The growing role of CIOs in ESG
We are at a pivotal moment. After decades of activism, denial, tensions and tentative reforms, the concern for people, planet, and how we sustainably run business has risen to the top of boardroom agendas. The attempt to formalise how we treat people and planet has gained a name that looks set to stick and become a key, perhaps the key, performance metric – ESG.
ESG stands for Environmental Social Governance, and it is rapidly gaining importance amongst leaders, regulators, customers, employees, and investors. It’s good for business too. According to Mckinsey (1) , a better ESG score translates to about a 10% lower cost of capital, as the risks that affect your business are reduced. Simply put, ESG is a measurement that an organisation uses to improve and demonstrate good behaviour.
Why is technology so central to ESG?
Digital technology has a huge role to play in all aspects of ESG. From the reduction in commuting emissions due to hybrid working, the lower waste of the paperless office, the power of blockchain to increase trust, even the algorithms that can detect unconscious bias in hiring, the potential of technology is enormous. Technology can also provide the key ingredient ESG requires, the one thing that without which organisations cannot move forwards in their ESG strategy. Measurement. ESG strategies and initiatives require measurable, reportable outcomes.
For external stakeholders these metrics are an easy way to identify if an organisation is acting responsibly and achieving their commitments before choosing to work with them. Internally these metrics are used by organisations as benchmarks against which they can improve themselves. Digital technology, and in particular cloud computing, possesses two qualities that make it central to creating ESG metrics. It permeates every area of an organisation – from logistics to HR, from distribution to power consumption. It generates performance data. IT is the nervous system of every corporation. It provides critical functionality across every part of an organisation and as it does so, collects information constantly and in detail. This means that improved, modern IT is the key to data-driven decisions, making it the central factor that will mature ESG strategies. Companies which adopt sustainable technology achieve 4% higher ESG scores on the Arabesque S-Ray dataset than those that do not, translating into an 11% (2) jump in their ESG ranking.
The growing role of CIOs in ESG
The starring role of technology in ESG has a simple consequence. CIOs have become a major player in forming and actioning their organisation’s ESG strategy. Delivering on the potential of sustainable, data driven, and ethical technology will require CIOs to take a leading part in ESG decisions. They need to work in close partnership with their extended leadership to select the technologies and processes that drive the company forwards towards its ESG goals. This growth of CIO involvement in ESG comes at a time when their responsibilities and centrality to business success are rapidly expanding into other areas, with 90% of CIOs (3) saying that they feel their influence and general impact within their company has also grown.
The obvious implication? Something must give.
CIOs cannot be in the weeds, delivering IT basics at a time when strategy and demands are growing. So how can a CIO juggle these pressures? One way in which CIOs are reducing the burden, is by outsourcing IT functions to managed service providers. This can work in a number of ways:
- Delivering basic IT needs: Leveraging a Managed Service Provider (MSP) to put in place and run basic IT needs, from network to security, can greatly reduce time demands and stress on CIOs.
- Helping formulate and deliver transformation: Working with an experienced technology partner to create and execute a transformation plan with the skills already in place to do so, can free time and focus for the CIO, while assuring a faster, better outcome.
- Helping align IT and transformation strategy with ESG: The relationship between IT and ESG is new. Taking advantage of the digital transformation process to bake in ESG is also a recent practice. Leveraging an MSP with experience of delivering both in unison, is a simple way to accelerate the process, and fill any knowledge gaps.
It’s clear that ESG needs to be a business priority, and alongside becoming a more responsible business, it can also lead to value creation. Creating a strategy is not always simple, but often working with an experienced technology partner can be a good way of alleviating some of the pressure and enabling you to build a strong future for your organisation.
