How to Harness the Trend of the Decade – ESG
How to Harness the Trend of the Decade - ESG
Coined as the “trend of the decade,” Environmental, Social, and Governance (ESG) investments are forecasted to soar beyond $30 trillion by the year 2030. As this area continues to gain traction and considerable financial attention, many organizations are questioning what ESG is, what it means for sustainability, and how it can be used to remain competitive.
In this article, we will address these questions with a specific focus on how ESG impacts an organization’s approach to sustainability and, by extension, management of their supply chains.
The dawn of ESG
ESG is a framework used for evaluating the extent to which a company goes to meet both environmental and social goals. Compared to traditional corporate priorities, ESG encourages creating environmental and social value in addition to expected financial yields for shareholders.
Although previously used interchangeably with the term “sustainability,” ESG is far more nuanced. While sustainability can vary in definition between organizations, ESG is an all-encompassing set of specific criteria for environmental, social and governance investments.
As an umbrella term, organizations today often incorporate their approaches to sustainability and sustainable processes in an attempt to meet their ESG goals. This is particularly relevant to goals related to environmental and social considerations. An example of this can be seen in what is referred to as the “Race to Zero,” which refers to a mass global alliance between corporations that seeks to meet net zero carbon emissions by 2050.
Proceeding, ESG, its utility and implementation in corporate practices has evolved considerably over the years. Much of this can be attributed to advancements in technology and the subsequent enhanced sophistication of stakeholder expectations.
To elaborate, previously, there were little to no means of measuring and tracking the effectiveness of ESG investments. Organizations would adopt what is characterized as a greenwashing approach to ESG. Within which, companies could make grandiose claims of their commitment to ESG goals, particularly those related to environmental sustainability, without having to provide any kind of evidence or support.
Today, with advancements in information technology (IT) and increased data transparency, companies are expected to provide insights to their investors that demonstrate whether or not they are actually “moving the needle on ESG principles.”
In addition to providing insights on whether goals are met, technology such as IBM’s Envizi can also be used to support the actual achievement of ESG goals. A profound example can be seen in the Race to Zero.
Here, technology can be used in four primary ways; process optimization, carbon data transparency, circular products and services, and data systems and ventures. Within these areas, examples of technology that can be used include cloud technology, artificial intelligence, IoT and blockchain.
As ESG continues to grow in popularity, various stakeholders such as consumers, investors, and regulatory bodies continue to pressure organizations to adopt sustainable practices and source sustainably. This has resulted in an increased need for optimizing processes and increasing visibility, specifically within supply chains.
IBM, a pioneer in sustainable supply chain solutions, highlights 3 ways to accelerate organization supply chain sustainability. This includes inventory management, fulfilment optimization and product provenance.
Inventory management refers to the in-depth review, analysis and forecasting of supply chain needs. This aids in the achievement of sustainability and, by extension, ESG-goals by providing a granular view of stock requirements. In turn, this enables organizations to accurately predict their needs, cut costs and reduce the need for emergency shipments.
Fulfilment optimization refers to the practice of fulfilling customer needs in a way that is environmentally sustainable. This involves sourcing inventory closer to customers in order to reduce an organization’s carbon footprint by decreasing logistics-related emissions.
Finally, product provenance refers to the curation and nurturing of an interconnected ecosystem of supply chain partners that adhere to the same environmental values.
As it increases in popularity among investors and customers alike, organizations looking to remain competitive will have to adopt ESG principles into their operational practices. For those looking to enhance their environmental sustainability, this may require considerable adjustment to supply chain management.
To achieve this, companies can look to a variety of technologies that can effectively support their transition to a business model that is not only profitable but also environmentally and socially sustainable. Coliance are experts at leveraging technology and data to accelerate your company’s journey to a sustainability advantage. Our strategies together with our cloud based Managed services and solutions from our partners such as IBM, can help you take a proactive approach to ensure that your organisation is working towards making your partner ecosystem sustainable. Contact us today to reimagine your business and improve your performance against ESG goals.