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Can digital transformation drive ESG?

Say the buzz phrase digital transformation and you’re likely to get one of three reactions: an eye roll because of how often it’s been used; a shudder because digital transformation projects are notoriously challenging to implement; or a nod in recognition of the fact that there’s more to it than “moving to digital”.

PwC sums it up quite nicely: “Digital doesn’t just enable you to do the same thing faster—it changes what you do.”

So what does that have to do with ESG?

Apart from the obvious parallels between the two concepts – they are daunting, company-wide projects that require buy-in from all levels and have a high rate of failure due to lack of objectives, too many obstacles and confusion on how to measure and report success – it is the aim of digital transformation, that is changing what you do, that can help drive ESG initiatives.

What does that mean? Digital transformation brings a wealth of benefits and opportunities to business – when done successfully, of course. The obvious tie-in benefit with ESG is remote or hybrid working. With more companies opting for home-only or a combination of home and office working, a trend likely to veer more to home-only, there is less travelling and therefore less emissions. While this hasn’t directly translated into fewer people buying cars (some experts expect just a small rise in car sales compared to last year) it has the potential to make a difference to carbon footprints.

In addition, lockdown has proved to companies that not only staff can work effectively remotely, but relationships with clients, partners and prospects can be fostered and maintained just as well virtually as face-to-face. Again, this reduction of travel, road, rail and air, contributes to lowering carbon emissions.

That’s just the tip of the fast-melting iceberg. The real value digital transformation brings is in enabling change.

IoT comes into its own

One of the main obstacles in implementing ESG programmes, as mentioned, is the question of how to measure success. How to place a metric on the impact of ESG? Well, look at IoT. As a key component of digital transformation, IoT can be used to collect data from sensors related to ESG activity success as electricity usage, energy efficiency, water quality, water usage, waste management… More than that, once data is collected it can be sent to the cloud for processing and analysis which can then inform future actions. It’s not just useful for the larger concerns like mines or power plants; the same applies to massive office parks monitoring energy usage or hotels monitoring water consumption and energy efficiency.

Mirror, mirror

This can be taken a step further for those larger businesses that have traditionally had the most impact on the environment, such as mines, manufacturing sites and oil and gas plants with the concept of digital twins. Digital twins are essentially virtual versions of physical assets that can be used to model or monitor operations, such as maintenance, energy usage, identifying opportunities to minimise waste, etc. The same applies to corporates, such as a financial services firm using a digital platform to keep track of compliance or a data centre operator monitoring individual sites to ensure energy efficiency or that it remains within its set carbon goals.

Virtually impossible

Another way digital transformation can aid ESG is in, you guessed it, making the most of virtualisation and digitalisation. From streamlining the supply chain and making it more efficient, to keeping quality standards in production with a view to reducing waste, technology can help. It can also boost innovation without the associated sustainability downsides – processes can be developed to make customised products on a smaller scale without excess waste or virtual modelling can be used to test ideas without physically making something or burdening the environment.

What’s next

Now, to answer the question stated in the headline: can digital transformation drive ESG. I believe the answer is yes. There is more to it. Following the discussion above it seems ESG and digital transformation are two disparate entities with obvious overlap. But what if the two worked together? Were executed as part of the same programme? Too much risk? Or just the right amount for great reward? Now there’s something to think about.

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