Does sustainability apply to the service sector as well? Absolutely yes! Although the IT industry is not obviously associated with traditional ESG areas, its impact on the environment, society and corporate governance is significant. The implementation of sustainability strategies in technology companies translates into a positive impact on the planet and society on the one hand and brings tangible profits to IT companies on the other. What should you know about ESG in the technology sector?
In today's global and technologically advanced world, IT companies are at the forefront of the digital revolution. However, as their technological influence grows, so does their responsibility for sustainability. Implementing ESG (Environmental, Social, Governance) strategies in the IT sector not only promotes social and environmental responsibility, but also drives innovation, attracts clients and investors and increases competitiveness.
Learn more: ESG – sustainability advisory services
Non-financial reporting - not just a statutory obligation
At present, ESG reporting has become a key element of business strategies. IT companies, even if they do not have a statutory non-financial reporting obligation, can benefit in a number of ways from voluntarily implementing ESG practices and reporting.
Regulatory requirements and stakeholder expectations make it crucial for IT sector entities to be transparent in their operations.
- Legal regulations: Many countries are introducing regulations to oblige companies to report their ESG activities, e.g. the CSRD in the European Union.
- Investor expectations: Investors are looking for companies which are responsible and sustainable. ESG is becoming a key investment criterion.
- Client expectations: More and more companies are taking sustainability issues into account when choosing an IT service provider. This is a particularly important factor for large and international companies, which are obliged to report ESG and require a responsible approach to these issues by their business partners.
- Employee expectations: IT professionals, especially from generation Z, are often looking for employers who are committed to social and environmental issues. ESG reporting can help recruit the best candidates.
- Access to financing: Financial institutions are increasingly taking ESG factors into account in their investment decisions. IT companies with good ESG practices can obtain better financing terms or easier access to capital for developing innovative projects.
Implementing ESG practices on a voluntary basis will also allow IT companies to prepare for future regulatory requirements. As one of the key pillars of the digital economy, the new technology sector is likely to be subject to increasingly stringent sustainability regulations over the next few years.
Check our full ESG Reporting offer: ESG Reporting
ESG reporting – what data do IT companies need to collect?
IT companies, like entities in other industries, are required to report ESG in three main areas:
- Environment - greenhouse gas emissions, carbon footprint, energy consumption and efficiency, waste management, water consumption, impact on biodiversity
- Social - employment and working conditions, diversity and inclusivity in the workplace, employee development and training, data security and customer privacy, community engagement and CSR
- Corporate governance - governance and oversight structure, business ethics and anti-corruption, transparency in reporting, risk management, supply chain practices
The extent of the data that an IT company should collect and report on will be determined by a dual materiality analysis. This is a comprehensive audit of an organisation that helps to determine its environmental, social and corporate governance impact and, on the other hand, the impact of ESG factors on the company and its financial performance.
For IT entities, the following issues will be particularly relevant:
- data security
- cyber security
- energy efficiency of data centres,
- e-waste management and recycling of electronic equipment,
- ethical use of artificial intelligence,
- responsible approach to employment and employee development,
- innovation in support of sustainable development.
Learn more about ESG reporting:
Counting the carbon footprint of cloud services and products
Cloud solutions are a significant part of IT companies' business. Counting the carbon footprint of these services is essential in order to understand their environmental impact and implement measures to reduce it.
- The carbon footprint of data centres: Data centres consume huge amounts of energy. Optimising energy consumption and switching to renewable sources can significantly reduce emissions.
- Energy efficiency: Cloud technologies can be optimised for energy efficiency, which not only reduces the carbon footprint, but also reduces operating costs.
Read also: Calculating the carbon footprint
Examples of ESG activities of IT companies
Examples of IT companies that have implemented ESG and achieved significant success demonstrate the real potential of this strategy.
- Microsoft: In 2020, Microsoft announced that it would become carbon neutral by 2030. Investments in sustainability and ESG reporting have helped to win many new contracts and increase market value.
- Google: Google achieved carbon neutrality in 2007 and committed to using only renewable energy sources. The corporation's commitment to ESG has attracted many customers and investors who value environmental responsibility.
- IBM: IBM has invested in technologies to reduce emissions and optimise energy consumption in its data centres. The company has committed to achieving carbon neutrality by 2030, improving its reputation and attracting new customers.
Key benefits of implementing ESG in an IT company
Implementing ESG in IT companies brings many benefits that translate into real business growth. Entities that incorporate sustainability into their strategies often experience:
- Increased competitiveness: In the IT sector, innovation and staying ahead of trends are key, so customers and investors are increasingly choosing companies that are socially and environmentally responsible. Commitment to ESG can be a significant differentiator in the market.
- Improved reputation: Transparency and ethical operations build trust among stakeholders. For IT companies, which often have access to sensitive customer data, building a reputation based on ethics and responsibility is particularly important.
- Better risk management: Identifying and managing ESG risks helps IT companies to avoid costly mistakes. This applies in particular to risks related to cyber security, data protection or the use of artificial intelligence.
- Product and service development: ESG engagement can inspire IT companies to develop new technologies as well as create innovative solutions to support their sustainable transformation.
- Revenue growth: Strengthening competitiveness, eliminating risks and opening up new business perspectives through ESG activities measurably impacts the growth of an IT company and improves its financial performance.
Summary
Implementing ESG strategies in IT companies is not only ethical, but also cost-effective. Transparent reporting of ESG activities, reduction of the carbon footprint of cloud services and commitment to sustainability contribute to competitiveness, innovation and stakeholder trust. Examples from companies such as Microsoft, Google and IBM show that investments in ESG bring real business benefits, helping to win new contracts and increase market value. IT companies should therefore address the topic of ESG today to ensure stable and sustainable growth in the future.
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