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Gartner: 5 key steps for CIOs to drive ESG initiatives

Most CIOs will soon — if they don’t already — play a central role on their enterprise sustainability team, developing new technology solutions, services and IT/digital infrastructure and building critical data platforms to drive sustainable business strategy. The task seems enormous, but a few key actions can ensure they are more effective.

“In most enterprises there are hundreds, if not thousands, of potential sustainability ideas and projects that IT could support. The CIO has to make sure the IT organization focuses on those that will actually drive the enterprise’s sustainability ambitions,” says Simon Mingay, VP Analyst at Gartner.

Orchestrating the right technologies and practices will be key to meeting the ESG goals that organization uses to track and report progress to both external and internal stakeholders. ESG scores are becoming more important every day. A good one can improve stock performance, customer engagement and reduce operating costs. A bad one can tarnish reputation with job candidates, employees, customers, regulators and investors.

1. Be proactive in engaging with sustainability peers.

Actively engage with executives driving enterprise sustainability/ESG programs to fully understand the specifics and context of what are material-to-enterprise ambitions, sustainability/ESG goals, sustainability strategy and key performance indicators/targets. (If your organization lacks a sustainable business strategy, push to create one.)

Remember that sustainability is an outcome, while ESG is a set of criteria that evaluates your commitment to achieving sustainability and resolving environmental, social and governance issues. For example, if your sustainable business strategy includes a commitment to reduce global warming, you may measure success in terms of reductions in greenhouse gas (GHG) emissions.

For most enterprises, sustainability and ESG programs are data- and technology-intensive. As such, you and your IT organization are important enablers in the execution of the enterprise sustainability strategy, but IT itself may be a sustainability issue at your organization (see No. 2).

Strategize with the individual executives who have primary responsibility for the most material/significant issues identified in your material assessment and related strategic plans to identify opportunities, establish clear priorities and build a suitable business case for investment.

2. Assess whether IT itself is a material issue.

For enterprises in certain sectors, such as financial, professional and technology services, information and digital technologies are themselves a material sustainability issue. In such cases, you’ll need to improve the sustainability performance of the IT/digital infrastructure and services themselves. Likely initiatives include:

–Increasing the energy and material efficiency of the IT infrastructure and workplace services.

–Reducing Scope 2 greenhouse gas emissions (related to electricity consumption) by working with your real estate/facilities or energy management teams to adopt a suitable renewable energy strategy.

–Implementing circular economy practices in partnership with vendors and service providers to improve e-waste management, increase reuse, refurbishment and component harvesting and reduce Scope 3 emissions (supply chain).

–Working with the sourcing and procurement team on IT vendor/service provider ESG performance management and selection practices.

3. Apply digital to sustainability.

Existing IT systems can’t address all material issues, so it’s important to invest in solutions that help digitalize products, services and processes, improve resource and energy efficiency, and reduce carbon emissions. In a Gartner survey, 63% of respondents indicated investments in IT and digital solutions are part of their sustainability programs.

Digital sustainability investments so far relate mostly to solutions that dematerialize a product, service or process somewhere along the life cycle, improve resource and energy efficiency or reduce emissions. Examples include investing in solutions like the Internet of Things (IoT) and artificial intelligence (AI) to address material issues, such as:

Packaging waste. Reusable transport packaging can provide location, condition and other data, whereas AI can identify ways to reduce packaging.

Sustainable sourcing. Wearable devices can detect and warn employees of health issues, whereas AI can determine whether a project will pose a threat to water or wildlife.

Product transparency. Sensors can trace a product’s origins, whereas AI can signal when to refurbish a product.

For better digital sustainability outcomes:

–Actively monitor how competitors are exploiting digital and IT solutions to achieve sustainability outcomes.

–Engage with strategic IT and digital partners to understand how they can contribute to your enterprise’s sustainability goals.

4. Be clear on ESG goals, such as emissions.

It’s important to know what specific ESG KPIs you need to meet. Consider climate mitigation and adaptation, where KPIs generally relate to enterprise operations, upstream supply chain and downstream value chain.

In a recent Gartner survey, 54% of respondents reported their organization had set an ambitious target for reducing greenhouse gas emissions that would require investing in some kind of carbon offsetting program. (Note that the survey excluded oil and gas companies and energy utilities because of their specific GHG emission issues and regulation.)

Sample targets include:

–Carbon neutral.

–Climate neutral.

–Net zero.

–Climate positive/negative.

For most organizations, these targets relate to their enterprise operations only (Scopes 1 and 2 GHG emissions), making CIOs integral to mitigating the future costs of failing to act. Among survey respondents, 74% believe that organizations will be obligated to pay for their GHG emissions in the future, beyond any voluntary scheme entered into by virtue of setting a net-zero or other goal.

5. Improve data quality, traceability and accessibility.

Monitoring and delivering on ESG KPIs takes quality data and insight. The critical challenge is not really about what or how much to report but rather ensuring the accuracy of what is reported. With investors and customers demanding more transparency around ESG, it’s best to gather insights from a range of initiatives and use it to improve data quality, accessibility and traceability.

To do this:

–Move away from spreadsheets to automated data collection by leveraging technologies such as bar codes, IoT, APIs and digital twins.

–Establish a sustainability data platform where you can gather and analyze ESG data from operations as the value chain.

–Deliver a set of analytical, reporting and business application tools that can provide the necessary hindsight, insight and foresight.

–Leverage ESG ratings and research data to learn what investors know, improve ESG scores and benchmark against peers.

–Empower business units to measure carbon footprint, supply chain optimization and green revenue in real time.