Going green is not easy, but IT leaders will need to figure out a way to do it -- and soon.
As more companies focus on environmental sustainability, CIOs and other tech leaders have an important role to play, said Ned Calder, a partner at Innosight, a strategy consulting firm based in Lexington, Mass. Many companies are putting a major emphasis on the 'e' in their environmental, social and governance (ESG) goals. To create success, technology must be a key driver, and the IT department must be a key partner.
In this interview, Calder discusses the following concepts:
- corporate climate action drivers;
- the importance of defining terms;
- sustainability first steps;
- the role of technology in taking climate action;
- foundations of a sustainability strategy; and
- IT-business alignment on environmental concerns.
Why companies must care about their climate impact
Businesses and software vendors suddenly seem to be talking about climate action, including technology to support a circular economy, ways to measure carbon emissions and decarbonizing data centers. What factors are prompting business and IT leaders to give environmental sustainability more attention?
Ned Calder: A number of factors are coming together. Where the emphasis is depends on the industry, but I think there are four big [environmental sustainability drivers]:
- Consumer expectations. This is the increased consumer expectation that the companies they buy from are acting responsibly toward the environment.
- Employee expectations. As concerns about sustainability pervade larger parts of our society, employees want to work for an employer that represents their values. People want to see their companies taking action on issues that are important to them.
- Investor expectations. A really important [corporate sustainability driver] is that the investment community is starting to factor in what firms are doing in regards to climate change. If a business is on the wrong side of this macro trend toward sustainability, investors increasingly [view that] as a risk to the long-term health of a company. Companies trying to attract an investment base necessarily need to have a [sustainability] story and action plan.
- Government regulatory action. More aggressive government regulatory action to address sustainability, whether it's about improving the health of their populations or making the right sort of contributions to try and reduce climate change more broadly.
Can tech go green?
In October 2021, representatives from across the globe met in Glasgow for the United Nations Climate Change Conference, commonly referred to as COP26. Many pledged to focus on climate action, but as the saying goes, the devil is in the details. Whether the tech sector can rise to the climate challenge and address its numerous environmental issues -- including waste generation and massive consumption of energy and resources -- remains to be seen. Some of the more hyped technologies are especially problematic. For example, there are major environmental concerns about blockchain, cryptocurrency and nonfungible tokens.
How can IT and business leaders support more productive conversations about environmental sustainability within their companies?
Calder: Define your terms. When we discuss sustainability, for example, what do we actually mean by that term within the context of our company? There's often not an exercise to really define terms so that we can then have productive conversations about what actions we want to take, where we take those actions, and what roles different parts of the organization have to play in supporting our priorities.
Environmental sustainability first steps
What should leaders tackle first if they haven't prioritized sustainability before now?
Calder: One of the biggest shifts we've seen surrounding the topic of sustainability is how the conversation has broadened and included a heightened sense of accountability. [Concern for the environment has] typically been something that existed in a small pocket of the organization, possibly backed only by 'lip service.'
Now, sustainability needs to fundamentally intertwine with the long-term strategy of the company. Sustainability needs to affect:
- how leaders think about what markets they're going to play in;
- what types of products and services they're going to bring;
- how they're going to bring those products and services to market;
- what business models they're going to wrap around those; [and]
- what types of resources they're going to bring to deliver those in a way that is increasingly sustainable.
The impacts need to be measurable so there is a way to track and demonstrate progress.
CIOs and other IT leaders -- as they're part of helping to shape a business strategy -- need to be part of the conversation on how we're going to incorporate [an environmental focus] into the overall strategy. They then need to translate that and say, 'How does this influence how I operate my organization as a CIO and what the priorities are for the IT organization?'
There has to be a very clear connection between IT's priorities and the overall sustainability strategy of the organization.
Environmental sustainability technology
Is there a particular type of technology that IT leaders should prioritize to drive sustainability efforts?
Calder: It depends on the particular focus of the business. In any organization that's of a certain size and complexity, [the right type of sustainability technology is] probably not one thing, it's probably many things.
For example, take the packaging issue in CPG [consumer packaged goods]. Some product categories may benefit from recycled plastic. Others may be able to shift to paper alternatives. Still others may benefit from moving away from packaging entirely.
One of the related challenges many organizations are wrestling with right now is simply trying to understand and quantify [environmental] impacts and be able to measure that in a consistent and objective way over time. This is both so that they can understand initially where their bigger impacts are but then also so that any interventions they take, they can monitor and communicate that progress both internally and externally.
That's not to say that organizations don't have any insight to that, but they certainly historically haven't optimized their internal systems to be able to measure all the variables that they might want to measure.
CIOs typically have a big role in putting in place the systems and analytics to enable environmental impacts. That is a really important job.
Sustainability strategy foundations
What are essential foundations to create a sustainability strategy?
Calder: Companies need to look beyond the existing planning horizon and put in place a longer-term strategy that clearly defines the priorities and has the scope to address the significance of these challenges -- for example, contemplating more fundamental choices about if and how to transform the business.
Taking a 'future-back' approach can be extremely clarifying because it allows you to get out in front of weak-signals and tactical near-term issues, helping leaders decide what's more or less important to the long-term health of the business. If you have a longer-term lens, you can see how things might unfold, make some decisions that can help you prioritize what things to invest in and what things you don't need to be investing in.
The technology organization can play a key role in this, acting as a partner in setting that long-term vision. What doesn't work is when a technology organization tries to set some sort of path that's not in sync with what the business wants.
IT-business alignment on climate change
What if a CIO or IT leader understands the need for climate action, but realizes the business side does not match that focus?
Calder: You may be seeing something about the world that may be a blind spot to the business.
Having an effective conversation with the business doesn't mean that you're simply an order taker. You can bring a perspective that can help to shape, help to influence. A key success factor is connecting that perspective into the realities of the business.
When there's a clear vision that provides clarity about the priorities as well as a strong partnership with the business on what we're trying to do, then you can have a lot more conviction about where and how you need to invest and how quickly to move. And you've got the right partners internally in place to support you in that. [IT-business alignment on climate change] can make working through a really complicated set of issues and the change program a lot easier.