant Microsoft, which has been carbon neutral since 2012 and has set the target of becoming carbon negative by 2030. By 2050, Microsoft aims to have removed all the historical carbon emissions it has produced since it was founded in 1975. Its strategy focus is now shifting to the creation of carbon-intelligent solutions that are designed to help customers reduce their carbon footprints using data science, AI, and digital technology. Multi-national technology company Amazon has also committed to powering its operations with 100% renewable energy by 2025 and reaching net-zero carbon emissions by 2040. Similarly, the fashion industry, which is responsible for a substantial percentage of global greenhouse gas emissions, is also starting to set ambitious net-zero targets. For example, the world-class luxury group Kering has committed to achieving carbon neutrality across its entire supply chain by 2025.
The European Union has set a target of reducing its greenhouse gas emissions by at least 55% by 2030, on the way to net-zero by 2050.
Similarly to these private sector initiatives, many Governments around the world have set net-zero emissions targets. For example, the United Kingdom has set a target of reaching net-zero emissions by 2050, and the European Union has set a target of reducing its greenhouse gas emissions by at least 55% by 2030, on the way to net-zero by 2050.
Another instance that illustrates what is being discussed is the potential of digital twin technology. By creating a virtual replica of a supply chain, organisations can gain insights into the environmental impact of their operations and identify areas for improvement. For example, digital twin technology provides an opportunity to optimise production processes and reduce waste and energy consumption. By analyzing data from sensors and other sources, inefficiencies and bottlenecks can be identified and data-driven decisions can be formed with the main aim to reduce their carbon footprint.
Meanwhile, automotive manufacturer Porsche launched a project with ‘Circularise’ to create a digital twin of its entire supply chain for traceability of plastics and tracking sustainability metrics. This enables improved decision-making for future vehicles and end-of-life recycling approaches.
Still, it’s important to note that digital twin technology is only one tool in the broader effort to build more sustainable supply chains and such a model must be used in conjunction with other technologies and strategies to create a truly sustainable and resilient supply chain.
A sustainable business is built to last, and strategies are implemented for longevity. A strong sustainability proposition will help businesses tap into new markets, while also expanding into existing ones. Among the most reputable companies is Lego, who switched up their strategy to create their core products and packaging from sustainable materials that are either renewable or made from recycled content. This strategic vision saw the company’s reputation skyrocket. A sustainable business also attracts and engages top talent. As millennials make up the largest proportion of the workforce, not delivering on important sustainability credentials could mean you fail to attract top talent.
4% of institutional investors are more likely to divest from companies with poor sustainability performance.
Supporting these results, according to a 2021 EY Global Institutional Investor Survey, 74% of institutional investors are more likely to divest from companies with poor sustainability performance. In this study, 90% stated they would pay more attention to a business’s sustainability performance when making investment decisions.
The picture is clear. Sustainability creates business value for long-term prosperity.
The key to success?
Recognising that a successful sustainable business strategy should be integrated into core business operations, develop clear and measurable goals, form collaborations and partnerships, embrace innovation, and prioritise transparency and trust.
Article by: Tessabelle Camilleri, Senior Manager, Tech.mt