Environmental, social and governance (ESG) issues are becoming some of the most important considerations for the IT industry and technology teams across organisations, and a new report has identified more than 30 technology trends that are shaping the ESG mandate within businesses. Energy usage and diversity are two areas tech leaders can focus on to help drive the ESG agenda within their organisations.
The new report, ESG in Tech: impacts and implications, identifies trends including bias in AI, data centre efficiency, consumer data privacy and talent strategies as key considerations for companies focusing on ESG. Two experts told Tech Monitor why, as technology executive and c-suite members, CIOs have the responsibility to ensure that the ESG goals are top of the agenda.
Beware of the “watermelon organisations”
Although ESG is a relatively new term, corporate social responsibility has been part of organisations’ strategies for many years, says Simon Robinson, head of research at 451 Research at S&P Global Market Intelligence and one of the authors of the new report. Businesses are working to “do good in the world or minimise the bad”, he says, and the relevance of ESG themes is increasing for a variety of reasons and in reaction to world events.
Robinson says that ESG is a two-fold mandate driven by investment and consumers. On one hand, investors want to put their money into organisations that are behaving ethically, are committed to equity and diversity, and are minimising their environmental impact. On the other, consumers are increasingly looking to buy products from companies that behave in certain ways.
Charles Radclyffe, partner at EthicsGrade, an ESG ratings agency specialising in evaluating companies on their maturity against AI governance best-practice, agrees that at the core of ESG is a relation with investors, who want to know about the internal governance of the businesses they are investing in. “It’s essentially all things that your stakeholders might care about and that’s different for different organisations,” Radclyffe tells Tech Monitor.
Although the current conversation is dominated by climate-related issues, whether businesses choose to focus on the environment or social justice matters largely depends on the nature of the organisations themselves and their stakeholders. Radclyffe says that whereas some firms will be more sensitive to their carbon footprint, others introducing wholesale data analytics or AI, for example, might make their stakeholders concerned about the possibility of this leading to discriminatory outcomes.
There is no doubt, however, that when businesses get ESG wrong, the consequences can be “extraordinarily costly and embarrassing”, Radclyffe adds. That is particularly the case of what he calls “watermelon organisations”: firms that present themselves as "green" on the outside but are effectively "red" underneath because "as soon as you scratch the surface, you realise that they've got they've got other issues."
One of the most notable recent examples is the craft beer company BrewDog, where CEO James Watt was accused by dozens of ex-employees of fostering a “culture of fear” and bullying, and not living up to its eco-friendly commitments. This has led to investors’ concern and could have severe financial consequences. Watt has apologised for any mistakes made in the past and vowed to work with current and past employees to improve the culture at the company.
Tech and ESG: what can CIOs do to make a difference?
As members of the c-suite responsible for the technology functions of organisations, CIOs can play a key role in driving the ESG business agenda.
Radclyffe says that IT decision-makers should be engaging with the people responsible in their team for digital transformation, likely to be the chief digital officer or equivalent, as well as peers who are heading up automation and might be reporting into the COO office. “Essentially, the CIOs' task is to engage with stakeholders in the organisation, which is going to be employees or colleagues and customers predominantly, and try to understand what the issues are that they are most concerned by,” he says.
In Robinson’s view, CIOs should start by prioritising two ESG areas, namely energy efficiency and promoting diversity, equity and inclusion among their teams. On the first, he says that as huge consumers of energy, IT departments could start by looking at how to reduce the amount of energy they use and choosing suppliers providing renewable or sustainable energy: “I think this is increasingly of interest and one of the things that CIOs can definitely develop strategies around,” Robinson says.
He adds that many organisations have already committed to carbon reduction or net zero goals. Microsoft, Facebook or Amazon, who have set net zero pledges by 2040 or sooner. In the case of Microsoft, the company claims that by 2050 will have removed all the carbon it emitted directly or through electricity use since it was founded in 1975.
However, Radclyffe warns of the side effects of upgrading IT equipment for better energy efficiency. Companies should consider the carbon impact of the digital waste generated through these upgrades. Therefore Radclyffe says it is important to consult with the employee base about these initiatives, as many might not necessarily want the latest equipment and rather slow down the upgrade cycle. Then devices could be donated to schools, charities or overseas to improve the digital skills ecosystem.
Although diversity, equity and inclusion should be part of a broader corporate agenda, Robinson says that CIOs can look internally at their teams and promote ways to make the IT department more welcoming and inclusive. In the UK, only 19% of workers are women and the vast majority (66%) identify as white. A BCS report also found that disabled IT specialists are less likely to get work via 'in company’ contacts than their non-disabled peers, and a 2018 study by the Institution of Engineering and Technology found that 30% of LGBT+ young people would not consider a career in STEM because discrimination concerns.
Robinson concludes: “What are they [CIOs] doing to ensure that there is opportunity for all? And if you're a big organisation, what are you doing to promote people from all backgrounds to come into the technology and STEM-style industries?”