Joe Baguley, VP and CTO, EMEA, VMware.

Strong ESG (environmental, social, and governance) practice is good for business. Greater innovation, long-term talent retention, customer loyalty, enhanced revenues, increased resilience and reduced risk have all been ascribed to a greater focus on ESG. 

However, as organisations across industries, geographies and sizes allocate more resources toward improving ESG, the ways in which it’s practised are coming under greater scrutiny. 

There has been no single approach to improving sustainability performance. Businesses have evaluated the carbon footprint of their own operations, as well as their impact through customers, partners and the supply chain. Then they made strategic decisions on where best to direct their sustainability efforts.

As an example, rather than focusing on decarbonising their own operations, many financial institutions are directing their efforts towards their investment portfolios and in meeting various ESG indices set by the capital markets. The financial industry is having a huge impact on sustainability in general, as it channels investments into the ‘green economy’, where eco-friendly companies create sustainable products. 

The airline industry, one of the major sources of greenhouse gases, is also focusing efforts on where it can get the biggest impact — reducing the emissions created by aircraft. Airlines hope to achieve this by switching from traditional fossil-derived jet fuels to ones made from renewable sources. They are also looking to new materials to make their aircraft lighter and more aerodynamic, and hence less fuel hungry. 

The common thread is return on investment, but companies also need to go for the immediate wins, such as decarbonising their IT operations. R&D also needs to continue and strategies should be developed for bigger and more substantive changes to come.

Many compute-intensive businesses have already turned their attention to the energy consumption of their digital infrastructure. These enterprises have moved workloads to the cloud to reduce their energy consumption and carbon footprint. 

But less IT-dependent sectors have placed it much lower on the ESG agenda and the IT estate could be a good place. After all, we know that IT contributes between 2.1% and 3.9% of global greenhouse gas emissions today, largely from datacentres. 

Digital twins, IoT systems, edge computing, AI and machine learning can provide huge sustainability benefits. 

But these technologies can have environmental impacts of their own. Training a single AI model can emit nearly five times the lifetime emissions of an average American car. Every element of the IT strategy, from current hardware requirements to cloud-optimised deployments, to digitalisation strategies needs to be carefully viewed through an ESG lens.

Concurrently, we’re seeing a shift towards mandatory rather than voluntary sustainability, and regulations around corporate sustainability are getting tighter. For example, the EU’s Corporate Sustainability Reporting Directive (CSRD) is about modernising and strengthening rules regarding the environmental and social information that companies have to report. It will require around 50 000 large companies and listed SMEs to report in line with the European Sustainability Reporting Standards (ESRS).

It’s prudent to start laying the groundwork before legislation comes into force.

With digital technology perhaps the biggest enabler in driving carbon footprint reductions, we believe it is essential that IT leaders are engaged with ESG strategies. They can and should play a key role in delivering the solutions that have a long-term positive impact – on the environment as well as the business.

The time is now. The window of opportunity is open. It won’t stay that way forever.