Research by Opinium and FleishmanHillard has confirmed that Environmental, Social, and Governance (ESG) is fast becoming a key factor influencing purchase decision-making in the B2B market. Over 76% of decision-makers prefer firms to make their ESG commitments public, and over half said that firms that don’t disclose ESG data are missing out on business opportunities. For B2B technology companies, these statistics are even more resonant, as many tech clients have their own ESG metrics to consider. They will therefore often work with firms and suppliers that share their commitment to ESG.
Bain’s recent publication “The Visionary CEO’s Guide to Sustainability” explains that US customers are willing to pay an 11% premium for sustainable products and services. As B2B and consumer markets grow more conscious of their environmental and social impact, forward-thinking tech companies are making the most of these opportunities by adopting sustainable and ethical practices, all while improving their product margins.
But what emerging trends do we see in tech companies’ ESG management? And how can these firms make the most of market shifts?
We’ve put together the following outline of the biggest trends and opportunities in ESG management that we’re currently seeing in the technology sector. As regulations continue to evolve, staying on top of new developments is vital for any firm or fund looking to ensure they remain appealing to new and existing customers and investors. These strategic moves will pay dividends in the long run.
A recent KPMG study found that 75% of companies are not ready for pending ESG assurance requirements.
Tech companies are now expected to provide detailed reports on their environmental footprint, social contributions, and governance structures. This includes data on carbon emissions, waste management, diversity and inclusion initiatives, and ethics. Data requirements differ depending on the firm’s size, sector, and geographical location.
ESG in the technology sector is far simpler to manage and monitor than in other industries, such as infrastructure or manufacturing. With so many companies ill-prepared for new regulations, and with consumer purchasing habits so closely aligned with these requirements, savvy techcompanies can appeal to their clients and set themselves apart from the competition simply by preparing themselves for new regulations.
Tech firms are naturally excellent at managing their carbon footprint. The data is relatively easy to track and consolidate because supply chains and manufacturing processes generally don’t play a part. Data centres tend to be the most significant contributor to a tech firms’ emissions, and these outputs can be measured, reduced, or offset.
KEY ESG’s software, for instance, is hosted and stored at a secure Amazon Web Services (AWS) data centre in Ireland, which runs off 100% renewable energy. This means that our clients receive a secure service, all while endorsing sustainable processes.
By adopting a similar approach, and by working with partners who also work sustainably, tech firms can significantly reduce their environmental impact by focusing on just one contributing factor.
Community outreach programs, diversity and inclusion efforts, and employee well-being programmes are becoming standard across the tech sector. These efforts bolster a firm’s ESG metrics while simultaneously contributing to a better workplace culture.
The ESG Data Convergence Initiative data set has revealed a positive correlation between employee engagement programmes (for example employee surveys) and a reduction in staff turnover. A culturally diverse workforce contributes a more multifaceted array of ideas. And recent studies published by BlackRock have shown that companies with more gender-balanced teams consistently outperform their less-balanced peers.
More and more tech companies are acknowledging the benefits of improving their social and governance outputs alongside their environmental impact, and this has led to improved productivity, better idea generation, and more efficient working practices.
We’ve seen many successful companies forming partnerships with governments, non-profit organisations, and other businesses to improve ESG metrics. Notable examples include We Mean Business, the World Economic Forum’s Sustainable Development Impact Summit, the Mission Possible Partnership for decarbonisation, and the Business Climate Hub. Closer to home, our partnership with AWS helps us to ensure KEY ESG’s servers are all run on renewable energy.
These collaborations range from joint ventures in sustainable technology development to partnerships for social initiatives. By pooling resources and expertise, firms are able to make more significant strides when attempting to achieve their ESG goals.
With 85% of senior investors and business executives planning to increase their ESG investment over the next 5 years, ESG management efforts are more important now than ever before.
The market is saturated with firms that are solely focused on boosting their bottom line, and so demonstrating a commitment to ESG processes is an excellent way for a tech business to ensure it stands out within its sector. And these efforts ultimately lead to increased profitability anyway, as evidenced by Palatine.
ESG management for tech companies is no longer a peripheral concern but a central business strategy. By embracing these emerging trends, tech companies can not only enhance their reputation and fulfil regulatory requirements, but also drive innovation and create sustainable value for all stakeholders. As the sector continues to lead the way in technological advancements, its role in shaping a sustainable and equitable future will become more and more important.
If you’d like to see how you can turn ESG into a competitive advantage for your tech firm, book your demo now or get in touch with one of our experts.